Good morning, and welcome to SNDL Inc. fourth quarter 2025 Financial Results Conference Call. This morning, SNDL Inc. issued a press release announcing their financial results for 2025 ended on 12/31/2025. This press release is available on the company's website at sndl.com and filed on EDGAR and SEDAR as well. The webcast replay of the conference call will also be available on the sndl.com site. SNDL Inc. has also posted a supplemental investor presentation, in addition to the conference call presentation we will be reviewing today, on its sndl.com website. Presenting on this morning's call, we have Zachary George, Chief Executive Officer, and Alberto Paredero-Quiros, Chief Financial Officer. Before we start, I would like to remind investors that certain matters discussed in today's conference call or answers that may be given to questions could constitute forward-looking statements. Actual results could differ materially from those anticipated. Risk factors that could affect results are detailed in the company's financial reports and other filings that are made available on SEDAR and EDGAR. Additionally, all financial figures mentioned are in Canadian dollars unless otherwise indicated. We will now make prepared remarks, and then we will move on to analyst questions. I would now like to turn the call over to Zachary George. Please go ahead.

Welcome to SNDL Inc.'s Q4 and full year 2025 Financial and Operational Results Conference Call. 2025 marked another step forward in our performance, with multiple new records achieved throughout the year, including record full year net revenue, gross profit, adjusted operating income, and free cash flow. Beginning with free cash flow, our most important KPI for assessing financial health, we are pleased to report that following our first year of positive annual free cash flow in 2024, we more than doubled this result in 2025, reaching $18,000,000. This was achieved through continued operational improvements and disciplined working capital management. Our cannabis business continued to grow, expanding revenue year over year during the last 16 consecutive quarters. While we have seen a market slowdown during 2025, both our Retail and Operations segments continued to gain market share, showcasing the strength of our vertical model. We would also like to highlight that for the first time in our history, we achieved positive full year adjusted operating income, supported by a strong contribution in the fourth quarter. This result underscores our financial discipline and continued traction in delivering operational efficiencies and productivity initiatives, including synergies from the Indiva acquisition. As a reminder, the only adjustments to operating income in 2025 relate to restructuring costs associated with the integration of Endiva and the corporate restructuring program, which is currently in its third and final phase. Delivering consistent year-on-year financial progress remains a priority alongside continuing to build a strong foundation for long-term profitable growth and shareholder returns. Few companies in our industry are positioned to leverage a balance sheet of this strength with no debt and over $250,000,000 in unrestricted cash at the end of 2025, enabling disciplined capital deployment across both organic and inorganic opportunities. In this regard, in 2025, we increased capital…

Definitions of these measures, please refer to SNDL Inc.'s Management Discussion and Analysis document. Our fourth quarter financial results demonstrate strong profitability improvements despite softness at the top line. Net revenue of $252,000,000 represents a 2% year-over-year decline, driven by market contractions in both liquor and cannabis retail, particularly liquor retail, partially offset by market share gains across both retail segments. Gross profit of $70,200,000 marked a new absolute quarterly record, increasing by $1,400,000 or 2.1% year over year despite the decline in revenue. A strong margin expansion across both retail segments translated to a 110 basis point increase in gross margin, reaching a new quarterly record of 27.8%. This strong gross margin performance, combined with efficiency improvements across retail and corporate SG&A, resulted in a record quarterly adjusted operating income of $12,800,000, and adjusted operating income of $11,800,000 also represents a new quarterly high. This performance reflects a significant improvement versus the prior year, driven not only by the absence of the $65,700,000 sunscreen adjustment recorded one year ago, but also by meaningful underlying operational margin improvements. Free cash flow of over $10,000,000 in the quarter was another solid result, although slightly lower than the prior year due to differences in the timing of working capital buildup for the holiday season, as well as increased capital expenditures and inventory investments to support new store openings. Our full year financial results demonstrate meaningful year-over-year progress and new records across all key metrics. Net revenue of $946,000,000 represents growth of 2.8%, supported by 11% growth from our combined cannabis segments, partially offset by a 2.8% decline in liquor. Importantly, all of our segments gained market share during the year. This revenue growth, combined with a 120 basis point increase in gross margin, translated to gross profit growth of 7.6% compared to…

Let's now turn to the progress we have made recently against our three strategic priorities: growth, profitability, and people. Starting with growth, each of our cannabis and liquor retail segments gained 20 basis points of market share year over year. Cannabis Retail achieved this through strong execution, new store openings, and conversions to our successful Value Buds banner. Liquor Retail also demonstrated solid execution in a challenging environment, supported by private label growth and the resilience of our Wine and Beyond banner. As previously mentioned, we increased our capital expenditures and working capital investments to support the opening of three additional cannabis stores and two new One and Beyond locations in the fourth quarter. Our Cannabis Operations segment also contributed meaningfully, delivering 32% full year revenue growth, driven primarily by our leadership in edibles following the acquisition of Endeavor as well as continued growth in international sales. Profitability is a strategic priority where we made substantial progress not only throughout full year 2025, but also in the fourth quarter, as demonstrated by nearly $13,000,000 in adjusted operating income and $10,000,000 in free cash flow delivered in Q4. The previously highlighted improvements in gross margin were a key driver of this performance. Alongside our continued focus on G&A optimization. In this regard, our Retail segments delivered full year combined efficiency improvements of $7,100,000 in G&A reductions, and our corporate restructuring program has already surpassed the committed $20,000,000 in annualized savings, even ahead of the implementation of the third and final phase of the initiative. Last but not least, under our people strategic priority, we initiated our annual performance-to-pay process in the fourth quarter, designed to reward employee performance based on both overall business results and individual contributions. We also delivered merit increases ahead of the holiday season across our facilities and…

Thank you.

We will now open for questions. Please press star then 11 to ask a question and wait for your name to be announced. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 11 again. One moment for questions. Our first question comes from Frederico Gomes with ATB Core Mark Capital Markets. You may proceed.

Hi. Good morning. Thanks for taking my questions. First question on the cannabis retail segment, same-store sales decline that we saw this quarter and your comment about the market slowdown in the second half. Can you talk more about what is behind that slowdown? Is it related to competitive pressures at retail, overall macro conditions, or maybe just the natural state of the Canadian market becoming more mature at this point? Thank you.

Hi, Frederico. Good morning. Thank you for your question. Yes. So we have noticed, particularly in the last two months of the quarter, so the months of November and December, absolute declines in the market. We attribute that to multiple factors. Certainly, there is an element of saturation in retail doors across most provinces, particularly where we have the biggest footprint, like Alberta. But in Ontario as well, we are starting to see that dynamic playing out. There are different dynamics as well in terms of what we are lapping and what the industry is lapping from heavy, aggressive promotional period in the prior year. In 2024 and 2025, we are seeing pretty healthy growth rates based on more aggressive price competition. Obviously, we are lapping that, and we believe that not only ourselves, but many other retailers in the industry that are focused a little bit more on profitability and mix improvements, we see margin expansions, but we are seeing as well some reduction in traffic and top line. There is as well a certain dynamic of some doors starting to shut down. We were getting to a dynamic with a lot of independents or some independents reaching their five-year rent commitments, and they are realizing that this is a competitive task and competitive marketplace. Some of the larger operators are starting to build that scale, and it is difficult to compete against those, and as a result of that, as I said, the market in certain areas is starting to shrink, or some doors are starting to shut down. The industry is consolidating as well. So that is another element, not necessarily impacting the market, but clearly the dynamics in the industry. But in general, we think that it is, as I said, saturation in the market and price points.

Thank you very much for that. Second question, still on the cannabis retail segment, specifically on M&A. So first, when do you expect the acquisition of the One Centimeters stores in Ontario to close? And in regards to your comment about the industry consolidating, do you expect your growth in cannabis retail to be mainly driven by organic new store openings, or are you more focused on the M&A side and acquiring some of these struggling players? Thank you.

Good morning, Frederico. It is Zachary George. Thanks for the question. And this dovetails nicely from your prior question as well. Just in terms of the One Centimeters acquisition, remaining stores in Ontario, we are just finalizing our review with the AGCO. So we expect to, at the latest, report back to shareholders in Q2 on that timing, but it should be resolved shortly. And, just in line with the deceleration of same-store sales growth that we are seeing across the space with almost every major player, if you think about this cyclically, this is exactly the time when operators start to lift their heads up and look for other ways to create value. So we do expect intense focus on consolidation in the space. And I think that would apply to performing independents that may want to monetize their positions, but would also apply to both medium and even the largest portfolios in the Canadian marketplace. If I could just in terms of organic growth, we have we have a pretty active pipeline, you know, double digit count of that are under review in multiple provinces. And we have a very attractive stand-up cost for the opening of new doors. So we are looking at this from multiple perspectives and not relying on M&A outcomes to drive future growth.

Thank you. Appreciate that. If I could just ask one final question. Could you just remind us about the status of your EU GMP certification and maybe comment about the international growth outlook for this year compared to 2025 as you expand that capacity? Thank you.

Yes. We are waiting for the last visit to our site. It has been a long process that has required some patience, but we expect at this point to have the certification complete sometime over the summer. There has been some change in the administration in Germany that has impacted as well. And in terms of our international business, we saw decent growth off a very, very small base in terms of 2025 versus 2024. And we are in the process of developing relationships and building strong partnerships, but it is still early days. So we do expect material growth, but, again, it is a very small part of the business today. That is a top three priority in terms of future capital deployment as well.

Thank you. I will hop back in the queue.

Thank you. Our next question comes from Aaron Thomas Grey with Alliance Global Partners. You may proceed.

Hi. Thanks for the questions. Maybe touching on retail but in terms of liquor here. Obviously, you still have some challenges within the broader category outside of yourselves, but some highlights for you guys. You guys did have one quarter during the fiscal year of year-over-year growth, you know, return to declines made the past two, you guys are continuing to open up stores as well. So maybe just given your outlook, given you are still making investments in liquor, there are some structural challenges. As you look into 2026, how are you seeing the broader liquor retail? Do you think it is in position to start to stabilize on a year-over-year basis? Thank you.

Thank you, Aaron, for the question. So, yes, actually, throughout the year, as you saw in the first quarter, we have reported growth in 2025 that was driven primarily by the shift of Easter compared to the prior year. So on a normalized basis, we have seen a pretty consistent roundabout 3% revenue decline and about 4% to 5% market decline in the category. It is very hard to predict where that is going to go. The first part or the first couple of months of 2026, we are seeing similar declines in the market. At the same time, there are a couple of areas within our portfolio that are showing very good strength, and this is where we are focusing our investment. Particularly, if you look at our Wine and Beyond banner, despite the market declines, mid single digits, we are seeing that banner growing healthy. It is a very different business model compared to the rest of the independent network. Just make a convenience business. Ours is a larger scale format, significantly different type of offerings, much broader portfolio base. That resonates very well with consumers, and that is why, as a result of that clear differentiation and unique offering that we have, we are seeing positive growth. It is still in the low single digits, but it is growth rates in the market, and as I said, we see a competitive advantage in that front, and that is where we are deploying the capital, both from a CapEx perspective opening the doors, but as well the inventory associated with those store openings. And then we have as well our private label. One clear dynamic that we are starting to observe as well is the loss in purchasing power. It is making consumers more price-conscious, and they are looking for products that offer very good price points with good qualities as well. We have been expanding our private label offerings that continue to gain penetration. It has been already several years of increases in market share from our private label offering, and that is an area where we are still building additional relationships with producers, and we are expecting to continue making investments and expanding our portfolio on that front because, as I said, that is what is right now resonating with the consumers, and we are seeing the stronger demand. And that part of the portfolio as well is growing in relative terms to the rest of the business, and in absolute terms as well. So that is where we are focusing. We believe that we still have opportunities to manage elements of growth within our portfolio despite the fact that the market we still anticipate to decline in the low to mid single digits for the next several quarters.

Okay. Great. Appreciate that color. That is helpful. Second question for me just on some of your U.S. exposure, particularly with SunStream. Just if you could provide us an update in terms of some potential outcomes, as we hopefully come to some resolutions either with Parallel or Skymet here in 2026. I know in the past, you have talked about potential changes you might need to be made to best optimize some of the U.S. assets. So, in terms of how you are looking at SunStream, the U.S. assets, and how to best optimize those in 2026, as hopefully we come to some resolutions there. Thanks.

Absolutely, Aaron. Thank you for the question. So, the portfolio has been simplified quite significantly. It is really three positions. In the case of cannabis, I think you have been following the liquidation of that portfolio. We have seen a return of capital recently as that position gets monetized and capital repatriated. And then the two larger positions of interest would be in Parallel and SkyMint. Parallel is going through a foreclosure process in the state of Florida, and SkyMint is in receivership in Michigan. For almost the entirety of 2025, the foreclosure process related to Parallel was delayed because of litigation that was in place. There was a key settlement to that litigation in December, and so we think there is now a path to resolve that foreclosure, and we will likely see it sometime in Q2 or just after. So we are finally heading towards a resolution here after a multiyear process. Again, the reason behind these delays and the inefficiencies really comes down to the lack of access to the federal bankruptcy courts in the United States. And so once you are relegated to these other insolvency proceedings at the state level, they are much less predictable, and the adjudication can provide unique outcomes. So we are pleased that we will actually land this plane, so to speak, in 2026. But it has been a frustrating process, and we are eager to have it wrapped up.

Okay. Great. Appreciate the color then. I will go ahead and jump back to the

Thank you. This concludes the question and answer session. I would now like to turn the conference back over to Zachary George for any closing remarks.

Thank you, and thanks for joining our call today. We look forward to updating you in the near future. Have a great day. Thank you. This concludes today's conference call.

You may disconnect your lines. Thank you for participating, and have a pleasant day.