Q2 2026 Canopy Growth Corp Earnings Call

Conference operator today.

Operator: Good morning. My name is Joanna. I will be your conference operator today. I would like to welcome you to Canopy Growth's Q2 Fiscal 2026 Financial Results Conference Call. Currently, all participants are in a listen-only mode. I will now turn the call over to Tyler Burns, Director, Investor Relations. Tyler, you may begin the conference call.

I would like to welcome you to canopy Growth's second quarter fiscal 2026 financial results Conference call. Currently all participants are in a listen only mode. I will now turn the call over to Tyler Burns Director of Investor Relations. Taylor you May begin the conference call.

Good morning, and thank you for joining us on our call today, we have canopy Growth's, Chief Executive Officer, Luc Mojo and Chief Financial Officer, Tom Stuart.

Tyler Burns: Good morning. Thank you for joining us. On our call today, we have Canopy Growth's Chief Executive Officer, Luc Mongeau, and Chief Financial Officer, Tom Stewart. Before financial markets open today, Canopy Growth issued a news release announcing the financial results for our Q2 fiscal 2026 ended 30 September 2025. The news release and financial statements have been filed on EDGAR and SEDAR and will be available on our website under the Investors tab. Before we begin, I would like to remind you that our discussion during the call will include forward-looking statements that are based on management's current views and assumptions, and that this discussion is qualified in its entirety by the cautionary note regarding forward-looking statements included at the end of the news release issued today.

Before financial markets opened today and IP growth issued a news release announcing the financial results for our second quarter fiscal 2026 ended September 32025.

News release and financial statements have been filed on Edgar and SEDAR and will be available on our website under the investors tab.

Before we begin.

I'd like to remind you that our discussion during the call will include forward looking statements that are based on management's current views and assumptions and that this discussion is qualified in its entirety by the cautionary note regarding forward looking statements included at the end of the news release issued today.

Please review today's earnings release, and canopies reports filed with SEC and SEDAR for various factors that could cause actual results to differ materially from projections. In addition, reconciliations between any non-GAAP measures to their closest reported GAAP measures are included in our earnings release.

Tyler Burns: Please review today's earnings release and Canopy's reports filed with the SEC and SEDAR for various factors that could cause actual results to differ materially from projections. In addition, reconciliations between any non-GAAP measures to their closest reported GAAP measures are included in our earnings release. Please note that all financial information is provided in Canadian dollars unless otherwise stated. Following remarks by Luc and Tom, we will conduct a question and answer session where we will take questions from analysts. With that, I'll turn the call over to Luc.

Please note that all financial information is provided and Kenny and dollars unless otherwise stated.

Following remarks by Luc and Tom We will conduct a question and answer session, where we will take questions from analysts with that I'll turn the call over to Luke.

Good morning, everyone.

Thank you for joining us today.

Luc Mongeau: Good morning, everyone. Thank you for joining us today. It's great to be with you again to share the continued progress we're making in building a competitive, profitable, and trusted leader in the global cannabis market. Q2 was one of our strongest to date, reflecting real, measurable progress driven by our continued disciplined focus on fundamentals. Q2 highlights included continued momentum in our Canadian adult-use cannabis business, consistent growth in our Canadian medical cannabis business, and a stronger and significantly healthier balance sheet. Together, these actions give me confidence in our ability to sustain progress and deliver results for quarters to come. Turning to our Canadian adult-use cannabis business. Net revenue increased 30% year over year in Q2, driven by demand for our Claybourne infused pre-rolls and our new all-in-one vapes from Tweed and 7ACRES.

It's great to be with you again to share the continued progress we're making in building a competitive.

Profitable and.

And trusted leader in the global cannabis market.

The second quarter.

Was one of our strongest to date.

Reflecting real measurable progress drill.

Driven by our continued disciplined focus on fundamentals.

Q2 highlights, including our continued momentum in our Canadian adult use cannabis business.

Consistent growth in our Canadian medical cannabis business, and a stronger and significantly healthier balance sheet.

Together.

These actions give me confidence in our ability just sustained progress and deliver results for quarters to come.

So I think though what Canadian adult use cannabis business.

Net revenue increased 30% year over year in Q2 grew driven by demand, probably claiborne infused pre rolls and our new OLED <unk> base from tweet on seven acres.

Stronger relationships with Canadian boards large accounts.

Luc Mongeau: Stronger relationships with Canadian boards, large accounts, and independent retailers drove continued distribution gain, including a 20% year-over-year distribution increase amongst Alberta independent retailers. We also improved our service levels with higher on time, higher in fulfill rates across key accounts, reinforcing our reliability with retail partners. For the six months period ending 30 September 2025, revenue is up 37% compared to the same period last year. This growth reflects the renewed momentum of our adult-use cannabis business following the actions taken earlier this year to tighten our product portfolio, streamline execution with boards and retailers, and refine our sales model. Looking ahead, we're building on this momentum with additional Claybourne innovation, new genetics across our core flower portfolio and PRJ brands, and plans to reach a broader group of consumers later this year.

Independent retailers.

<unk> continued distribution gains.

Including a 20% year over year distribution increase amongst Alberta independent retailers.

We also improve our service levels.

With idle time.

Are you in full fill rates across key accounts reinforcing our reliability with retail partners.

For the six months period, ending September 32025.

Revenue is up 37%.

Compared to the same period last year.

This growth reflects the renewed momentum of our adult use cannabis business. Following the actions taken earlier this year to tighten our product portfolio.

<unk> execution with boards and retailers and refine our sales model.

Looking ahead.

We're building on this momentum with additional Italy airborne innovation.

<unk> genetics across our core four.

<unk> portfolio of N P. R J brands and plans to reach a broader group group of consumers later this year.

We're also elevating our cultivation standards.

Luc Mongeau: We're also elevating our cultivation standards, including manual and refined post-harvest processes to deliver superior flower, ensuring consumers experience the very best of what Canopy has to offer. In our Canadian medical cannabis business, net revenue grew 17% year over year, marking another consecutive quarter of growth. We're staying true to our medical strategy, offering the right products at the right price, consistently in stock, and for the right patient segments. During the quarter, our BC Dojo site became an exclusive medical cultivation facility producing craft and small-batch cannabis dedicated to Spectrum patients. Dojo is also exclusively hand-bucking and hand-trimming all product, which is a deliberate investment to drive quality and consistency in the Spectrum patient experience. We're also seeing continued growth among insured patients, with registration up 20% year over year and almost tripling since 2021.

Including menu OLED refi post orbit processes to deliver superior flower and shrink consumers experience the very best of what canopy has to offer.

And our Canadian medical cannabis business.

Revenue grew 17% year over year, marking another consecutive quarter of growth.

We're staying true to our medical strategy off.

<unk> the right products at the right price consistently in stock and for the right patient segments.

During the quarter, our BZ door, just site became index Liz of medical and cultivation facility.

Kraft and small batch cannabis dedicated.

Two spectrum patients.

So Jos also exclusively and bulking, it had trimming old product, which.

Which is a deliberate investment to drive quality consistency and the spectrum patient experience.

We're also seeing continued growth among insured patients.

Registration.

20% year over year, and almost tripling since 2021.

This continued growth speak to the reliability and care within our medical business.

Luc Mongeau: This continued growth speak to the reliability and care within our medical business. Looking ahead, delivering a superior patient experience remains central to how we will continue to growing this business despite proposed government changes to medical reimbursement. In international markets, frankly, I'm disappointed with our performance during the quarter, where net revenues declined CAD 3 million. Performance in Europe was primarily the result of supply constraint and internal process challenges. Lower source from sales in Europe did not meet required quality standard and internal process gaps limited our ability to deliver supply to Germany from our Canadian GMP facilities. I want to be clear, Canopy Growth is fully committed to the European market. We have already mobilized a dedicated effort to improve supply chain execution, which includes daily management, oversight of logistics, product roadmaps, and licensing.

Looking ahead, delivering a superior patient experience remains central to all we will continue to growing this business. Despite proposed government changes to Medicare reimbursement.

And.

So markets.

Frankly, I am disappointed whatever our performance during the quarter, where net revenues declined $3 million.

Performance in Europe was primarily the result of supply constrained and internal process challenges.

Lower source sales in Europe.

Mitra required quality standards.

An internal process gaps limited our ability to deliver supplies to Germany from a Canadian GMP facilities.

I want to be clear.

Therapy growth is fully committed to the European market.

We have already Bob Bobby.

Mobilize a dedicated effort to improve supply chain execution, which includes daily management oversight of logistics product Roadmaps and licensee.

Speaker #1: In Europe did not meet required quality standard and internal process gaps limited our ability to deliver supply to Germany from our Canadian GMP facilities .

Speaker #1: On international . I know we've talked about it . You know , in the past . I just want to , you know , bring it up again in terms of , you know , your current supply chain .

Speaker #1: It's still happy with , you know , some reliance on third party products . Obviously you guys have some of your own products .

We expect operations to stabilize or begin improving as we exit exit the fiscal year with international markets remaining a key part of our path to profitability.

Luc Mongeau: We expect operations to stabilize and begin improving as we exit the fiscal year, with international markets remaining a key part of our path to profitability. At Storz & Bickel, the launch of the new VEAZY Vaporizer was received with great enthusiasm by consumers globally and generated early sales momentum, helping contribute to sequential quarter-over-quarter revenue growth. While the VEAZY only contributed to 3 weeks of performance during the quarter, we're seeing positive signals into Q3, and together with holiday seasonality, expect continued growth through a remainder of the year. Looking ahead, I'm encouraged by the momentum at Storz & Bickel. The team's commitment to precision engineering, medical-grade quality, and design excellence continues to set the brand apart, and that's what will drive performance in the long run.

Speaker #1: You can also export internationally. Do you feel like there's any need to increase the verticality? You know, that you have to supply the international markets because of some of the supply chain issues?

Speaker #1: I want to be clear Canopy Growth Corp is fully committed to the European market . We have already mobilized a dedicated effort to improve supply chain execution , which includes daily management , oversight of logistics , product roadmaps and licensing .

Speaker #1: Or do you feel like there's still a lot of opportunity to find ? Quality product to sufficiently meet the potential demand ? In international markets ?

Storz <unk> bickel the launch of the UV easy Vaporizer was received with great enthusiasm by consumers globally and generated early sales momentum, helping contribute to sequential quarter over quarter revenue growth.

Speaker #1: Thanks .

Speaker #2: Yeah . Some of our thank you for the question . And good morning . Some of the challenges came from Flower Source out of out of Portugal .

Speaker #1: We expect operations to stabilize and begin improving as we exit , exit the fiscal year with international markets remaining a key part of our path to profitability .

Speaker #2: So we're we're out of this right now . As I said earlier , we have plenty of capacity within our own GMP . A Canadian GMP facilities .

While <unk> contributed three weeks our performance during the quarter were seeing positive signals into Q3 and together with all of these seasonality expect continued growth through the remainder of the year.

Speaker #1: As stores and because the launch of the new Veev easy vaporizer was received with great enthusiasm by consumers globally and generated early sales momentum , helping contribute to sequential quarter over quarter revenue growth .

Speaker #2: So we're confident that we will be able to supply from our own source grown flower . We're not writing off having third party flower in the future , but right now we're really retooling the entire route to market with our own grown flower , which we have enough capacity for the foreseeable future .

Looking ahead I'm encouraged by the momentum that storz <unk> bickel.

The team's commitment to pursue precision engineering medical grade quality and design excellence continues to set the brand apart and that's what will drive performance in the long run.

Speaker #1: While the VC only contributed to three weeks of performance during the quarter , we're seeing positive signals into Q3 and together with holiday seasonality , expect continued growth through remainder of the year .

On our priority expenses.

Speaker #1: Okay , great . Thanks for that , Luke . Second , you made some nice progress on the profitability you mentioned continued progress towards positive EBITDA .

Luc Mongeau: On operating expenses, our SG&A savings program, launched earlier this fiscal, has delivered over CAD 21 million in annualized savings, surpassing our CAD 20 million target ahead of schedule. As we build a culture of fiscal responsibility, the team continues to identify additional savings opportunities while delivering top-line growth. On profitability, we made strong progress this quarter with margin expansion and disciplined cost management that's moving us closer to positive adjusted EBITDA. We're also taking further steps to meaningfully lower our cost of goods sold through streamlining processes, smart investment to deliver improved yield and quality, as well as tighter supplier management. Before I close, I'd like to touch on the Canadian federal government's recent proposal to reduce reimbursement for veterans who use prescribed medical cannabis. These proposed changes have the potential to seriously impact access and quality of the care and services that veterans have come to rely on.

SG&A savings program launched earlier this fiscal as delivered over $21 million.

Speaker #1: Looking ahead , I'm encouraged by the momentum at stores and Beco , the team's commitment to precision engineering , medical grade quality and design excellence continues to set the brand apart .

Annualized savings.

<unk>.

Speaker #1: Any updates in terms of some of the key levers and timing of when you might expect to get to profitability ? I know something that you guys have stopped doing in terms of specific timelines , but but fair to say you'd be disappointed if you didn't achieve it in some time of calendar 2026 .

Surpassing our $20 million target ahead of schedule.

As would be able to cope culture of fiscal responsibility. The team continues to identify additional savings opportunities, while delivering top line growth.

Speaker #1: And that's what will drive performance in the long run . On a priority expenses . Our savings program launched earlier this fiscal as delivered over 21 million in annualized savings , surpassing our 20 million target ahead of schedule as we build a culture of fiscal responsibility .

Speaker #1: Your fiscal year at the back half or front half of 27 . Thanks .

On profitability, we made strong progress this quarter with margin expansion and disciplined cost management, that's moving us closer to positive adjusted EBITDA.

Speaker #3: I would say , Aaron , we're controlling what we can control . And right now the cost savings measures were taken . We know will empower us to to get to a improved adjusted EBITDA performance .

We're taking further steps to be meaningfully lower our cost of goods sold through streamlining processes.

Speaker #3: I think it's too early to speculate at this point in terms of when that would be . But I think , as you can see from the results , this has been our strongest quarter .

Speaker #1: The team continues to identify additional savings opportunities while delivering top line growth on profitability . We made strong progress this quarter with margin expansion and disciplined cost management .

Smart investment to deliver improved yield and quality as well as tight or supplier management.

Speaker #3: While albeit a loss , it's our it's our narrowest loss that we've had to date . In my recent memory . So I think you're the changes .

Speaker #3: We're we're making in the organization is going to fully support that . And we'll we'll keep pushing as much as we can here .

Before I close I'd like to touch on the Canadian Federal government's recent proposal to reduce reimbursement for veterans, who use prescribe medical cannabis.

Speaker #1: That's moving us closer to positive adjusted EBITDA. We're also taking further steps to meaningfully lower our cost of goods sold through streamlining processes, smart investments to deliver improved yield and quality, as well as tighter supplier management.

Speaker #2: Yeah . If I may add , on top of this positive adjusted EBITDA is our main and remains our main priority . That's why we're overindexing and really retooling Europe to make sure we fire on all cylinders .

These proposed changes of the potential to seriously embark access and quality of the care and services that veterans of come to rely on.

As one of Canada's leading medical cannabis providers.

Speaker #4: Ladies and gentlemen , as a reminder , if you have any questions , please press star one . The next question comes from Federico Gomez at ATB Capital Markets .

Luc Mongeau: As one of Canada's leading medical cannabis providers, we believe consistency and fairness in access to care is critical. We're continuing to assess the proposed changes and are engaging across the country to ensure the needs of patients remain front and center. In closing, Q2 demonstrated continued progress across our core businesses, including positive momentum in our Canadian medical and adult use businesses, an expanded product lineup at Storz & Bickel, and a clear action plan on the way to improve execution in our international markets to drive future success. As we further sharpen our focus on quality, patient and consumer experiences, and disciplined execution, I'm confident we have the right strategy, focus, and team to become a trusted global provider of elevated cannabis experiences. Thank you. I will now turn the call over to Tom to walk through the financial results in more detail.

We believe consistency and fairness and access to care is critical.

Speaker #1: Before I close , I'd like to touch on the Canadian federal government's recent proposal to reduce reimbursement for veterans who use prescribed medical cannabis .

We're continuing to assess the proposed changes and are engaging across the country to ensure that needs of patients remain front and center.

Speaker #4: Please go ahead .

Speaker #5: Good morning . Thanks for taking the questions . First question just given the growth that you're seeing in your cannabis platform , the outlook for for an adult use Canadian Medical international medical as well .

Speaker #1: These proposals changes have the potential to seriously impact access and quality of the care and services that veterans have come to rely on .

In closing.

Q2 demonstrate our continued progress across our core businesses.

<unk>.

Speaker #5: How are you looking at your capacity right now ? Do you foresee any any need to invest in additional capacity ? I guess in the near future , like meaningful investments ?

Speaker #1: As one of Canada's leading medical cannabis providers . We believe consistency and fairness in access to care is critical . We're continuing to assess the proposed changes and are engaging across the country to ensure the needs of patients remain front and center .

We have momentum in our Canadian medical adult adult use businesses.

Expanded product lineup at stores that vehicle.

Speaker #5: You know , if the business keeps growing .

And it's clear action plan underway to improve execution in our international markets to drive future success.

Speaker #2: Good morning . Thank you for the question . As I'm as I mentioned , and we're doing smart investment to really unlock yield and quality of the flower that we're growing in our own facilities .

As we further sharpened our focus on quality patient and consumer experiences and disciplined execution.

Speaker #1: In closing , Q2 demonstrate a continued progress across our core businesses , including positive momentum in our Canadian medical and adult use businesses , and expanded product line up at stores and Beco and the Clear Action Plan on the way to improve execution in our international markets to drive future success .

Speaker #2: We've looked at this large and wide . We're confident with limited investment , that we can meet the demand and meet the growth targets that we have .

We have the right strategy focus and team to become a trusted global provider of elevated cannabis experiences.

Thank you I will now turn the call over to Tom to walk through the financial results in more detail.

Speaker #3: So yeah , thanks . Thanks for the question , Fred . Yeah , we believe our our footprint primarily with our cultivation and is sufficient to meet our needs .

Thank you Luke and good morning, everyone.

Speaker #1: As we further sharpen our focus on quality patient and consumer experiences and discipline execution . I'm confident we have the right strategy , focus and team to become a trusted global provider of elevated cannabis experiences .

I am proud of our disciplined execution, including stronger financial performance rigorous cost saving initiatives and significantly deleveraged balance sheet and sustained cash flow improvements.

Tom Stewart: Thank you, Luc, and good morning, everyone. I am proud of our disciplined execution, including stronger financial performance, rigorous cost-saving initiatives, a significantly deleveraged balance sheet, and sustained cash flow improvements. Our adjusted EBITDA loss narrowed significantly year over year, driven by growth in the Canadian cannabis business, along with lower SG&A expenses and efficiency gains. As a result of the progress made, we have eliminated the conditions that once raised substantial doubt about the company's ability to continue as a going concern. This is a significant accomplishment for Canopy Growth. We had CAD 298 million of cash and cash equivalents as of 30 September 2025, which exceeded debt balances by CAD 70 million. During Q2, we prepaid $50 million US dollars on our senior secured term loan, capturing roughly $6.5 million US dollars in annualized interest savings.

Speaker #3: A lot of the focus and investment that we're making is really to improve our yield and the quality of our flower coming out of that facility.

Speaker #3: But we wouldn't expect a significant amount of additional capital investment needed to meet the demand . So I think it's again , it's executing with the with the assets that we have and improving utilization across the board .

Our adjusted EBITDA loss narrowed significantly year over year, driven by growth in our Canadian cannabis business, along with lower SG&A expenses and efficiency gains.

Speaker #1: Thank you . I will now turn the call over to Tom to walk through the financial results in more detail .

As a result of the progress made we have eliminated the conditions that once raise substantial doubt about the company's ability to continue as a going concern.

Speaker #5: Thank you . And then just a second question , just on the I guess related to that balance sheet , now in a net cash position , you obviously you have access to capital , your good position here , but I guess if you could talk about the .

Speaker #2: Thank you , Luke , and good morning everyone . I am proud of our disciplined execution , including stronger financial performance , rigorous cost saving initiatives , and significantly deleveraged balance sheet and sustained cash flow improvements .

This is a significant accomplishment for canopy growth.

We had $298 million of cash and cash equivalents as of September 32025, which exceeded that balances by $70 million.

Speaker #5: Capital allocation priorities that you have now that you have significantly reduced debt, thanks.

Speaker #2: Our adjusted EBITDA loss narrowed significantly year over year , driven by growth in the Canadian cannabis business , along with lower SG&A expenses and efficiency gains as a result of the progress made , we have eliminated the conditions that , once raised substantial doubt about the company's ability to continue as a going concern .

During Q2, we prepaid 50 million U S dollars on our senior secured term loan capturing roughly $6 5 million U S dollars in annualized interest savings.

Speaker #3: Yeah . So from my view , Fred , the 300 million of cash with no near-term debt obligations , it really provides further optionality for us when it comes to evaluating our capital structure and evaluating potential investment opportunities to grow and strengthen our business .

As a reminder, the company has no significant debt maturities prior to September 2027.

Tom Stewart: As a reminder, the company has no significant debt maturities prior to September 2027. Moving to our detailed segment results and starting with cannabis. Q2 cannabis net revenue was CAD 51 million, up 12% compared to a year ago. This growth was led by the Canadian adult use business, up 30% year over year, primarily driven by strong consumer demand for our Claybourne infused pre-rolls and our new Tweed all-in-one vape offerings. Canada Medical also continued to perform well, up 17% from the prior year, supported by growth in patient registrations, larger order volumes, and a broader assortment of products on our Spectrum Therapeutics store. International cannabis sales underperformed during Q2, decreasing 39% from the prior year, which was driven by supply challenges.

Speaker #2: This is a significant accomplishment for Canopy Growth . We had $298 million of cash and equivalents as of September 30th , 2025 , which exceeded that balances by 70 million during Q2 .

Moving to our detailed segment results and starting with canvas.

Speaker #3: The cash also provides us with flexibility to capitalize on on these potential opportunities , but also mitigate risks as market conditions fluctuate . As we all know , cannabis is a highly volatile space , so I think for for right now , we we're we're evaluating potential accretive options that that are out there .

Youtube cannabis net revenue was $51 million up 12% compared to a year ago.

This growth was led by the Canadian adult use business.

Speaker #2: We prepaid 50 million USD on our senior secured term loan , capturing roughly 6.5 million USD in annualized interest savings . As a reminder , the company has no significant debt maturities prior to September 2027 .

30% year over year, primarily driven by strong consumer demand for our Claiborne infused pre rolls and our new tweet all on one day offerings.

Speaker #3: But ultimately, we want to make sure we remain resilient, stabilize this company, and focus on the business that we have today.

Canada Medical also continued to perform well up 17% from the prior year supported by growth in patient registrations larger water volumes and a broader assortment of products on our spectrum therapeutics store.

Speaker #4: Thank you . The next question comes from Pablo Zuanic at Zurich and Associates . Please go ahead .

Speaker #2: Moving to our detailed segment results and starting with cannabis Q2 Cannabis net revenue was 51 million , cash up 12% compared to a year ago .

Speaker #6: Thank you and good morning , everyone . Look , I will ask my two questions up front . One on the vape launch .

International cannabis sales underperformed during Q2 decreasing 39% from the prior year, which was driven by supply challenges.

Speaker #2: This growth was led by the Canadian Adult use business , up 30% year over year , primarily driven by strong consumer demand for our Claiborne infused pre-rolls and our new tweed all in one vape offerings .

Speaker #6: I mean , obviously the Claiborne launching pre-rolls has been very successful . Can you give more color in terms of the vape launch ?

While we expect this decline in sales to improve in the back half of the year, we are proactively identifying opportunities to mitigate the near term impact on revenue and preserve our focus on consolidated profitability.

Tom Stewart: While we expect this decline in sales to improve in the back half of the year, we are proactively identifying opportunities to mitigate the near term impact on revenue and preserve our focus on consolidated profitability. Cannabis gross margin in Q2 was 31%, down year-over-year, but up sequentially from 24% in Q1. The sequential improvement in cannabis gross margin primarily reflects the impact of price increases on select Canadian products, improved sales mix within Canada, and improvements to flower and fulfillment costs. These improvements were partially offset by the previously discussed European underperformance and inventory provisions. I will now speak about the performance of our Storz & Bickel segment. Storz & Bickel net revenue in Q2 was CAD 16 million, up 5% sequentially, driven by strong consumer demand for the new VEAZY vaporizer.

Speaker #6: Is it just in all in one so that you also planning in 510 cartridges ? Are we talking all in ones just in distillates or also live resin or live rosin liquid diamonds , if you can just give more color on how you think about the category , especially in terms of room for innovation and also the price competition there , there's been a bit of a race to the bottom .

Speaker #2: Canada medical also continued to perform well , up 17% from the prior year , supported by growth in patient registrations , larger order volumes , and a broader assortment of products on our spectrum .

<unk> gross margin in Q2 was 31% down year over year, but up sequentially from 24% in Q1.

Speaker #2: Therapeutics store . International cannabis sales underperformed during Q2 , decreasing 39% from the prior year , which was driven by supply challenges . While we expect this decline in sales to improve in the back half of the year , we are proactively identifying opportunities to mitigate the near-term impact on revenue and preserve our focus on consolidated profitability .

The sequential improvement in Canada gross margin, primarily reflects the impact of price increases on select Canadian products improved sales mix within Canada and improvements to flower and fulfillment costs.

Speaker #6: It seems , on all in ones . That's in terms of vape , in terms of my second question is more in terms of the US business .

These improvements were partially offset by the previously discussed European underperformance and inventory provisions.

Speaker #6: I know that you've said , look , the US is more of a long term opportunity , and I understand that , but it would help if you can give a , you know , an update in terms of where things stand with canopy USA , especially in terms of any help you had to give to acreage in terms of balance sheet or guarantees .

Speaker #2: Cannabis gross margin in Q2 was 31% , down year over year , but up sequentially from 24% in Q1 . The sequential improvement in cannabis gross margin primarily reflects the impact of price increases on select Canadian products , improved sales mix within Canada , and improvements to flower and fulfillment costs .

I will now speak about the performance of our stores and vehicle segment.

Storz <unk> Bickel net revenue in Q2 was $16 million up 5% sequentially driven by strong consumer demand for the new BZ vaporizer.

Year over year revenue declined 10% as the prior year period benefited from strong <unk> and <unk> sales as well as strong performance on the back of favorable German regulatory reforms.

Speaker #6: I think in the past , the company bought debt from AFC gamma . I don't know what happened recently . The June quarter or September quarter in terms of help , acreage operate , especially from a balance sheet and cash flow .

Tom Stewart: Year over year, revenue declined 10% as the prior year period benefited from strong Venty and Mighty sales, as well as strong performance on the back of favorable German regulatory reforms. Storz & Bickel gross margins increased to 38% in Q2 compared to 32% in the prior year period. Gross margins in the prior year were adversely impacted by discounts provided to clear out the remaining Mighty stock, which was retired in favor of the MIGHTY+ device. Moving on to operating expenses. SG&A expenses in Q2 declined 13% year over year, reflecting disciplined cost management and the benefits of our ongoing restructuring program. The decline in SG&A expenses year over year was primarily driven by reductions in headcount and professional fees, partially offset by higher investments in advertising and promotions made in support of new product launches that occurred during the quarter.

Speaker #2: These improvements were partially offset by the previously discussed European underperformance and inventory provisions. I will now speak about the performance of our stores and vehicle segment. Stores and Becle net revenue in Q2 was $16 million, up 5% sequentially, driven by strong consumer demand for the new VS vaporizer.

Stores in Deco gross margins increased to 38% in Q2 compared to 32% in the prior year period.

Speaker #6: Thank you .

Speaker #2: Yeah , good morning . Hope you're doing well . Let's start with the vapes . And Tom will jump in for for the US .

Gross margins in the prior year were adversely impacted by discounts provided to clear out the remaining money stock, which was retired in favor of the Mighty plus device.

Speaker #2: So we're thrilled with the the early results . We're getting with our all in one . So as I mentioned we launched Tweed seven Acres .

Speaker #2: Year-over-year revenue declined 10% as the prior year period benefited from strong Venti and Mighty sales, as well as strong performance on the back of favorable German regulatory reforms.

Moving onto operating expenses.

SG&A expenses in Q2 declined 13% year over year, reflecting disciplined cost management and the benefits of our ongoing restructuring program.

Speaker #2: We did really well . We actually ran out of stock . So we had to to accelerate replenishment of first wave . As I mentioned , we're launching we're about to launch Claiborne in all in one vapes as a first first entry .

Speaker #2: Stores and gross margins increased to 38% in Q2 , compared to 32% in the prior year period . Gross margins in the prior year were adversely impacted by discounts provided to clear out the remaining mighty stock , which was retired in favor of the Mighty Plus device .

The decline in SG&A expenses year over year was primarily driven by reductions in head count and professional fees, partially offset by higher investments in advertising and promotions made in support of new product launches that occurred during the quarter.

Since launching our cost saving initiatives in March we have achieved $21 million in annualized savings exceeding our initial $20 million target.

Speaker #2: We're we're very encouraged by the gross margins that we're able to achieve with these with these products . So we're putting out there product of superior quality .

Speaker #2: Moving on to operating expenses . CA expenses in Q2 declined 13% year over year , reflecting disciplined cost management and the benefits of our ongoing restructuring program .

Tom Stewart: Since launching our cost-saving initiatives in March, we have achieved CAD 21 million in annualized savings, exceeding our initial CAD 20 million target. We are continuing to identify and implement additional cost reductions to further improve our structure while ensuring no disruption to our core capabilities and ability to execute in key markets. Turning to adjusted EBITDA. Our Q2 loss was CAD 3 million, compared to a loss of CAD 6 million a year ago. The year-over-year improvement was driven in part by the positive impact of our lower cost base and improved margins, partially offset by the negative impact of lower international cannabis revenues and inventory provisions. I'd like to now review our cash flow. Free cash flow was an outflow of CAD 19 million in Q2 fiscal 2026, down from an outflow of CAD 56 million in the same period last year.

We are continuing to identify and implement additional cost reductions to further improve our structure, while ensuring no disruption to our core capabilities and ability to execute in key markets.

Speaker #2: The decline in SG&A expenses year over year was primarily driven by reductions in headcount and professional fees , partially offset by higher investments in advertising and promotions made in support of new product launches that occurred during the quarter .

Speaker #2: So we're pricing them appropriately . And they've been they've been marked margin accretive for us as it comes to the full spectrum of live resin and so on .

Turning to adjusted EBITDA, our Q2 loss was $3 million compared to a loss of $6 million a year ago.

Speaker #2: Distillate and liquid diamonds and everything . There's more developments to that will that will come there . We're committed to being a leader in all in one vapes .

The year over year improvement was driven in part by the positive impact of our lower cost base and improved margins, partially offset by the negative impact of lower international cannabis revenues and inventory permissions.

Speaker #2: Since launching our cost saving initiatives in March , we have achieved 21 million in annualized savings , exceeding our initial $20 million target .

Speaker #2: We are continuing to identify and implement additional cost reductions to further improve our structure , while ensuring no disruption to our core capabilities and ability to execute in key markets .

Speaker #2: It is a key market , key growing , key growing market . So more more news to come there . Make sure to try the the new the new Claiborne all in ones as the as they come out .

I'd like to now review our cash flow.

Free cash flow was an outflow of $19 million in Q2 fiscal 'twenty.

Down from an outflow of $56 million in the same period last year.

Speaker #2: Turning to adjusted EBITDA . Our Q2 loss was 3 million compared to a loss of 6 million a year ago . The year over year improvement was driven in part by the positive impact of our lower cost base and improved margins , partially offset by the negative impact of lower international cannabis revenues and inventory provisions .

The year over year decrease in free cash flow is primarily driven by a reduction in cash interest payments as a result of our debt pay downs as well as year over year improvements in working capital.

Speaker #2: I was able to sample them this week and you know it's it's what we stand for as superior elevated experiences with quality products and those deliver on all of that .

Tom Stewart: The year-over-year decrease in free cash flow is primarily driven by a reduction in cash interest payments as a result of our debt pay downs, as well as year-over-year improvements in working capital. For fiscal 2026, we expect to achieve significant improvement in free cash flow, driven primarily by a reduction in cash interest costs due to lower debt balances, tighter management of working capital, and improved financial performance. I'd like to now provide our outlook and priorities for the remainder of fiscal 2026. In our cannabis business, we expect improved performance in our Canada adult use channel over the remainder of fiscal 2026, driven by a robust innovation pipeline, a focused product formats, and tight alignment with cannabis boards and retailers. We will continue to monitor developments around the Canadian federal government's proposed changes to the medical cannabis reimbursement program for veteran and RCMP patients.

For fiscal 'twenty, six we expect to achieve significant improvement in free cash flow driven primarily by a reduction in cash interest costs due to lower debt balances tighter management of working capital and improved financial performance.

Speaker #2: Tom, you want to give some insights about the U.S.

Speaker #2: I'd like to now review our cash flow free cash flow was an outflow of 19 million in Q2 fiscal 26 , down from an outflow of 56 million in the same period last year .

Speaker #3: Yeah , sure . So so Pablo , a couple points within your US question there . So there are no guarantees between Canopy Growth and Canopy USA .

I'd like to now provide our outlook and priorities for the remainder of fiscal 'twenty.

Speaker #3: So canopy USA is an independently run and managed enterprise . They did have new financing over the summer from a from from their lender .

Speaker #2: The year over year decrease in free cash flow is primarily driven by a reduction in cash interest payments as a result of our debt , paydowns , as well as year over year improvements in working capital for fiscal 26 , we expect to achieve significant improvement in free cash flow , driven primarily by a reduction in cash interest costs due to lower debt balances , tighter management of working capital , and improved financial performance .

And our cannabis business, we expect improved performance in our Canada adult use channel over the remainder of fiscal 'twenty six driven by a robust innovation pipeline, a focused product formats and tighter alignment with cannabis boards and retailers.

Speaker #3: And the team has been working diligently to , to deploy that that capital in the areas where they see the highest return overall .

Speaker #3: Their focus now is on on execution and really bringing the three companies together and executing well in the US space . But to be clear , there's no funding , new or otherwise , with canopy USA and Canopy Growth .

We will continue to monitor developments around the Canadian federal governments for poaching proposed changes to the medical cannabis reimbursement program for veteran an Rcmp patients.

Speaker #2: I'd like to now provide our outlook and priorities for the remainder of fiscal 26 . In our cannabis business , we expect improved performance in our Canada adult use channel over the remainder of fiscal 26 , driven by robust innovation pipeline of focused product formats and tight alignment with cannabis boards and retailers .

As more information becomes available and should the bunch of pass we will assess its impact on our business and what our next steps may be.

Tom Stewart: As more information becomes available, should the budget pass, we will assess its impact on our business and what our next steps may be. Excluding any impact of these potential changes, we would expect Canada medical cannabis top line to continue to grow in the H2 of fiscal 2026. In international markets cannabis, we are focused on stabilizing and realigning operations in Europe. For the remainder of fiscal 2026, we expect revenue in the region to remain generally consistent with the Q2 levels, with growth expected as we exit the fiscal year. In Australia, we anticipate that our recently launched flower products, along with upcoming new format introductions, will support continued sequential growth in the H2 of the fiscal year.

Speaker #4: This concludes Canopy Growth's second quarter fiscal 2026 financial results . Conference call a replay of this conference call will be available until February 5th , 2026 , and can be accessed following the instructions provided in the company's press release issued earlier today .

Excluding any impact of these potential changes we would expect we would expect Canada medical cannabis topline to continue to grow in the back half of fiscal 'twenty.

Speaker #2: We will continue to monitor developments around the Canadian federal government's proposed proposed changes to the medical cannabis Reimbursement program for veteran and RCMP patients , as more information becomes available .

In international markets cannabis, we are focused on stabilizing and realigning operations in Europe.

For the remainder of fiscal 'twenty six we expect revenue in the region to remain generally consistent with the second quarter levels with growth expected as we exit the fiscal year.

Speaker #2: And should the budget pass , we will assess its impact on our business and what our next steps may be . Excluding any impact of these potential changes , we would expect , we would expect Canada medical cannabis top line to continue to grow in the back half of fiscal 26 .

In Australia, we anticipate that our recently launched flower products, along with upcoming new format introductions.

<unk> continued sequential growth in the second half of the fiscal year.

The stores in backhaul, we expect stronger performance over the remainder of fiscal 'twenty six driven by the successful launch of the VZ at the end of our second quarter. That's one of the strength coming from the holiday selling season.

Speaker #2: In international markets , cannabis . We are focused on stabilizing and realigning operations in Europe for the remainder of fiscal 26 . We expect revenue in the region to remain generally consistent with the second quarter levels , with growth expected as we exit the fiscal year in Australia , we anticipate that our recently launched flower products , along with upcoming new format introductions , will support continued sequential growth in the second half of the fiscal year for stores and becle .

Tom Stewart: For Storz & Bickel, we expect stronger performance over the remainder of fiscal 2026, driven by the successful launch of the VEAZY at the end of our Q2, as well as strength coming from the holiday selling season. However, the year-over-year comparisons are likely to be challenged due to the ongoing economic uncertainty that exists, particularly in the US, and the negative impact this is having on consumer sentiment. While US tariffs have created pressure on Storz & Bickel's profitability, we remain focused on mitigating their impact through disciplined cost management and operational efficiencies. Turning to cannabis gross margins. Excluding the potential impact to Canadian medical reimbursement levels, we expect sequential improvement in cannabis gross margins over the remainder of fiscal 2026, driven by top line growth and additional production efficiencies and cost savings.

However, the year over year comparisons are likely to be challenged due to the ongoing economic uncertainty that exist, particularly in the U S and the negative impact this is having on consumer sentiment while.

While U S tariffs of ink have created pressure on stores in Pecos profitability, we remain focused on mitigating their impact through disciplined cost management and operational efficiencies.

Speaker #2: We expect stronger performance over the remainder of fiscal 26 , driven by the successful launch of the VC . At the end of our second quarter , as well as strength coming from the holiday selling season .

Turning to cannabis gross margins, excluding the potential impact of Canadian medical reimbursement levels, we expect sequential improvement in cannabis gross margins over the remainder of fiscal 'twenty, six driven by topline growth and additional production efficiencies and cost savings.

Speaker #2: However , the year over year comparisons are likely to be challenged due to the ongoing economic uncertainty that exists , particularly in the US and the negative impact this is having on consumer sentiment .

Speaker #2: While US tariffs have have created pressure on stores and vehicles profitability , we remain focused on mitigating their impact through disciplined cost management and operational efficiencies .

And our outlook for Storz <unk> Bickel gross margins, we expect sequential improvement over the remainder of fiscal 'twenty driven.

Tom Stewart: In our outlook for Storz & Bickel gross margins, we expect sequential improvement over the remainder of fiscal 2026, driven primarily by top line growth and cost saving initiatives. As we move into the H2 of the year, our priorities remain firmly grounded in execution, efficiency, and disciplined financial stewardship. The deliberate actions we have taken to improve our operations, launch exciting new products in core categories, strengthen the balance sheet, and reduce costs have materially reinforced Canopy's foundation for long-term stability and growth. This concludes my prepared remarks. We will now take questions.

Driven primarily by top line growth and cost saving initiatives.

As we move into the second half of the year, our priorities remain firmly grounded in execution efficiency and disciplined financial stewardship. The deliberate actions, we have taken to improve our operations launch exciting new products in core categories strengthen the balance sheet and reduce costs have materially reinforced cannot be found.

Speaker #2: Turning to cannabis gross margins , excluding the potential impact to Canadian medical reimbursement levels , we expect sequential improvement in cannabis gross margins over the remainder of fiscal 26 , driven by top line growth and additional production efficiencies and cost savings in our outlook for stores and gross margins , we expect sequential improvement over the remainder of fiscal 26 , driven primarily by top line growth and cost saving initiatives .

<unk> for long term stability and growth.

This concludes my prepared remarks, we will now take questions.

Thank you.

Speaker #2: As we move into the second half of the year , our priorities remain firmly grounded in execution , efficiency and disciplined financial stewardship .

Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on your Touchtone phone.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the 1 on your touch-tone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the 2. If you are using a speakerphone, please lift the handset before pressing any keys. We do ask that you please limit yourself to 2 questions. Should you have additional questions, you may press star 1 again to rejoin the question queue. The first question comes from Bill Kirk at ROTH Capital Partners. Please go ahead.

Speaker #2: The deliberate actions we have taken to improve our operations , launch exciting new products in core categories , strengthen the balance sheet and reduce costs , have materially reinforced Canopy's foundation for long term stability and growth .

You will hear comps that you had has been waste if you wish to claim from the polling process. Please press star followed by the Q if.

Thank you Ms Speakerphone, please lift the handset before pressing any case.

We do ask that you. Please limit yourself to two questions should you have additional questions. You May press star one again to be join the question queue.

Speaker #2: This concludes my prepared remarks . We will now take questions .

Speaker #3: Thank you . Ladies and gentlemen , we will now begin the question and answer session . Should you have a question , please press the star followed by the one on your touchtone phone .

The first question comes from Bill Cook at Roth Capital Partners. Please go ahead.

Speaker #3: You will hear a prompt that your hand has been raised . If you wish to decline from the polling process , please press star followed by two .

Good morning, everybody at Luke you talked about the supply chain challenges impacting international I know you mentioned quality standard.

Bill Kirk: Good morning, everybody. Luc, you talked about the supply chain challenges impacting international. I know you mentioned quality standards. What specifically do you have to change to reopen that pipeline? Is the solution going to be more costly than the prior product path into the German market?

Speaker #3: If you are using a speakerphone , please lift your handset before pressing any keys . We do ask that you please limit yourself to two questions .

But what specifically do you have to change to reopen that pipeline and its the solution going to be more costly than the prior product path into the German market.

Speaker #3: Should you have additional questions , you may press star one again to rejoin the question queue . The first question comes from Bill Kirk at Roth Capital Partners .

Okay.

Good morning, Thank you for the.

Speaker #3: Please go ahead .

Question.

Speaker #4: Good morning everybody . Luke , you talked about the supply chain challenges impacting international . I know you mentioned quality standards , but what specifically do you have to change to reopen that pipeline .

Luc Mongeau: Good morning. Thank you for the question. Let me just give you a bit more context, Andy. I've been in the business with 9 months. We pretty much started the transformation on the organization on day 1. I'm thrilled overwhelmingly with everything that's happening in the business, and we see it in the results today. We're driving growth on Canadian medical and adult use business. Margin is improving sequentially. Cost control, we're well ahead of targets and chasing for more. Our supply chain is improving. As I said, Europe, sadly, I'm disappointed, and I thought we would be ahead in the transformation. That being said, we're on it. We've moved to, as I mentioned, a daily management oversight of the situation.

Let me, let me just give you a bit more bulk context, so a bit the business with nine months.

Pretty much started the transformation of the organization on day one.

Trails overwhelmingly with with everything Thats happening in the business and we sit in the results to date, so where we're driving growth on our Canadian medical and adult use.

Speaker #4: And is the solution going to be more costly than the prior product path into the German market ?

Speaker #1: Good morning . Thank you for the the question . Let me let me just give you a bit more , more context . And so a bit of business with nine months , we pretty much started the transformation on the organization on day one .

Business.

Margin is improving sequentially cost control we're.

We're well ahead of our objective.

Targets at chasing or or our supply chain is improving as I said Europe, sadly I'm disappointed and I thought we would be ahead of the transformation.

Speaker #1: I'm thrilled . Overwhelmingly with with everything that's happening in the business . And we see it in the results today . So we're we're driving growth in Canadian medical and adult use business .

That being said.

We're on it.

Speaker #1: Margin is improving sequentially . Cost control were well ahead of objectives of targets and chasing for more supply chain is improving . As I said , Europe , sadly I'm disappointed and I thought we would be ahead in the transformation .

We've moved to <unk> as I've mentioned, a daily management oversight.

Of the situation.

We're retooling.

<unk>.

Luc Mongeau: We're retooling the route to market end-to-end, and we're making significant progress. Let me get now to the specific of your question. We're retooling to a place where we will be able to satisfy European demand for the foreseeable future from our Canadian GMP facilities. Tom Stewart, please feel free to jump in while I'm done, but I do not see any increases in the cost of the flower that we will be providing to Europe. We should be able to achieve superior margin there in the quarters to come. I see us, you know, the outlook for me is a much stronger position as we exit the fiscal year. Tom Stewart, anything to add?

The route to market.

And to add Andrew.

We're making significant progress.

Let me go now to the specifics of your question. So we're retooling to a place where we will be able to satisfy European demand.

Speaker #1: That being said , we're on it . We've moved to I . As I mentioned , a daily management oversight of the situation .

For the foreseeable future.

Aged.

Speaker #1: We're retooling the route to market end to end , and we're making significant progress . Let me get now to the specific of your question .

<unk> P facilities.

So Tom please feel free to jump in while I'm, Doug, but I do not see any increases in the cost of the floor word that we will be providing too.

Speaker #1: So we're retooling to a place where we will be able to satisfy European demand for the foreseeable future from our Canadian GMP facilities .

To Europe, so we should be able to achieve superior margins.

They're in the <unk>.

Quarters, two commented as we.

I see us.

The outlook for me as a much stronger position as we exit.

Speaker #1: So , Tom , please feel free to jump in while I'm done . But I do not see any increases in the cost of the flour that we will be providing to to Europe .

The fiscal <unk>.

Fiscal year, so Tom anything to add.

I think the only only thing I would I would say there's not a lot of additional investment. This is about execution with the assets that we have today.

Speaker #1: So we should be able to achieve superior margin there and in the quarters to come . And as we I see us , you know , the outlook for me is a much position as we exit the fiscal fiscal year .

Tom Stewart: No, I think the only thing I would say, Bill, is there's not a lot of additional investment. This is about execution with the assets that we have today. We also need to make sure, you know, we have a proper supply coming out of Kincardine. Overall, this is a story of execution, and Luc and I are managing this quite closely.

So we also need to make sure where we have a proper supply coming out of kick garnered but overall. This is a story of execution and Luke and I are managing this quite closely absolutely and if I may add as you can see by the amount of time, we're spending up. This this is extremely important to us and we're extremely close to situation.

Speaker #1: So , Tom , anything to add ?

Luc Mongeau: Absolutely. If I may add, as you can see by the amount of time we're spending on this is extremely important to us, and we're extremely close to situation. We're expanding the number of strains we are growing for Europe, which allows us to broaden our portfolio of products significantly. At the same time, we are broadening our distribution retail offering in Europe, which as well will open up the market for us quite significantly.

Speaker #2: No , I think the only other thing I would I would say is there's not a lot of additional investment . This is about execution with the assets that we we have today .

We're expanding.

The number of strains we are growing for Europe, which allows us to broaden our portfolio of products significantly at the same time, we are broadening our.

Speaker #2: So we also need to make sure we're , you know , we have a proper supply coming out of China . But overall , this is a story of execution .

Speaker #2: And Luke and I are managing this quite closely .

Speaker #1: Absolutely . If I may add , as you can see by the amount of time we're spending on this , this is really important to us .

Our distribution.

Retail.

Offering.

Speaker #1: And we're extremely close to situation . We're expanding the number of strains we are growing for Europe , which allows us to broaden our folio products of .

In Europe, which as well, we'll open up the market for us quite significantly.

Thank you. Thank you for that both and then Tom the ATM was used pretty aggressively in <unk> can you talk about the decision to use it now and in that size and then given the magnitude in the quarter. How should we think about issuance going forward is it done.

Bill Kirk: Thank you. Thank you for that, both. Tom, the ATM was used pretty aggressively in Q2. Can you talk about the decision to use it now and in that size? Given the magnitude in the quarter, how should we think about issuance going forward? Is it done?

Yeah, So I would say.

We're continuously evaluating our capital requirements and funding strategies.

Tom Stewart: I would say, Bill, we're continuously evaluating our capital requirements and funding strategies to ensure we have an optimal capital structure and that balances cost efficiency with financial flexibility. You know, you're aware we launched the new program at the end of August. You know, ultimately for us, we wanna make sure we have that optionality in the market. I think it wouldn't be appropriate to speculate on how it would be used. We have the program in place to the extent we need to draw on it. We're acting prudently with those proceeds.

To ensure we have an optimal.

Capital structure.

And the balances cost efficiency with financial flexibility.

You know you are aware, we launched a new program at the at the end of August.

Ultimately for US we want to make sure we have that optionality in the market.

I think it would be.

It wouldn't be appropriate to speculate on how it would be use we have the program in place to the extent, we need to draw on it but we're active prudently with with those proceeds.

The next question comes from Aaron Grey at Alliance Global Partners. Please go ahead.

Operator: The next question comes from Aaron Grey at Alliance Global Partners. Please go ahead.

Hi, Thank you for the questions first question for me just wanted to double back a bit on international I know, we've talked about it you know in the past just wanted to bring it up again in terms of your current supply chain or are they still happy with us.

Aaron Grey: Hi. Thank you for the questions. First question from me, just wanted to double back a bit on international. I know we've talked about it, you know, in the past. Just wanted to, you know, bring it up again in terms of, you know, your current supply chain. Are they still happy with, you know, some reliance on third-party products? You guys have some of your own product you can also export internationally. Do you feel like there's any need to increase the verticality, you know, that you have to supply the international markets because of some of the supply chain issues? Or do you feel like there's still a lot of opportunity to find, you know, quality product to sufficiently meet the potential demand in international markets? Thanks.

Some reliance on third party product.

So you guys have some of your own pocket you can also export internationally do you feel like there's any need to increase the Britta County that you have to supply international markets because of some of the supply chain issues or do you feel like Theres still a lot of opportunity to find quality product to sufficiently meet the potential demand in international markets.

Yes, some of our thank you for the question, Eric and good morning.

Luc Mongeau: Yeah, some of our, thank you for the question, Aaron, and good morning. Some of the challenges came from flower source out of Portugal. We're out of this right now. As I said earlier, we have plenty of capacity within our own GMP Canadian GMP facilities. We're confident that we will be able to supply from our own source grown flower. We're not writing off having third-party flower in the future, right now we're really retooling the entire route to market with our own grown flower, which we have enough capacity for the foreseeable future.

All of the challenges came from flowers source of.

Operator: Good morning. My name is Joanna, and I will be your conference operator today. I would like to welcome you to Canopy Growth's second quarter fiscal 2026 financial results conference call. Currently, all participants are in a listen-only mode. I will now turn the call over to Tyler Burns, Director of Investor Relations. Tyler, you may begin the conference call.

Out of Portugal, So where are we are out of this right now as I said earlier, we have plenty of capacity within our all in G&P Canadian GMP facilities. So we're confident that we will be able to supply from our own source of growth.

Tyler Burns: Good morning, and thank you for joining us. On our call today, we have Canopy Growth's Chief Executive Officer, Luc Mongeau, and Chief Financial Officer, Tom Stewart. Before financial markets opened today, Canopy Growth issued a news release announcing the financial results for our second quarter fiscal 2026 ended 30 September 2025. The news release and financial statements have been filed on EDGAR and SEDAR and will be available on our website under the Investors tab. Before we begin, I would like to remind you that our discussion during the call will include forward-looking statements that are based on management's current views and assumptions, and that this discussion is qualified in its entirety by the cautionary note regarding forward-looking statements included at the end of the news release issued today.

Flowers.

Not of writing off.

Having third party flower in the future, but right now were really retooling the.

Intaglio route to market with our own growth flower, which we have enough capacity for the foreseeable future.

Okay, great Thanks that Luke.

Second you made some nice progress on the profitability.

Aaron Grey: Okay, great. Thanks for that, Luc. Second, you made some nice progress on the profitability. You know, mentioned continued progress towards positive EBITDA. You know, any updates in terms of, you know, some of the key levers and timing of when you might expect to get to profitability? I know it's something that you guys, you know, have stopped doing in terms of specific timelines, but fair to say you'd be disappointed, you know, if you didn't achieve it in some time of calendar 2026, you know, fiscal year, either back half or front half of 2027. Thanks.

You mentioned.

Continued progress towards positive EBITDA.

In terms of you know from the key levers and timing of when you might expect to get the profitability I know, it's something that you guys have seen.

Top two in terms of specific timelines, but fair to say you'd be disappointed if you didn't achieve it in sometime in calendar 2026, your fiscal year or the back half or front half of 'twenty Kevin. Thanks.

Tyler Burns: Please review today's earnings release and Canopy's reports filed with the SEC and SEDAR for various factors that could cause actual results to differ materially from projections. In addition, reconciliations between any non-GAAP measures to their closest reported GAAP measures are included in our earnings release. Please note that all financial information is provided in Canadian dollars unless otherwise stated. Following remarks by Luc and Tom, we will conduct a question-and-answer session, where we will take questions from analysts. With that, I'll turn the call over to Luc.

I would say Aaron Berg controlling what we can control and right now the cost savings measures were taken we know will empower us to to get to a improved adjusted EBITDA performance I think it's too early to speculate at this point in terms of when that would be but I think as you can see from the results. This has been our strongest quarter.

Tom Stewart: I would say, Aaron Grey, we're controlling what we can control. Right now the cost savings measures we're taking, we know will empower us to get to a improved adjusted EBITDA performance. I think it's too early to speculate at this point in terms of when that would be. I think as you can see from the results, this has been our strongest quarter. While albeit a loss, it's our narrowest loss that we've had to date in my recent memory. I think the changes we're making in the organization is gonna fully support that. We'll keep pushing as much as we can here.

Being a loss at <unk>.

Our narrower loss that we've had.

To date in my recent memory. So I think your the changes we're making in the organization is going to fully support that and.

Well, we'll keep pushing as much as we can here if I may add on top of this.

Luc Mongeau: Good morning, everyone, and thank you for joining us today. It's great to be with you again to share the continued progress we're making in building a competitive, profitable, and trusted leader in the global cannabis market. The second quarter was one of our strongest to date, reflecting real, measurable progress driven by our continued disciplined focus on fundamentals. Key highlights included continued momentum in our Canadian adult-use cannabis business, consistent growth in our Canadian medical cannabis business, and a stronger, and significantly healthier, balance sheet. Together, these actions give me confidence in our ability to sustain progress and deliver results for quarters to come. Turning to our Canadian adult-use cannabis business, net revenue increased 30% year-over-year in Q2, driven by demand for our labor-infused pre-rolls and our new all-in-one vapes from Tweed and 7ACRES.

Positive adjusted EBITDA as our main and remains our main priority. That's why we're over indexing and really retooling Europe to make sure we fire on all cylinders.

Luc Mongeau: Yeah, if I may add on top of this, positive adjusted EBITDA is our main and remains our main priority. That's why we're over-indexing and really retooling Europe to make sure we fire on all cylinders.

Ladies and gentlemen.

Wonder if you have any questions. Please press star one. The next question comes from Federico Gomez at HED capital markets. Please go ahead.

Operator: Ladies and gentlemen, as a reminder, if you have any questions, please press star one. The next question comes from Frederico Gomes at ATB Capital Markets. Please go ahead.

Good morning, Thanks for taking the questions.

First question just.

Frederico Gomes: Morning. Thanks for presenting the questions. First question, just, you know, given the growth that you're seeing in your cannabis platform, you know, the outlook for natural use, Canada medical, International medical as well, how are you looking at your capacity right now? You know, do you foresee any need to invest in additional capacity, I guess, in the near future, like meaningful investments, you know, if the business keeps growing?

Given the growth that you're seeing in air Canada's platform, you're on your outlook for Fortinet bookings they need a medical international medical as well how are you looking at your capacity right now and you'll do you foresee any any need to invest in additional capacity I guess in your future like meaningful investments if the business keeps growing.

Good morning, Thank you put a question.

As I mentioned, we're doing smart investment to really unlock yield and quality of the flowered at we're growing in our own facility.

Luc Mongeau: Good morning. Thank you for the question. As I mentioned, we're doing smart investment to really unlock yield and quality of the flower that we're growing in our own facilities. We've looked at this large and wide. We're confident with limited investment, that we can meet the demand and meet the growth targets that we have.

Facilities.

We've looked at this large and why we're confident with limited investment.

That we can meet the demand and meet the growth targets that we have so yeah. Thanks. Thanks for the question Fred Yes, we believe our footprint, primarily with our cultivation and concurrently is sufficient to meet our needs a lot of the focus and investment that we're making is really to improve.

Luc Mongeau: Stronger relationships with Canadian boards, large accounts, and independent retailers drove continued distribution gains, including a 20% year-over-year distribution increase among Alberta independent retailers. We also improved our service levels with on-time, in-full fill rates across key accounts, reinforcing our reliability with retail partners. For a six-month period ending 30 September 2025, revenue is up 37% compared to the same period last year. This growth reflects the renewed momentum of our adult-use cannabis business following the actions taken earlier this year to tighten our product portfolio, streamline execution with boards and retailers, and refine our sales model. Looking ahead, we're building on this momentum with additional Claybourne innovation, new genetics across our core flower portfolio and PRJ brands, and plans to reach a broader group of consumers later this year.

Tom Stewart: Yeah. Thanks. Thanks for the question, Fred. Yeah, we believe our footprint, primarily with our cultivation in Kincardine is sufficient to meet our needs. A lot of the focus and investment that we're making is really to improve our yield and the quality of our flower coming out of that facility. We wouldn't expect a significant amount of additional capital investment needed to meet the demand. I think it's, again, it's executing with the assets that we have and improving utilization across the board.

Our our yield and the quality of our flower coming out of that facility, but we wouldn't expect a significant amount of additional capital investment needed to meet the demand. So I think it's again, it's executing with the with the assets that we have an improving utilization across the board.

Thank you and then I guess the second question just on the I guess related to that balance sheet.

Frederico Gomes: Thank you. Then just a second question, just on the, I guess related to that, you know, balance sheet now and net cash position. You obviously have access to capital and you're in a good position here, but I guess if you could talk about the capital allocation priorities that you have now significantly reduced the debt. Thanks.

Cash position.

You, obviously have access to capital position here, but I guess, if you could talk about the capital allocation priority that you have now that you have no significantly we can instead of that thanks.

So from my view fried items of 300 million of cash with no near term debt obligations.

Tom Stewart: Yeah. From my view, Fred, the CAD 300 million of cash with no near-term debt obligations, it really provides, you know, further optionality for us when it comes to evaluating our capital structure and evaluating potential investment opportunities to grow and strengthen our business. The cash also provides us with flexibility to capitalize on these potential opportunities, also mitigate risks as market conditions fluctuate. As we all know, cannabis is a highly volatile space. I think for right now we're evaluating potential creative options that are out there, ultimately we wanna make sure we remain resilient and stabilize this company and focus on the business that we have today.

It really provides further optionality for us when it comes to evaluating our capital structure and evaluate.

And in potential investment opportunities to grow and strengthen our business.

The cash also provides us with flexibility to capitalize on on these potential opportunities, but also mitigate risks as market conditions fluctuate as we all know it's cannabis is a highly volatile space.

Luc Mongeau: We're also elevating our cultivation standards, including manual and refined post-harvest processes, to deliver superior flower, ensuring consumers experience the very best of what Canopy has to offer. In our Canadian medical cannabis business, net revenue grew 17% year-over-year, marking another consecutive quarter of growth. We're staying true to our medical strategy, offering the right products at the right price, consistently in stock, and for the right patient segments. During the quarter, our BC Doja site became an exclusive medical cultivation facility, producing craft and small-batch cannabis dedicated to Spectrum patients. Doja is also exclusively N-bucking and hand-trimming all products, which is a deliberate investment to drive quality and consistency in the Spectrum patient experience. We're also seeing continued growth among insured patients, with registration up 20% year-over-year and almost tripling since 2021. This continued growth speaks to the reliability and care within our medical business.

So I think for right now we were evaluating potential.

Accretive options that are out there, but ultimately we want to make sure we remain resilient and stabilize the company and focus on the business that we have today.

Thank you. The next question comes from Pablo <unk> Associates. Please go ahead.

Operator: Thank you. The next question comes from Pablo Zuanic at Zuanic & Associates. Please go ahead.

Thank you and good morning, everyone.

I will ask my two questions upfront.

Pablo Zuanic: Thank you, good morning, everyone. Look, I will ask my two questions upfront. One on the vape launch. I mean, obviously the Claybourne launching pre-rolls has been very successful. Can you give more color in terms of the vape launch? Is it just in all-in-ones, or are you also planning 5, 10 cartridges? Are we talking all-in-ones just in distillates, or also live resin or live rosin, liquid diamonds? If you can just give more color on how you think about the category, especially in terms of room for innovation and also the price competition there. There's been a bit of a race to the bottom, it seems, on all-in-ones. That's in terms of vape. In terms of my second question is more in terms of the US business.

One on the Vape launch I mean, obviously the big labels launching three rules has been very successful can you give more co loading dose, though the Babe launch you suggest.

In the all in ones that are you also planning and <unk> cartridges are we talking only ones just in distillates and also late worsen or like Wilson.

Daimon, Steve you can just give more color on how you think about the category, especially in terms of the room for innovation and also the price competition. There there's been a bit of a race to the bottom it seems on a all in ones does industrial Babe.

In terms of my second question is more in terms of the.

The U S business I know that you've said look the U S is more of a long term opportunity and I understand that.

Pablo Zuanic: I know that you said, Luc, the US is more of a long-term opportunity. I understand that. It would help if you can give, you know, an update in terms of where things stand with Canopy USA, especially in terms of any help you had to give to Acreage in terms of balance sheet or guarantees. I think in the past, the company bought debt from AFC Gamma. I don't know what's happened recently in the Q2 or Q3 in terms of help Acreage operate, especially from a balance sheet and cash flow perspective. Thank you.

But it would help if you can give us.

An update in terms of where things done we'd kind of be USA.

Especially in terms of any help you had to give to our acreage in terms of our balance sheet or the guarantees I think in the past.

Luc Mongeau: Looking ahead, delivering a superior patient experience remains central to how we will continue growing this business despite proposed government changes to medical reimbursement. In international markets, frankly, I'm disappointed with our performance during the quarter where net revenues declined $3 million. Performance in Europe was primarily the result of supply constraints and internal process challenges. Flower sourced from sales in Europe did not meet required quality standards, and internal process gaps limited our ability to deliver supply to Germany from our Canadian GMP facilities. I want to be clear: Canopy Growth is fully committed to the European market. We have already mobilized a dedicated effort to improve supply chain execution, which includes daily management oversight of logistics, product roadmaps, and licensing. We expect operations to stabilize and begin improving as we exit the fiscal year, with international markets remaining a key part of our path to profitability.

The company both dead from AFC Gama I don't know what happened recently in the June quarter or September quarter, industrial Bob he'll bakeries operate, especially from a balance sheet and cash flow perspective. Thank you.

Hey, good morning, Okay, well, let's start with the base and Tom will jump in for a for the U S. So we're thrilled with the.

Luc Mongeau: Yeah, good morning. Hope you're doing well. Let's start with the vapes and Tom will jump in for the US. We're thrilled with the early results we're getting with our all-in-one. As I mentioned, we launched Tweed, 7ACRES. We did really well. We actually ran out of stock, we had to accelerate replenishment of first wave. As I mentioned, we're launching, we're about to launch Claybourne an all-in-one vapes as a first first entry. We're very encouraged by the gross margins that we're able to achieve with these with these products. We're putting out their product of superior quality, we're pricing them appropriately. They've been margin accretive for us.

The early results we're getting.

With all were all at once so as I imagined, we launched a tween southern acres, we did really well we actually are running out of stock. So we have to to accelerate replenish metal first wave.

I imagine we're launching.

We're about to launch.

Lay bar and all in one our base as a first a first century.

We're we're very encouraged by the gross margins that we're able to achieve with.

With these.

With these products, so we're putting out their product of superior quality, so where pricing Deb.

Appropriately and they've been they've been bulk margin accretive.

So as it comes to the full spectrum of live arise and then saw a distillate that's liquid diamonds and everything there is more developments to that will that will come there with <unk>.

Luc Mongeau: As it comes to the full spectrum of live resin and so on, distillate and liquid diamonds and everything, there's more developments that will come there. We're committed to being a leader in all-in-one vapes. It is a key market, key growing market. More news to come there. Make sure to try the new Claybourne all-in-ones as they come out. I was able to sample them this week, you know, it's what we stand for, a superior, elevated experiences with quality products and those deliver on all of that. Tom, you wanna give some insights about the US?

Committed to being a leader.

Luc Mongeau: At Storz & Bickel, the launch of the new Venty vaporizer was received with great enthusiasm by consumers globally and generated early sales momentum, helping contribute to sequential quarter-to-quarter revenue growth. While the Venty only contributed to three weeks of performance during the quarter, we're seeing positive signals into Q3, and together with holiday seasonality, I expect continued growth through the remainder of the year. Looking ahead, I'm encouraged by the momentum at Storz & Bickel. The team's commitment to precision engineering, medical-grade quality, and design excellence continues to set the brand apart, and that's what will drive performance in the long run. On operating expenses, our SG&A savings program, launched earlier this fiscal, has delivered over CAD 21 million in annualized savings, surpassing our CAD 20 million target ahead of schedule. As we build a culture of fiscal responsibility, the team continues to identify additional savings opportunities while delivering top-line growth.

And all in one and base. It is a key market key growing Q.

Two growing markets, so more news to come there and make sure to try it.

Then you then you play Aborn OLED wants us.

As they come out that was able to assemble that this weekend.

Yeah.

It's what we stand for a superior elevated.

<unk> says with quality products at dose that live for.

Although Tom you want to give some insights about the U S. Yes, sure. So so probably a couple points within your question. There. So that there are no guarantees between canopy growth and canopy USA. So canopy USA is an independently run and managed and.

Tom Stewart: Yeah, sure. Pablo, a couple points within your US question there. There are no guarantees between Canopy Growth and Canopy USA. Canopy USA is an independently run and managed enterprise. They did have new financing over the summer from their lender, and the team has been working diligently to deploy that capital in the areas where they see the highest return. Overall, their focus now is on execution and really bringing the three companies together and executing well in the US space. To be clear, there's no funding, new or otherwise, with Canopy USA and Canopy Growth.

Bryce they did have new financing over the summer from a from from their lender and the team has been working diligently to deploy that capital in the areas, where they see the highest return.

Overall their focus now is on execution and really bringing the three companies together and executing well in the U S space, but to be clear, there's no funding newer otherwise with canopy, USA and Canada growth.

This concludes canopy growth's second quarter fiscal 2026 financial results conference call.

Operator: This concludes Canopy Growth's Q2 fiscal 2026 financial results conference call. A replay of this conference call will be available until 5 February 2026 and can be accessed following the instructions provided in the company's press release issued earlier today. Canopy Growth's investor relations team will be available to answer additional questions. Thank you for attending today's call.

Play up this conference call will be available until February 13, 2026, and can be accessed following the instructions provided in the company's press release issued earlier today.

Luc Mongeau: On profitability, we made strong progress this quarter with margin expansion and disciplined cost management that's moving us closer to positive adjusted EBITDA. We're also taking further steps to meaningfully lower our cost of goods sold through streamlining processes, smart investment to deliver improved yield and quality, as well as tighter supplier management. Before I close, I'd like to touch on the Canadian federal government's recent proposal to reduce reimbursement for veterans who use prescribed medical cannabis. These proposed changes have the potential to seriously impact access and quality of the care and services that veterans have come to rely on. As one of Canada's leading medical cannabis providers, we believe consistency and fairness in access to care is critical. We're continuing to assess the proposed changes and are engaging across the country to ensure the needs of patients remain front and center.

Pay closest Investor relations team will be available to answer additional questions. Thank you for attending today's call.

Luc Mongeau: In closing, Q2 demonstrated continued progress across our core businesses, including positive momentum in our Canadian medical and adult-use businesses, an expanded product lineup at Thorson Bickel, and a clear action plan on the way to improve execution in our international markets to drive future success. As we further sharpen our focus on quality, patient and consumer experiences, and disciplined execution, I'm confident we have the right strategy, focus, and team to become a trusted global provider of elevated cannabis experiences. Thank you. I will now turn the call over to Tom to walk through the financial results in more detail.

Tom Stewart: Thank you, Luc, and good morning, everyone. I am proud of our disciplined execution, including stronger financial performance, rigorous cost-saving initiatives, a significantly deleveraged balance sheet, and sustained cash flow improvements. Our adjusted EBITDA loss narrowed significantly year-over-year, driven by growth in the Canadian cannabis business, along with lower SG&A expenses and efficiency gains. As a result of the progress made, we have eliminated the conditions that once raised substantial doubt about the company's ability to continue as a going concern. This is a significant accomplishment for Canopy Growth. We had CAD 298 million of cash and cash equivalents as of 30 September 2025, which exceeded debt balances by CAD 70 million. During Q2, we prepaid $50 million on our senior secured term loan, capturing roughly $6.5 million in annualized interest savings. As a reminder, the company has no significant debt maturities prior to September 2027.

Tom Stewart: Moving to our detailed segment results and starting with cannabis. Q2 cannabis net revenue was CAD 51 million, up 12% compared to a year ago. This growth was led by the Canadian adult-use business, up 30% year-over-year, primarily driven by strong consumer demand for our Claybourne infused pre-rolls, and our new Tweed all-in-one vape offerings. Canada medical also continued to perform well, up 17% from the prior year, supported by growth in patient registrations, larger order volumes, and a broader assortment of products on our Spectrum Therapeutics store. International cannabis sales underperformed during Q2, decreasing 39% from the prior year, which was driven by supply challenges. While we expect this decline in sales to improve in the back half of the year, we are proactively identifying opportunities to mitigate the near-term impact on revenue, and preserve our focus on consolidated profitability.

Tom Stewart: Cannabis gross margin in Q2 was 31%, down year-over-year, but up sequentially from 24% in Q1. The sequential improvement in cannabis gross margin primarily reflects the impact of price increases on select Canadian products, improved sales mix within Canada, and improvements to flower and fulfillment costs. These improvements were partially offset by the previously discussed European underperformance and inventory provisions. I will now speak about the performance of our Thorson Bickel segment. Thorson Bickel net revenue in Q2 was $16 million, up 5% sequentially, driven by strong consumer demand for the new VZ Vaporizer. Year-over-year, revenue declined 10% as the prior year period benefited from strong Venty and Mighty sales, as well as strong performance on the back of favorable German regulatory reforms. Thorson Bickel gross margins increased to 38% in Q2 compared to 32% in the prior year period.

Tom Stewart: Gross margins in the prior year were adversely impacted by discounts provided to clear out the remaining Mighty stock, which was retired in favor of the Mighty Plus device. Moving on to operating expenses. SG&A expenses in Q2 declined 13% year-over-year, reflecting disciplined cost management, and the benefits of our ongoing restructuring program. The decline in SG&A expenses year-over-year was primarily driven by reductions in headcount and professional fees, partially offset by higher investments in advertising and promotions made in support of new product launches that occurred during the quarter. Since launching our cost-saving initiatives in March, we have achieved CAD 21 million in annualized savings, exceeding our initial CAD 20 million target. We are continuing to identify and implement additional cost reductions to further improve our structure, while ensuring no disruption to our core capabilities and ability to execute in key markets.

Tom Stewart: Turning to adjusted EBITDA, our Q2 loss was $3 million compared to a loss of $6 million a year ago. The year-over-year improvement was driven in part by the positive impact of our lower cost base and improved margins, partially offset by the negative impact of lower international cannabis revenues and inventory provisions. I'd like to now review our cash flow. Free cash flow was an outflow of CAD 19 million in Q2, fiscal 2026, down from an outflow of CAD 56 million in the same period last year. The year-over-year decrease in free cash flow is primarily driven by a reduction in cash interest payments as a result of our debt paydowns, as well as year-over-year improvements in working capital.

Tom Stewart: For fiscal 2026, we expect to achieve significant improvement in free cash flow, driven primarily by a reduction in cash interest costs due to lower debt balances, tighter management of working capital, and improved financial performance. I'd like to now provide our outlook and priorities for the remainder of fiscal 2026. In our cannabis business, we expect improved performance in our Canada adult-use channel over the remainder of fiscal 2026, driven by a robust innovation pipeline, a focused product format, and tight alignment with cannabis boards, and retailers. We will continue to monitor developments around the Canadian federal government's proposed changes to the medical cannabis reimbursement program for veteran and RCMP patients. As more information becomes available, and should the budget pass, we will assess its impact on our business and what our next steps may be.

Tom Stewart: Excluding any impact of these potential changes, we would expect Canada Medical Cannabis top line to continue to grow in the back half of fiscal 2026. In international markets cannabis, we are focused on stabilizing and realigning operations in Europe. For the remainder of fiscal 2026, we expect revenue in the region to remain generally consistent with the second quarter levels, with growth expected as we exit the fiscal year. In Australia, we anticipate that our recently launched flower products, along with upcoming new format introductions, will support continued sequential growth in the second half of the fiscal year. For Thorson Bickel, we expect stronger performance over the remainder of fiscal 2026, driven by the successful launch of the VZ at the end of our second quarter, as well as strength coming from the holiday selling season.

Tom Stewart: However, the year-over-year comparisons are likely to be challenged due to the ongoing economic uncertainty that exists, particularly in the US, and the negative impact this is having on consumer sentiment. While US tariffs have created pressure on Thorson Bickel's profitability, we remain focused on mitigating their impact through disciplined cost management and operational efficiencies. Turning to cannabis gross margins, excluding the potential impact to Canadian medical reimbursement levels, we expect sequential improvement in cannabis gross margins over the remainder of fiscal 2026, driven by top-line growth, additional production efficiencies, and cost savings. In our outlook for Thorson Bickel gross margins, we expect sequential improvement over the remainder of fiscal 2026, driven primarily by top-line growth and cost-saving initiatives. As we move into the second half of the year, our priorities remain firmly grounded in execution, efficiency, and disciplined financial stewardship.

Tom Stewart: The deliberate actions we have taken to improve our operations, launch exciting new products in core categories, strengthen the balance sheet, and reduce costs have materially reinforced Canopy's foundation for long-term stability and growth. This concludes my prepared remarks. We will now take questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. We do ask that you please limit yourself to two questions. Should you have additional questions, you may press star one again to rejoin the question queue. The first question comes from Bill Kirk at Roth Capital Partners. Please go ahead.

Bill Kirk: Good morning, everybody. Luc, you talked about the supply chain challenges impacting international. I know you mentioned quality standards, but what specifically do you have to change to reopen that pipeline? Is the solution going to be more costly than the prior product path into the German market?

Luc Mongeau: Good morning. Thank you for the question. Let me just give you a bit more context, Andy. I have been in the business for nine months. We pretty much started the transformation on the organization on day one. I'm thrilled, overwhelmingly, with everything that's happening in the business, and we see it in the results today. We're driving growth in the Canadian medical and adult-use business. Margin is improving sequentially. Cost control, we're well ahead of targets, and chasing for more. Our supply chain is improving. As I said, Europe, sadly, I'm disappointed, and I thought we would be ahead in the transformation. That being said, we're on it. We've moved to, as I mentioned, a daily management oversight of the situation. We're retooling the route to market end-to-end, and we're making significant progress. Let me get now to the specifics of your question.

Luc Mongeau: We're retooling to a place where we will be able to satisfy European demand for the foreseeable future from our Canadian GMP facilities. Tom, please feel free to jump in when I'm done, but I do not see any increases in the cost of the flower that we will be providing to Europe. We should be able to achieve superior margin there in the quarters to come. As we see us, the outlook for me is a much stronger position as we exit the fiscal year. Tom, anything to add?

Tom Stewart: No, I think the only other thing I would say, Bill, is there's not a lot of additional investment. This is about execution with the assets that we have today. We also need to make sure we have a proper supply coming out of Kickern, but overall, this is a story of execution, and Luc and I are managing this quite closely.

Luc Mongeau: Absolutely. If I may add, as you can see by the amount of time we're spending on this, this is extremely important to us, and we're extremely close to the situation. We're expanding the number of strains we are growing for Europe, which allows us to broaden our portfolio of products significantly. At the same time, we are broadening our distribution retail offering in Europe, which as well will open up the market for us quite significantly.

Bill Kirk: Thank you. Thank you for that, both. Tom, the ATM was used pretty aggressively in Q2. Can you talk about the decision to use it now and in that size? Given the magnitude in the quarter, how should we think about issuance going forward? Is it done?

Tom Stewart: Yeah, I would say, Bill, we're continuously evaluating our capital requirements and funding strategies to ensure we have an optimal capital structure that balances cost efficiency with financial flexibility. You're aware we launched the new program at the end of August. Ultimately, for us, we want to make sure we have that optionality in the market. I think it wouldn't be appropriate to speculate on how it would be used. We have the program in place to the extent we need to draw on it, but we're acting prudently with those proceeds.

Operator: The next question comes from Erin Gray at Alliance Global Partners. Please go ahead.

Erin Gray: Hi. Thank you for the questions. First question for me, just wanted to double back a bit on international. I know we've talked about it in the past. Just wanted to bring it up again in terms of your current supply chain. Are they still happy with some reliance on third-party products? You guys have some of your own product. You can also export internationally. Do you feel like there's any need to increase the verticality that you have to supply the international markets because of some of the supply chain issues? Do you feel like there's still a lot of opportunity to find quality product to sufficiently meet the potential demand in international markets? Thanks.

Luc Mongeau: Thank you for the question, Erin, and good morning. Some of the challenges came from flower source out of Portugal. We are out of this right now. As I said earlier, we have plenty of capacity within our own Canadian GMP facilities, so we are confident that we will be able to supply from our own source grown flower. We are not writing off having third-party flower in the future, but right now, we are really retooling the entire route to market with our own grown flower, which we have enough capacity for the foreseeable future.

Erin Gray: Okay. Great. Thanks for that, Luc. Second, you made some nice progress on the profitability. You mentioned continued progress towards positive EBITDA. Any updates in terms of some of the key levers and timing of when you might expect to get the profitability? I know it's something that you guys have stopped doing in terms of specific timelines, but fair to say you'd be disappointed if you didn't achieve it in some time of calendar 2026, your fiscal year either back half or front half of 2027? Thanks.

Tom Stewart: I would say, Erin, we're controlling what we can control. Right now, the cost savings measures we're taking, we know will empower us to get to an improved adjusted EBITDA performance. I think it's too early to speculate at this point in terms of when that would be, but I think, as you can see from the results, this has been our strongest quarter, well, albeit a loss. It's our narrowest loss that we've had to date in my recent memory. I think the changes we're making in the organization are going to fully support that, and we'll keep pushing as much as we can here.

Luc Mongeau: Yeah. If I may add on top of this, positive adjusted EBITDA is our main, and remains our main, priority. That's why we're over-indexing and really retooling Europe to make sure we fire on all cylinders.

Operator: Ladies and gentlemen, as a reminder, if you have any questions, please press star one. The next question comes from Federico Gomez at ATB Capital Markets. Please go ahead.

Erin Gray: Good morning. Thanks for taking the questions. First question, just given the growth that you're seeing in your cannabis platform, the outlook for inadvertent use, Canadian medical, international medical as well, how are you looking at your capacity right now? Do you foresee any need to invest in additional capacity, I guess, in the near future, like meaningful investments if the business keeps growing?

Luc Mongeau: Good morning. Thank you for the question. As I mentioned, we're doing smart investment to really unlock yield and quality of the flower that we're growing in our own facilities. We've looked at this large and wide. We're confident with limited investment that we can meet the demand and meet the growth targets that we have. Tom?

Tom Stewart: Yeah, thanks for the question, Fred. Yeah, we believe our footprint, primarily with our cultivation in Kickern, is sufficient to meet our needs. A lot of the focus and investment that we're making is really to improve our yield and the quality of our flower coming out of that facility. We wouldn't expect a significant amount of additional capital investment needed to meet the demand. I think, again, it's executing with the assets that we have and improving utilization across the board.

Erin Gray: Thank you. Just a second question, just on the, I guess, related to that, balance sheet now in a net cash position. You obviously have access to capital, and you're in a good position here. I guess if you could talk about the capital location priorities that you have now that you have no significantly reduced debt. Thanks.

Tom Stewart: Yeah. From my view, Fred, I think the $300 million of cash with no near-term debt obligations really provides further optionality for us when it comes to evaluating our capital structure and evaluating potential investment opportunities to grow and strengthen our business. The cash also provides us with flexibility to capitalize on these potential opportunities, and also mitigate risks as market conditions fluctuate. As we all know, cannabis is a highly volatile space. I think for right now, we're evaluating potential or creative options that are out there, but ultimately, we want to make sure we remain resilient, stabilize this company, and focus on the business that we have today.

Operator: Thank you. The next question comes from Pablo Zuanic at Zuanic & Associates. Please go ahead.

Pablo Zuanic: Thank you. Good morning, everyone. Luc, I will ask my two questions upfront. One, on the vape launch. I mean, obviously, the Claybourne infused pre-rolls launch has been very successful. Can you give more color in terms of the vape launch? Is it just an all-in-one? Are you also planning in 510 cartridges? Are we talking all-in-ones just in distillates, or also live resin or live rosin, liquid diamonds? If you can just give more color on how you think about the category, especially in terms of room for innovation, and also the price competition there, there's been a bit of a race to the bottom, it seems, on all-in-ones. That's in terms of vape. My second question is more in terms of the US business. I know that you've said, Luc, the US is more of a long-term opportunity, and I understand that.

Pablo Zuanic: It would help if you can give an update in terms of where things stand with Canopy USA, especially in terms of any help you've had to give to Acreage in terms of a balance sheet or guarantees. I think in the past, the company bought debt from AFC Gamma. I don't know what happened recently, the June quarter or September quarter, in terms of helping Acreage operate, especially from a balance sheet and cash flow perspective. Thank you.

Luc Mongeau: Hey, good morning. Hope you're doing well. Let's start with the vapes, and Tom will jump in for the US. We're thrilled with the early results we're getting with our all-in-one. As I mentioned, we launched at Tweed, 7ACRES. We did really well. We actually ran out of stock, so we had to accelerate replenishment of the first wave. As I mentioned, we're about to launch Claybourne infused pre-rolls in all-in-one vapes as a first entry. We're very encouraged by the gross margins that we're able to achieve with these products. We're putting out there product of superior quality, so we're pricing them appropriately, and they've been marginally accretive for us. As it comes to the full spectrum of live resin and so on, distillate and liquid diamonds and everything, there's more developments that will come there. We're committed to being a leader in all-in-one vapes.

Luc Mongeau: It is a key market, key growing market. More news to come there. Make sure to try the new Claybourne all-in-ones as they come out. I was able to sample them this week, and it's what we stand for: superior, elevated experiences with quality products, and those deliver on all of that. Tom, you want to give some insights about the US?

Tom Stewart: Yeah, sure. Pablo, a couple of points within your US question there. There are no guarantees between Canopy Growth and Canopy USA. Canopy USA is an independently run and managed enterprise. They did have new financing over the summer from their lender, and the team has been working diligently to deploy that capital in the areas where they see the highest return. Overall, their focus now is on execution and really bringing the three companies together, executing well in the US space. To be clear, there's no funding, new or otherwise, with Canopy USA and Canopy Growth.

Operator: This concludes Canopy Growth's second quarter fiscal 2026 financial results conference call. A replay of this conference call will be available until 5 February 2026 and can be accessed following the instructions provided in the company's press release issued earlier today. Canopy Growth's investor relations team will be available to answer additional questions. Thank you for attending today's call.