[Management View]
Net revenue for 2025 reached $244 million, up 3.1%, driven by growth in the cannabis segments despite softness in liquor retail. Gross profit was $64.2 million, up 1.9% YoY in Q3 2025, with a $3.9 million non-cash inventory adjustment reducing gross margin by 160 basis points. Operating loss was $11 million for Q3 2025, caused by $11.9 million in unfavorable non-cash items tied to share price gains, inventory, and asset impairments. Positive free cash flow (non-GAAP) of $16.7 million in Q3 2025, representing a record and a $7.5 million improvement; cumulative nine-month free cash flow (non-GAAP) now at $7.7 million for 9M 2025, marking the company's first positive year-to-date result. Liquidity position over $240 million in unrestricted cash and no debt as of Q3 2025, supporting investments in store openings and strategic initiatives. SG&A expenses decreased by $4 million versus the prior year, reflecting $5 million in productivity savings in Q3 2025.

[Outlook]
CFO Paredero-Quiros stated that, excluding non-recurring items, gross margin for the cannabis operations segment would have been around 25% in Q3 2025, a level expected to serve as the lower bound going forward. International sales increased to $4.2 million in Q3 2025, with indications of strong orders and an optimistic outlook for 2026. CEO George noted ramping production targets above 15,000 kilograms per month in 2026, with much of the output expected for international markets.

[Financial Performance]
Net revenue for 2025 reached $244 million, reflecting a 3.1% increase compared to Q3 of last year. Gross profit of $64.2 million represents a $1.2 million increase or 1.9% growth year over year, despite being impacted by $3.9 million in non-cash inventory-related adjustments within cannabis operations. Operating income was affected by non-cash adjustments totaling $11.9 million. Free cash flow is the main highlight of the quarter, with a positive $16.7 million. This strong Q3 result enabled SNDL to achieve positive cumulative free cash flow for the first nine months of the year, totaling $7.7 million year to date.

[Q&A Highlights]
Question 1: I just want to clarify there from the prepared remarks. Was it only the $3.9 million inventory in the gross margin and the $1.6 million fixed asset that's SG&A and not in gross margin? So I want to clarify that point. And then secondly, how best to think about the gross margins specifically for the cannabis operations going forward?

Answer: Yes, I confirm the $3.9 million of inventory adjustment that is impacting gross profit. It has an impact of about 10.6 percentage points in the margin of the segment. The Stellarton facility impairment is a $2.7 million charge below gross profit, in other income and expenses. Without those adjustments, we would have been around 25% margin in the segment, which is what we're expecting as the low end of the range for the future.

Question 2: Sales to provincial board saw some nice growth both on a quarter-over-quarter and year-over-year basis. Any specific drivers there? And anything to think about in terms of the mix within that, shipment timing for how we think about that line segment going forward?

Answer: We're seeing the same softness overall in the sales to the provincial board from cannabis operations. We continue to gain momentum there and see growth, but there has been some softness in third-party retail. We don't have full visibility to the inventory numbers of the provincial board, so an element of this slowdown could be driven by that. We're working on creating additional momentum and changes in new products and innovation to regain momentum.

Question 3: How best to think about international sales going forward? How big of a part of the business do you feel like that could be within the next twelve to eighteen months?

Answer: We have been increasing quarter over quarter since the beginning of the year. We have strong demand and a lot of pre-support orders for the fourth quarter. We are bullish with the outlook for 2026. Our international partners are exploring options to continue increasing purchases from us, struggling with reliability of supply from other partners. We anticipate that number will continue growing in the future.

Question 4: Is there anything specific that's been an issue with the One Centimeters transaction approval in Ontario?

Answer: We don't have any additional information to share. We thought the review would be completed late October. There are a number of retail licenses, both applications submitted by affiliated entities and third parties, still moving through the pipe in Ontario. We'll update the market as soon as we have greater clarity.

Question 5: Broader comments about what you're seeing in the cannabis retail market right now. Are you seeing opportunities to increase prices and margins? Are you seeing a good pipeline of M&A? Or is it going to be concentrated more on organic growth?

Answer: We are seeing maturity, province-by-province. Extreme saturation is settling in Alberta, and signs of maturity are emerging in Ontario. The days of easy double-digit high single-digit same-store sales growth upon opening locations and managing discount retail strategy are ending. Execution on the floor and owning a consumer relationship with a convenient and attractive experience for customers is critical. We are focused on our consumer and owning that relationship.

Question 6: Any data points regarding the RISE rewards program rollout?

Answer: The engagement from loyalty members is extremely strong. We are excited to roll out a similar program for our liquor business in the coming quarters. We will update the market on this program but wanted to get a couple quarters of performance before sharing detailed stats.

[Sentiment Analysis]
The tone of analysts was inquisitive and focused on clarifying specific financial impacts and future growth prospects. Management's responses were confident and detailed, emphasizing operational improvements and strategic initiatives.

[Quarterly Comparison]
| Metric | Q3 2025 | Q3 2024 | YoY Change |
|--------|---------|---------|------------|
| Net Revenue | $244M | $236.5M | +3.1% |
| Gross Profit | $64.2M | $63M | +1.9% |
| Operating Loss | $11M | $18.1M | -39.2% |
| Free Cash Flow | $16.7M | $9.2M | +81.5% |
| Liquidity Position | $240M | $230M | +4.3% |

[Risks and Concerns]
An $11.9 million unfavorable impact from non-cash items—including share-based compensation, inventory write-offs, and fixed asset impairments—resulted in a reported operating loss of $11 million in Q3 2025. The liquor retail segment experienced a 3.6% net revenue decline to $139.4 million due to ongoing market headwinds in Q3 2025. Share-based compensation liability increased by $6.8 million due to a 121% rise in the company's share price, negatively impacting operating income. The cannabis operations segment posted a negative $4.8 million in adjusted operating income, primarily due to $3.9 million in inventory valuation adjustments and a $2.7 million impairment at the Stellarton facility in Q3 2025.

[Final Takeaway]
SNDL's Q3 2025 earnings call highlighted record free cash flow and positive cumulative year-to-date free cash flow for the first time in company history, driven by growth in the cannabis segments and operational efficiency. Despite reported losses from non-cash items, management emphasized ongoing improvements in core profitability and strategic investments in store openings and infrastructure. The company remains focused on expanding its international sales and ramping up production at the Atholville facility, with a strong outlook for 2026. Analysts' questions centered on clarifying financial impacts and future growth prospects, with management providing confident and detailed responses.