Q2 2026 Auxly Cannabis Group Inc Earnings Call

August 13, 2026

Speaker #1: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require me to assistance, please press star zero for the operator.

Speaker #1: This call is being recorded on Thursday, August 13, 2026. I would now like to turn the conference over to Mr. Hugo Alves, CEO. Please go ahead.

Speaker #2: Thank you. Good morning. I'm Hugo Alves, Auxly's Co-Founder and Chief Executive Officer. I'd like to welcome you all to Auxly Cannabis Group's Q2 2026 conference call and webcast.

Hugo Alves: Thank you. Good morning. I am Hugo Alves, Auxly's co-founder and Chief Executive Officer. I would like to welcome you all to Auxly Cannabis Group's Q2 2026 conference call and webcast. Joining me on this call today are Travis Wong, our Chief Financial Officer, and Mark Charbonneau, our Head of Investor Relations. Today, I will share highlights from the quarter. We will open up the call to questions from analysts and answer some questions that have come through the investor relations inbox over the last few days. Before we begin, I would like to remind you that our remarks may contain forward-looking information and actual results could differ materially. Forward-looking information is subject to many risks and uncertainties. Certain factors or assumptions applied in the forward-looking information can be found in our latest annual information form and management discussion and analysis. These documents are available on our website and at sedarplus.ca.

Hugo Alves: Thank you. Good morning. I am Hugo Alves, Auxly's co-founder and Chief Executive Officer. I would like to welcome you all to Auxly Cannabis Group's Q2 2026 Conference Call and Webcast. Joining me on this call today are Travis Wong, our Chief Financial Officer, and Mark Charbonneau, our Head of Investor Relations. Today, I will share highlights from the quarter. We will open up the call to questions from analysts and answer some questions that have come through the investor relations inbox over the last few days.

Speaker #2: Joining me on this call today are Travis Wong, our Chief Financial Officer, and Mark Charbin, our Head of Investor Relations. Today, I'll share highlights from the quarter, and then we'll open up the call to questions from analysts and answer some questions that have come through the investor relations inbox over the last few days.

Speaker #2: Before we begin, I'd like to remind you that our remarks may contain forward-looking information, and actual results could differ materially. Forward-looking information is subject to many risks and uncertainties.

Hugo Alves: Before we begin, I would like to remind you that our remarks may contain forward-looking information and actual results could differ materially. Forward-looking information is subject to many risks and uncertainties. Certain factors or assumptions applied in the forward-looking information can be found in our latest annual information form and management discussion and analysis. These documents are available on our website and at sedarplus.ca.

Speaker #2: Certain factors or assumptions applied in the forward-looking information can be found in our latest annual information form and management discussion and analysis. These documents are available on our website and at cedarplus.ca.

Speaker #2: More generally, if you have questions once the call is complete, please reach out to our investor relations. Our contact information can be found at the end of our earnings press release.

Hugo Alves: More generally, if you have questions once the call is complete, please reach out to our investor relations. Our contact information can be found at the end of our earnings press release. Moving on to our financial results. Our Q2 2026 financial results represented a quarterly record in net revenue, adjusted EBITDA, and cash flow from operations. Net revenue reached CAD 45.8 million, an increase of 18% year over year. Gross margin on finished cannabis inventory sold increased to 55%, up from 52% in Q2 2025. Adjusted EBITDA was CAD 14.3 million, an increase of 24% year over year, representing an EBITDA margin of 31%. Cash flow from operations before working capital changes reached CAD 13.4 million, an increase of 31% year over year and representing a 94% conversion from adjusted EBITDA.

Speaker #2: Moving on to our financial results, our Q2 2026 financial results represented a quarterly record in net revenue, adjusted EBITDA, and cash flow from operations.

Speaker #2: Net revenue reached $45.8 million, an increase of 18% year over year. Gross margin on finished cannabis inventory sold increased to 55%, up from 52% in Q2 2025.

Speaker #2: Adjusted EBITDA was $14.3 million, an increase of 24% year over year, representing an EBITDA margin of 31%, and cash flow from operations before working capital changes reached $13.4 million, an increase of 31% year over year, and representing a $94% conversion from adjusted EBITDA.

Speaker #2: Our net revenue growth is driven by continued strong demand for our core portfolio, led by back 40 strength in flour pre-rolls and vapes. Our gross margin reflects continuing improvements across our operating footprint, strategic procurement initiatives, and a favorable product mix.

Hugo Alves: Our net revenue growth is driven by continued strong demand for our core portfolio, led by Back Forty's strength in flower pre-rolls and vapes. Our gross margin reflects continuing improvements across our operating footprint, strategic procurement initiatives, and a favorable product mix. We believe that the operating leverage we are delivering is structural. We have the operating assets, the scale, and the cost discipline to deliver best-in-class margins, and these results demonstrate that. Our improved profitability is translating directly into cash flow with a 94% conversion rate between adjusted EBITDA and cash flow from operations before working capital. Our balance sheet remains strong, with CAD 38 million in cash and CAD 44 million in long-term debt. This cash balance also reflects the deployment of CAD 5.7 million in the quarter to repurchase 2.6 million post-consolidation shares through our active NCIB program.

Speaker #2: And we believe that the operating leverage we are delivering is structural. We have the operating assets, the scale, and the cost discipline to deliver best-in-class margins, and these results demonstrate that.

Speaker #2: Our improved profitability is translating directly into cash flow with a 94% conversion rate between adjusted EBITDA and cash flow from operations before working capital.

Speaker #2: Our balance sheet remains strong, with $38 million in cash and $44 million in long-term debt, this cash balance also reflects the deployment of $5.7 million in the quarter to repurchase $2.6 million post-consolidation shares through our active NCIB program.

Hugo Alves: Our balance sheet remains strong, with CAD 38 million in cash and CAD 44 million in long-term debt. This cash balance also reflects the deployment of CAD 5.7 million in the quarter to repurchase 2.6 million post-consolidation shares through our active NCIB program.

Speaker #2: And, of course, in July, we completed our 14-to-1 share consolidation—an important step forward in aligning our market profile with the quality of the business we have built.

Hugo Alves: Of course, in July, we completed our 14-to-one share consolidation, an important step forward in aligning our market profile with the quality of the business we have built. We are encouraged by the response from shareholders and the confidence that has been reflected in our share price performance since the consolidation took effect. Looking forward, our outlook for 2026 is unchanged. We believe Auxly can continue to grow net revenue above market rates through investments in distribution, innovation, and increased quality and capacity at Auxly Leamington. In July, we launched a new sativa cultivar under our Back Forty brand, Galactic Jack, and the early consumer response has been tremendous. We have additional innovations across our core categories planned for the seasonally stronger back half of the year.

Speaker #2: We are encouraged by the response from shareholders and the confidence that has been reflected in our share price performance since the consolidation took effect.

Speaker #2: Looking forward, our outlook for 2026 is unchanged. We believe Auxly can continue to grow net revenue above market rates through investments in distribution innovation and increased quality and capacity at Auxly Lealington.

Speaker #2: In July, we launched a new sativa cultivar under our Back Forty brand, Galactic Jack, and the early consumer response has been tremendous. We have additional innovations across our core categories planned for the seasonally stronger back half of the year.

Speaker #2: And we continue to invest in operational efficiency and maintain rigorous cost control across the organization to support continued profitability and we expect improved cash conversion through the reduction of interest expense and working capital to remain similar to last year with modest increases to support net revenue growth.

Hugo Alves: We continue to invest in operational efficiency and maintain rigorous cost control across the organization to support continued profitability. We expect improved cash conversion through the reduction of interest expense and working capital to remain similar to last year, with modest increases to support net revenue growth. In the outlook section of our Q2 MD&A, we have outlined a longer-term capital program of approximately CAD 30 million over the next three years to increase yield at Auxly Leamington by approximately 30% over 2025 levels. This program includes the CAD 10 to CAD 12 million we had previously guided towards for 2026. We are undertaking this expansion because of the continued strong demand we are seeing for our products, and the investments are expected to be funded comfortably from our cash from operations.

Speaker #2: In the outlook section of our Q2 MD&A, we have outlined a longer-term capital program of approximately $30 million over the next three years to increase yield at Auxly Leamington by approximately 30% over 2025 levels.

Speaker #2: This program includes the 10-to-10 10-to-12 million we had previously guided towards for 2026. We are undertaking this expansion because of the continued strong demand we are seeing for our products and the investments are expected to be funded comfortably from our cash from operations.

Speaker #2: Even with our improved capital markets posture, we believe our share price does not yet reflect the intrinsic value we have built. We have sufficient capacity and available cash from operations to continue repurchasing shares under our NCIB program as part of our discipline capital allocation framework, and we are committed to earning the confidence of our shareholders through execution and results.

Hugo Alves: Even with our improved capital markets posture, we believe our share price does not yet reflect the intrinsic value we have built. We have sufficient capacity and available cash from operations to continue repurchasing shares under our NCIB program as part of our disciplined capital allocation framework, and we are committed to earning the confidence of our shareholders through execution and results. To conclude, the Auxly team is focused and aligned in our pursuit of quality, innovation, and profitability. We are delighted with our record Q2 2026 results and seeing continued strong demand for our products as we head into the back half of the year. I'd like to thank our teams in Leamington, Charlottetown, and Toronto, whose commitment, passion, and resilience are the driving force behind Auxly's emergence as an industry leader. We are also grateful for the continued support of our shareholders, vendors, and partners.

Speaker #2: To conclude, the Auxly team is focused and aligned in our pursuit of quality innovation and profitability. We are delighted with our record 2 Q2 2026 results and seeing continued strong demand for our products as we head into the back half of the year.

Hugo Alves: We are delighted with our record Q2 2026 results and seeing continued strong demand for our products as we head into the back half of the year. I'd like to thank our teams in Leamington, Charlottetown, and Toronto, whose commitment, passion, and resilience are the driving force behind Auxly's emergence as an industry leader. We are also grateful for the continued support of our shareholders, vendors, and partners.

Speaker #2: I'd like to thank our teams in Leamington, Charlottetown, and Toronto, whose commitment, passion, and resilience are the driving force behind Auxly's emergence as an industry leader.

Speaker #2: We are also grateful for the continued support of our shareholders, vendors, and partners. We are building to last. We are excited about the future and believe the best is yet to come.

Hugo Alves: We are building to last. We are excited about the future and believe the best is yet to come. This concludes our prepared remarks. We're going to take calls from analysts, and then we'll answer questions that our investors have sent to us over the last few days. Operator, please open the call for questions. Thank you.

Speaker #2: This concludes our prepared remarks. We're going to take calls from analysts, and then we'll answer questions that are our investors have sent to us over the last few days.

Speaker #2: Operator, please open the call for questions. Thank you.

Speaker #1: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touch home phone.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should 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. Your first question comes from Neal Gilmer with Haywood Securities. Your line is now open.

Speaker #1: You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by 2.

Speaker #1: If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Neil Gilmer with Haywood Securities. Your line is now open.

Speaker #3: Yeah, thanks. Good morning and congrats on a good quarter here. Continues to look quite constructive and positive. Hugo, maybe if you could expand on both what you referenced in the MD&A about the 30% yield in Lealington, like sort of at the pretty significant jump, what sort of things are you planning on doing to sort of achieve that?

Neal Gilmer: Yeah, thanks. Good morning, and congrats on a good quarter here. Continues to look quite constructive and positive. Hugo, maybe if you could expand on both what you referenced in the MD&A about the 30% yield in Leamington. That's a pretty significant jump. What sort of things are you planning on doing to achieve that?

Speaker #2: Yeah, Neil, thanks. So, as discussed before, it is to build out additional post-harvest capabilities in Leamington and also to bring an additional grow zone online and add to the infrastructure, things like the HVAC that has to go into those pieces of infrastructure.

Hugo Alves: Yeah, Neal, thanks. As discussed before, it is to build out additional post-harvest capabilities in Leamington and also to bring an additional grow zone online and add to the infrastructure things like the HVAC that has to go into those pieces of infrastructure. But it is effectively additional cultivation and significant additional post-harvest capabilities. We are seeing very strong demand for our products, and I think as our demand picture becomes clearer and our thinking evolves, we thought it was right to share our longer-term ambitions with shareholders as they are constantly asking us for sort of our longer-term growth plans. We wanted to share those as they are baked into our strategic plan.

Speaker #2: But it's effectively additional cultivation and significant additional post-harvest capabilities. We're seeing very strong demand for our products, and I think as our demand picture becomes clear and our thinking evolves, we thought it was right to share our longer-term ambitions with shareholders as they are constantly asking us for sort of our longer-term growth plans.

Speaker #2: So we wanted to share those, as they are baked into our strategic plan.

Neal Gilmer: That is fair. Thank you for that. You say through to the end of 2028, so will we still start seeing some of those yield improvements in 2027?

Speaker #3: That's fair. Thank you for that. So you say through to the end of 2028, so will we still start seeing some of those yield improvements in 2027?

Speaker #2: Yes. Through the end of 2028 is when we'll have the whole thing kind of done, but you will see yield improvements throughout the course of that three-year period, of course.

Hugo Alves: Yes. Through the end of 2028 is when we will have the whole thing kind of done, but you will see yield improvements throughout the course of that three-year period, of course.

Speaker #3: Okay. Great. Thanks. Yeah, maybe turn it to the income statement here. I think it's 5 quarters in a row you're at an EBITDA margin of 31%.

Neal Gilmer: Okay, great. Thanks. Yeah, maybe turn to the income statement here. I think it is five quarters in a row you are at an EBITDA margin of 31%. Clearly it looks sustainable and clearly above most of the group in Canada. Sort of maybe elaborate a little bit on how you are able to achieve that, number one. But number two, do you feel that that continues to be sustainable? It is quite a good level, but I imagine with some of the dynamics in the market, there may be some challenges along the way. Maybe just talk a little bit about the puts and takes there between gross margin, operating leverage, and where you are ultimately achieving the EBITDA margin there.

Speaker #3: So clearly it looks sustainable and clearly above most of the group in Canada. Sort of maybe elaborate a little bit on how you're able to achieve that number 1, but number 2, do you feel that that's continued to be sustainable?

Speaker #3: It's quite a good level, but I imagine with some of the dynamics in the market, there may be some challenges along the way, maybe just talk a little bit about the puts and takes there between gross margin, operating leverage, and where you're ultimately achieving the EBITDA margin there.

Speaker #2: Yeah, sure. Hi, Neil. It's Travis here.

Travis Wong: Yeah, sure. Hi, Neal, it's Travis here. I think we break down the EBITDA margin overall as sustainable. It's really driven in our minds by three main components, of course, net revenue being the first one. We continue to guide that we will and target stronger than industry growth in that segment, driven by our innovation, our ability to read our consumers. We do believe that those revenue growth rates will continue to be above industry guidance. And there's a margin, I think this is where we really stand out. A lot of the improvements in our gross margin are structural in nature. We continue to see higher cultivation yields from last year. We've improved our manufacturing processes both at our Leamington facility and at Charlottetown facility.

Speaker #4: Yeah, I think we break down the EBITDA margin over a lot of sustainable. It's really driven in our minds by 3 main components. Of course, net revenue being the first one.

Speaker #4: We continue to guide that we will and target a stronger than industry growth in that segment. Driven by our innovation and our ability to read our consumers and we do believe that those revenue growth rates will continue to be above industry guidance.

Speaker #4: And here's the margin. I think this is where we really stand out. A lot of the improvements in our growth margin are structural in nature.

Speaker #4: So we continue to see higher cultivation yields from last year, we've improved our manufacturing processes both at our Lealington facility and at Charlottetown facility.

Speaker #4: And then lastly, we have engaged over the last 18 months in strategic procurement initiatives really lowering a lot of our inputs in our portfolio including for example, our API cost.

Travis Wong: Lastly, we have engaged over the last 18 months in strategic procurement initiatives, really lowering a lot of our inputs in our portfolio, including, for example, our vape API costs. Lastly, the SG&A is the final factor in protecting that EBITDA margin. We've always guided to maintaining SG&A growth at the same rate as revenue growth, particularly on an annual basis, and we continue to target that. We think that's achievable. As we get bigger, we will invest in our sales and marketing group, but we do think we've kind of figured out and right-sized our SG&A for the business that we're growing.

Speaker #4: And then lastly, the SG&A is the final factor in protecting that EBITDA margin. We've always guided to maintaining SG&A growth at the same rate as revenue growth, particularly on an annual basis.

Speaker #4: And we continue to target that. We think that that's achievable. As we get bigger, we will invest in our sales and marketing group, but we do think we've kind of figured out and right side our SG&A for the business that we're growing.

Speaker #3: Great. Thanks, Travis. Last one for me—maybe just what your current thoughts on international are, as far as obviously you're executing great in Canada.

Neal Gilmer: Great. Thanks, Travis. Last one from me, maybe just what your current thoughts on international are as far as obviously you're executing great in Canada. I know that's going to be your, or expect that's going to be your focus. Any thoughts or plans on looking at the international markets?

Speaker #3: I know that's going to be or expect that's going to be your focus. Any thoughts or plans on looking at the international markets?

Speaker #2: Yeah, Neil, I don't think our perspective on international has changed since the last time we spoke with shareholders. We believe in those markets. We believe in the long-term potential and growth opportunity there.

Hugo Alves: Yeah. I don't think our perspective on international has changed since the last time we spoke with shareholders. We believe in those markets. We believe in the sort of long-term potential and growth opportunity there. But we also believe that they're young markets, they're still very dynamic in terms of their regulatory framework, and things can change, dynamics can change very quickly, including pricing. So our strategy is to win at home. Obviously, our vision is to one day be a global leader, so we do think it is a part of our future. Right now, we're prioritizing the Canadian market. We're prioritizing winning at home. We see very, very strong demand. As you noted earlier, we're generating best-in-class margins. So we're comfortable with our strategic focus.

Speaker #2: But we also believe that they're young markets with their still very dynamic in terms of their regulatory framework and things can change. Dynamics can change very quickly including pricing.

Speaker #2: So our strategy is to win at home obviously our vision is to one day be a global leader. So we do think it is a part of our future.

Speaker #2: Right now we're prioritizing the Canadian market. We're prioritizing winning at home. We see very, very strong demand as you noted earlier. We're generating best-in-class margins.

Speaker #2: So we're comfortable with our strategic focus. We will continue to advance our international ambitions in terms of learning by doing and establishing the partnerships and relationships needed to be successful there.

Hugo Alves: We will continue to advance our international ambitions in terms of learning by doing and establishing the partnerships and relationships needed to be successful there. We are not going to get distracted in terms of the market we are trying to capture. We think that serving the Canadian consumer is our highest return option right now. I would just, again, note that we have Imperial Brands as a strategic partner. They are a global CPG company. When the time is right and these markets are more mature and we can deploy capital there with greater certainty, we will have a big advantage in those markets. We are not in a rush. Our view has not changed. We continue to be focused on winning at home.

Speaker #2: But we're not going to get distracted in terms of the market we're trying to capture. We think that serving the Canadian consumer is our highest-return option right now.

Speaker #4: And I would just again note that we have Imperial Brands as a strategic partner. They're a global CPG company and when the time is right and these markets are more mature, and we can deploy capital there with greater certainty, we'll have a big advantage in those markets.

Speaker #4: So we're not in a rush. Our view hasn't changed. We continue to be focused on winning at home.

Speaker #3: Okay. Great. Appreciate that context, Keller. Thanks, Hugo and congrats again on the quarter. I'll pass the line.

Neal Gilmer: Okay, great. Appreciate that context and color. Thanks, Hugo, and congrats again on the quarter. I will pass the line.

Speaker #2: Hey, thanks a lot. Really appreciate it.

Hugo Alves: Hey, thanks a lot. Really appreciate it.

Speaker #1: There are no further questions at this time. I will now turn the call over to Hugo for closing remarks.

Operator: There are no further questions at this time. I will now turn the call over to Hugo for closing remarks.

Speaker #5: Hi, everyone. Mark Charbat here. Just a few questions from investors. First, on innovation: we've seen some new products in market. Can you give us an update on how your recent innovations are performing?

Mark Charbonneau: Hi, everyone. Mark Charbonneau here. Just a few questions from investors. First, on innovation, we've seen some new products in market. Can you give us an update on how your recent innovations are performing?

Speaker #2: Yeah, Mark. Great question. Innovation is a key driver of our growth, one of our core competitive advantages. We've taken innovation leadership in our core categories of pre-rolls, flour, and vapes.

Hugo Alves: Yeah, Mark, great question. Innovation is a key driver of our growth, one of our core competitive advantages. We've taken innovation leadership in our core categories of pre-rolls, flower, and vapes. I think the results we're seeing from each of our recent launches and over the years demonstrate that we understand our consumers and our customers, and we're able to create great new products that are incremental to our existing portfolio. Innovation's a team sport at Auxly. It takes a whole organization to deliver great products to our consumers. So I'll use this as an opportunity to shout out again the great Auxly team for their continued performance. Liquid Imagination has now been the top-selling strain in Canada for over two years. We recently, as I mentioned, launched Galactic Jack. That was in mid-June.

Speaker #2: And I think the results we're seeing from each of our recent launches and over the years that I think demonstrate that we understand our consumers and our customers and we're able to create great new products that are incremental to our existing portfolio.

Speaker #2: And I would say innovation is a team sport at Auxly. It takes the whole organization to deliver great products to our consumers. So I'll use this as an opportunity to shout out again to the great Auxly team for their continued performance.

Speaker #2: But liquid imagination is now been the top selling strain in Canada for over two years. We recently, as I mentioned, launched Galactic Jack. That was in mid-June.

Speaker #2: It's our sales team has already won over 1,400 points of distribution. And the product is getting rave results rave reviews from consumers. Southpoint is already a top 40 flour brand nationally with two SKUs.

Hugo Alves: Our sales team has already won over 1,400 points of distribution, and the product is getting rave reviews from consumers. Southpoint is already a top-40 flower brand nationally with two SKUs, and we're excited to be adding a new strain to the brand later this year. Of course, Back Forty pre-rolls have quickly become Canada's favorite pre-roll, and I'm really excited about an innovation that we have launching imminently there. So innovation is performing great. It is a core competency. It's a discipline at Auxly, and I think one of our real key competitive advantages.

Speaker #2: And we're excited to be adding a new strain to the brand later this year. And of course, Back Forty pre-rolls. They've quickly become Canada's favorite pre-roll.

Speaker #2: And I'm really excited about an innovation that we have launching imminently there. So innovation is performing great. It is a core competency. It's a discipline at Oxley.

Speaker #2: And I think one of our real key competitive advantages.

Speaker #5: Thanks, Hugo. Secondly, on profitability, there's a decrease in net income, yet adjusted EBITDA and cash flow increased. Can you please review the factors that caused that?

Mark Charbonneau: Thanks, Hugo. Secondly, on profitability, there's a decrease in net income, yet adjusted EBITDA and cash flow increased. Can you please review the factors that caused that?

Speaker #4: Sure. This is why we focus primarily and guide investors to review our EBITDA and cash flow as our main KPIs. Net income for the quarter was 7.7 million dollars essentially flat to our 8.3 last year Q2 2025.

Travis Wong: Sure. This is why we focus primarily and guide investors to review our EBITDA and cash flow as our main KPIs. Net income for the quarter was CAD 7.7 million, essentially flat to our CAD 8.3 million last year, Q2 2025. But if you exclude the non-cash fair value adjustments on our biological assets and inventory, which are effectively non-cash mark-to-market accounting entries that do reverse over time, then our underlying net income would have improved meaningfully year-over-year, driven by the higher gross profits, lower interest expense. That is partially offset by higher SG&A to support our growth. Excluding these fair value swings, underlying net income would have improved CAD 2.2 million. And on a year-to-date basis, net income would have improved by CAD 8 million, driven by those same underlying strengths, higher gross profit, lower interest expense, offset by higher SG&A.

Speaker #4: But if you exclude the non-cash fair value adjustments on our biological assets and inventory, which are effectively non-cash mark to market accounting entries, that do reverse over time, then our underlying net income would have improved meaningfully year over year, driven by the higher gross profits and lower interest expense that's partially offset by higher SG&A to support our growth.

Travis Wong: That is partially offset by higher SG&A to support our growth. Excluding these fair value swings, underlying net income would have improved CAD 2.2 million. And on a year-to-date basis, net income would have improved by CAD 8 million, driven by those same underlying strengths, higher gross profit, lower interest expense, offset by higher SG&A.

Speaker #4: Excluding these fair value swings, underlying net income would have improved by $2.2 million. And then on a year-to-date basis, net income would have improved by $8 million, driven by those same underlying strengths: higher gross profit, lower interest expense, offset by higher SG&A.

Speaker #5: Thanks, Travis. And lastly on capital allocation. How are you thinking about the NCIB going forward? Are you going to use the whole 5%?

Mark Charbonneau: Thanks, Travis. And lastly, on capital allocation, how are you thinking about the NCIB going forward? Are you going to use the whole 5%?

Speaker #2: Yeah. Look, I think as I mentioned, we have a disciplined framework for capital allocation, right? Reinvesting in organic growth, pursuing selective inorganic opportunities, and repurchasing shares through our NCIB.

Hugo Alves: Yeah, look, I think as I mentioned, we have a disciplined framework for capital allocation, right? Reinvesting in organic growth, pursuing selective inorganic opportunities, repurchasing shares through our NCIB. We are still going to prioritize our capital investments as those improve yield, quality, and profitability. As I noted, organic growth is our highest return option. But we still have capacity and budget room under our NCIB to continue purchasing. The NCIB is an attractive option as we believe current prices do not reflect the intrinsic value that we have built, and that repurchasing our own shares can generate a compelling return on capital at these prices. So at these prices, we are buyers of our shares, not issuers. However, look, as our share price increases, the return that we can generate from repurchases may decline.

Speaker #2: We're still going to prioritize our capital investments as those improve yield, quality, and profitability. As I noted, organic growth is our highest return option.

Speaker #2: But we still have capacity and budget room under our NCIB to continue purchasing. The NCIB is an attractive option, as we believe current prices do not reflect the intrinsic value that we've built.

Speaker #2: And that repurchasing our own shares can generate a compelling return on capital at these prices. So at these prices, we're buyers of our shares, not issuers.

Speaker #2: However, look, as our share price increases, the return that we can generate from repurchases may decline. So, as I've stated previously, we're going to continue to evaluate our NCIB within the range of available opportunities that can advance our strategy and deliver returns in excess of our cost of capital.

Hugo Alves: As I have stated previously, we are going to continue to evaluate our NCIB within the range of available opportunities that can advance our strategy and deliver returns in excess of our cost of capital. And I would also add that we are also committed to maintaining a strong balance sheet so that we can fund these initiatives, including the NCIB, from our own cash flow without the need to access equity markets. So thanks for that, Mark. If there is no other questions, I want to thank everyone for joining us today, and please do not hesitate to contact us if you have any questions. Thanks.

Speaker #2: And I'd also add that we're committed to maintaining a strong balance sheet so that we can fund these initiatives, including the NCIB, from our own cash flow without the need to access equity markets.

Speaker #2: So thanks for that, Mark. If there's no other questions, I want to thank everyone for joining us today. And please don't hesitate to contact us.

Speaker #2: If you have any questions. Thanks.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.