Good morning. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Organigram Global Second Quarter Fiscal 2025 Earnings Conference Call. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Max Schwartz, you may begin your conference.

Thank you very much, and good morning, everyone. Thanks for joining us today. As a reminder, this conference call is being recorded and the recording will be available on Organigram's website 24 hours after today's call. Listeners should be aware that today's call will include estimates and other forward-looking information from which the company's actual results could differ. Please review the cautionary language in our press release dated May 12, 2025 on various factors, assumptions, and risks that could cause our actual results to differ. Further reference will be made to certain non-IFRS measures during this call, including adjusted EBITDA, adjusted gross margin, and adjusted gross margin percentage. These measures do not have any standardized meaning under IFRS and are intended to provide additional information and, as such, should not be considered in isolation, or as a substitute, for measures of performance prepared in accordance with IFRS. Our approach to calculating these measures may differ from other issuers, so these measures may not be directly comparable. Please see today's earnings report for more information about these measures. Listeners should be aware that the company relies on reputable third-party providers in making certain statements relating to market share data. Unless otherwise indicated, all references to market data are sourced from Hifyre in combination with data from Weedcrawler, provincial boards, retailers, and our internal sales figures. Today, we'll be hearing from key members of our senior leadership team, beginning with Beena Goldenberg, Chief Executive Officer, who will provide opening remarks and commentary, followed by Greg Guyatt, Chief Financial Officer, who will review our financial results for Q2 fiscal 2025. With that, I will now introduce Beena Goldenberg, Chief Executive Officer of Organigram Global Inc. Please go ahead, Ms. Goldenberg.

Good morning, everyone, and thank you for joining us today for our Q2 fiscal 2025 earnings call. We're very pleased to report a record-breaking quarter by revenue, as well as some very encouraging operational results, which we anticipate will continue to improve as seasonal sales pick up in Q3 and Q4. This marks our first earnings call since rebranding to Organigram Global, a name that better reflects our evolution into a diversified international cannabis leader. The refreshed brand identity aligns with our position as a market leader in Canada and underscores our active expansion across Europe, Australia, and most recently, the United States. It's also the first quarter where the full impact of our Motif acquisition is reflected in our financial results. Now, let's start with a look at the Canadian market and how we're navigating the current landscape. In Q2, Canada's cannabis market grew 4% year-over-year with the strongest momentum in vapes and pre-rolls, two categories that together make up about half the market. We're especially well-positioned here. By the end of the quarter, Organigram was the #1 LP by market share in both, including a leading 21.7% share in vapes. When you add flower to the mix, these three categories, flower, vapes, and pre-rolls, represents around 85% of the total market. And we've built a strong dominant presence across all three. To put today's market structure in perspective, the top three LPs collectively hold just 27% of total market share, showing how fragmented and competitive many categories still are. But in categories like milled flower, gummies, hash, infused pre-rolls, and vapes, the top three control between 45% to 70% of the market. These are the segments where scale, production capability, and execution matter more, contributing to higher barriers and more concentration compared to flower and traditional pre-rolls. While…

Thank you, Beena. We are very pleased to report a record quarter ahead of key seasonality in Q3 and Q4 as we believe our results will continue to improve throughout the year in line with previous guidance. We experienced strong year-over-year growth in the quarter. Our gross sales were up 79% and surpassed $100 million for the first time in any given quarter. Similarly, our net revenue was up 74% year-over-year to reach $65.6 million. These results were supported by a full quarter of financial contributions from our Motif business as well as organic growth in our recreational and international businesses. As we scale both domestic and international sales, fueled by growth in Germany, the launch of branded sales in the US and the expected launch of branded sales in Australia this fiscal year, we are beginning to approach the milestone of becoming a $0.5 billion run rate business by ship sales. In Q2, our international sales increased 177% to $6.1 million from $2.2 million in the same prior-year period and increased 84% sequentially since last quarter from $3.3 million. Building off of our leadership in Canada, we are aggressively pursuing growth in international markets through strategic acquisitions in growth markets, and we continue evaluating a robust pipeline of strategic opportunities supported by our Jupiter pool of approximately $58 million. Adjusted gross margin for the quarter increased to $21.9 million or 33%, compared to $11.6 million or 31% in the same prior-year period. This improvement was primarily driven by growth in our recreational business following the Motif acquisition, as well as increased contributions from international sales. On a sequential basis, adjusted gross margin remained flat. While we benefited from greater scale and stronger international shipments, Motif margins were lower than the core Organigram business, which reduced our overall adjusted gross…

Thank you, Greg. As we progress through fiscal 2025, we are confident in our ability to execute on our strategic priorities. The integration of Motif, revenue expansion on Collective Project, our international expansion efforts, and the continued success of our innovation pipeline, all position us well for sustained growth and improved profitability. We appreciate the continued support of our shareholders, customers, and employees. We remain committed to driving innovation, operational excellence, and long-term value creation. Now, let's open up the floor for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Aaron Grey with Alliance Global Partners. Please go ahead.

Good morning. Thank you very much for the questions. So, first question for me, you guys talked a lot about international, some of your growth aspirations. So, if we could just dive a little bit deeper into your outlook for 2025 and fiscal [indiscernible]. I know EU-GMP certificate doesn't change capacity and you're already selling into markets, but given the greater margin capture you'll have with the EU-GMP change, how do you think about allocating capacity internationally, given the greater margins you'll get there versus balancing the Canadian market share aspirations that you have? So, any color on any capacity constraints you might have, how you're looking to balance between your goals domestically and internationally? Thank you.

Yes, sure, Aaron. Thanks for the question. So, first of all, we will continue to work on balancing the demands between both domestic and international sales. While certainly international sales have higher margins today because they don't have excise taxes. We want to make sure we don't walk away from our leading position in some of our domestic flower brands, such as our Big Bag O' Buds, which are still experiencing very good growth. And the reason why this is very important and some of our competitors have chosen to walk away from the domestic market is because we do see that there will be more price compression in international markets. We're already seeing value flower showing up in Germany. And you're going to see supply from all over the world, not just from Canada in these markets. So, in order to make sure that we have a long-term plan, we want to make sure we're balancing both. Now, we have higher demand coming out of some of our international markets, and that's part of the reason why we're working on increased capacity -- flower capacity. We've done some work on improving some of our efficiencies in our facility. The 7,000 kgs coming from the LED upgrade, we're already starting to see some benefits on that as the project is coming to completion. And rooms that returned a couple months ago are starting to now generate extra flowers. So, the two projects together will give us an extra 14,000 kilos of capacity. And we keep driving better efficiencies in our flowers. So, we'll continue to look at growing our international sales. Your question on, how much is the upside potential? We expect to sell more in the back half internationally than we did in the front half. And with international sales, you need to start generating the following through medical doctors prescribing those specific cultivars. So, the cultivars are gaining momentum in Germany and they will have higher demand and as we shift to those markets with those cultivars. So, we're pretty excited about the following opportunity, but it's going to be a balancing act, for sure. Obviously, we like the margins with international, but the truth is the margins in the domestic market are getting better as there's less competition, and we've been able to actually take some pricing in the domestic market.

Really appreciate that color there, Beena. That was helpful. Second question for me. I just want to talk a little bit about the margin evolution. You gave some great color there on the gross margin. So, as we think about EBITDA profitability, where do you believe EBITDA margins have the potential to get to in the medium-term? And what are some of the most meaningful levers? You gave some color in terms of incremental synergies that you found going from $10 million to $15 million. Was that more so on the gross margin side or on the SG&A side? And then, how much of those synergies have been realized today? So, any color in terms of the margins, how we should think about the evolution will be helpful. Thanks.

Sure. Thanks for that question. So, first of all, I'll touch on the synergies. So, we realized, I'd say, about $1.5 million worth of the $5 million that we're targeting for this year. And the majority of that is in COGS, but there is certainly some overhead expenses from cost avoidance and just the general integration of the two businesses. So, I'd say in terms of what's going to drive EBITDA growth in the future, it's going to be a combination of margin growth. As I mentioned earlier, we're targeting about 40% gross margin in the back half of fiscal 2026. And then, also, just general cost management. It's something we're always looking at and making sure that we're spending our capital prudently. But by and large, we're not -- as revenue grows, we're not expecting our SG&A to grow materially. And that's going to be an important driver as we start seeing the scaling of our top-line and we'll get the leverage on the P&L, which will drop straight down to EBITDA. So, in our longer-term target for EBITDA, we expect it to continue to grow as a percentage of sales. So, certainly, as we look forward to the back half of the year when the key seasonality and stronger parts of our business kick in, we are expecting to see the EBITDA margin improve as well.

Okay. Great. Really appreciate that color. I'll go ahead and jump back into the queue.

Your next question comes from the line of Frederico Gomes with ATB Capital Markets. Please go ahead.

Hi, good morning. Thanks for taking my questions. First question is on the cash flow. We saw negative cash flow this quarter. I think a good portion of that was related to working capital. So, first, could you maybe talk about the drivers behind those working capital changes this quarter, maybe the key items here that drove that? And second, could you talk about your cash flow expectations for the remainder of the year, things like movements in working capital, CapEx, as well as the potential margin expansion and the seasonality that you mentioned as well? Thanks.

Sure. Maybe I'll start with the cash question. Thanks, Frederico. So, the last -- in Q2, we actually spent $6 million at the end of the quarter on the Collective Project acquisition. So, that had a negative impact on cash flow just from a timing perspective. But, primarily, the biggest driver, as you mentioned, was our investment in working capital, which was very intentional. Q3, Q4 is really our strongest time of the year. So, in Q2, our plan was to invest into working capital to ensure that we're prepared for the strong growth that's to come. Now, with working capital, there's a number of puts and takes, but the most significant increase was an increase in inventory, which is required to be prepared for the growth that's coming for the next two quarters. Did I cover everything, Frederico?

Yeah. Maybe just the second part of the question, related for your expectations for the remainder of the year. I guess, you answered sort of the question about the working capital for the second half, but also CapEx and the impact of the potential margin expansion, yeah.

From a CapEx perspective, we're expecting to spend on a regular sustaining capital, $8 million to $10 million for the full year, as well as the $9 million that was mentioned for the Moncton LED grow room expansion. The timing of that, we expect most of it to happen this year. And so, you'll see that being funded through operations, which as we mentioned Q3, Q4 is going to be our strongest period for the year of cash flow. So, we actually expect to be cash flow positive for the full year and we'll see that starting to come through in the third quarter.

Perfect. I appreciate that, Greg. And then, maybe, just a second question for me. If you could comment on your strategy for the US hemp-derived THC market. I know that you talked a little bit about that. We know there's a lot of brands in the marketplace today. A lot of other companies investing in that market as well. So, how do you plan to differentiate? And in regards to margins in that segment, when do you think they could be accretive and they could be meaningful to your overall margins? Thank you.

Sure. So, let's start off by saying, listen, we're early days in expanding the Collective Project brand in the US market, and we're very excited about the results so far in the markets where it's on the store shelves. We're talking to retailers, and the off-take is strong. It is our intention to continue to build out the distribution. Right now, we're selling into 10 provinces. We expect to see stronger distribution, probably in another six provinces before the end of the fiscal year. And we expect our direct-to-consumer website to start to launch this month. So, continuing to build that way. The priority right now in the US is to drive trial and awareness. We have a very strong summer support program kicked off to drive velocity at retail, so offtake, really get to consumers. What we think is the benefit of Collective Project, and you're right, there are many brands in the US, but some of them are not very good. They don't taste very good. We have great tasting products with Collective Project. As I mentioned, the awards we just received and we're excited about getting people to try. So, we have a lot of sampling programs during the summer. In places where you can't have infused samples, we'll have non-infused samples. We'll have a lot of POS and programs. So, back to your question about margins in the short-term, we're investing to drive the growth of this product. So, we expect to do roughly $1 million in US in retail sales. So, it's still small, but we're investing that margin back to drive the offtake and to increase awareness. This is key part of our strategy in the US. Obviously, in Canada, we expect to see growth in our business and that will grow and appreciate the gross margin that comes with that business. So, not a strong investment programs in Canada, although we will leverage our sales relationships and gain distribution. And the product talks for itself in Ontario, really a strong performance in that market. And we just need to get other provinces to take on the top-selling SKUs, because we know they perform. So, it's a strategy of investment right now. More focused on investment in the US to gain that consumer adoption and really breakthrough. As you mentioned, lots of players in the US, but not a lot of them have the money to invest behind the growth and -- or the product that delivers to the consumer expectation.

Thank you very much, Beena.

Your next question comes from the line of Yewon Kang with Canaccord Genuity. Please go ahead.

Hi, good morning. Thank you for taking my question. Apologies if I missed some of the remarks in the opening statements, but the international sales saw a significant sequential increase. So, just wondering if you could provide some color on what drove that growth. Was it primarily due to the expanded orders from existing partners like the Sanity Group, or did you onboard new customers during the period? Thank you so much.

Sure. No, it wasn't new customers. It was meeting incremental demand for our existing customers and not just Sanity Group. We have some strong customers in Australia as well that continue to see a higher demand in their market. There's a demand for a high-quality product. And while there's a lot of discussion of international flower coming from Colombia or South Africa, Canadian cannabis, we've been growing it for a while. The quality is great. It's recognized worldwide. So, there's increased demand. And one of the things that I mentioned earlier was the thing about medical markets is once a cultivar is established that a doctor is prescribing it and they see the benefits, consumers come back to that cultivar. So, you start -- you might start small, but it continues to build off of the repeat purchases of those cultivars in those markets. You have to make sure that when you go into international markets, you have stability data for cultivars. So, it takes a while to build that demand, but once it's there, it continues to drive incremental orders and we're really starting to see that. We expect to see our EU-GMP certification in the upcoming months. That won't increase demand. That will just speed up our fulfillment because you take out the middleman, you take out the converter, product will get to the market faster, repeat purchases will come in faster. So, we're excited to leverage that. And, sorry, I also forgot to mention that once we have EU-GMP, pricing will go up because you take out the converter in the middle. So, we're excited about what this international business will continue to grow, but it is not from increased customers. We have significant demand from our existing customers, and we continue to prioritize fulfilling those customer requests.

Thanks for that color. Just the second one from me here is on the Collective Project acquisition. It's been a few weeks and, obviously, very early days since integrating that brand into your platform, but I was wondering if you guys could provide any color into any insight that you might have gained from having exposure into the US hemp-derived space. Any differences between how the recreational market functions even on the consumer level and any insights there would be helpful. Thank you.

Certainly. So, we closed the Collective Project on March 31, so the last day of the quarter. And so, it's still early days, but I could tell you a couple of things on Collective Project. So, first of all, in Canada, we have some great relationships with our co-mans. They currently -- we're the licensed producer as well, because the Collective Arts team weren't a licensed producer. We're working on converting those relationships that where we're the licensed producer. There are some efficiencies we gained through excising and distributing the product and, obviously, leveraging our sales team to gain more distribution. And we obviously have relationships with the Boards and could drive some of that. So, we're pretty excited about the revenue growth opportunity in Canada. I also mentioned that we have invested $1.2 million in our Winnipeg facility. And this is where we're looking to look at new formulations, looking at where we bring in our FAST nanotechnology to really differentiate our products further. So, there's lots of upside potential and clearly taking some of product in-house will better leverage our infrastructure and improve our margins. In the US, it's a little bit different. US, obviously, we're dependent on co-man relationships. We've actually just changed our co-manufacturer for Collective Project, because we've got better costs and better quality of ultimate product that's important for us. We have great relationships with some key distributors to get the products out into more of the markets and build that distribution and establish relationships with some of the key retailers. Really the focus on Collective Project in the US is distribution and driving awareness trials. So, we get some offtake, really seeing that momentum behind the brand. There are only four big players in the US that have hemp-derived THC beverages that have the dollars behind it that could help drive that trial. And we're excited to be one of those. And that is our intention to continue to drive and grow in that market in the US.

Thank you for the color. I'll hop back into the queue.

Thank you.

And we have no further questions in our queue at this time. I will now turn the conference back over to management for closing comments.

Well, thank you everybody for joining our call today and thanks for your insightful questions. We are really looking forward to our key seasonality coming up in Q3 and Q4, looking forward to seeing the expansion of our Collective Project acquisition, the realization of the Motif synergies, the growth in our international sales, and we look forward to updating you further next quarter. Thanks, and have a good day.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.