Cannara Biotech (TSX:LOVE) released second-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.
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Summary
Cannara Biotech reported $27.2 million in revenue for Q2 2026, with adjusted EBITDA of $6 million and operating cash flow of $2.9 million, marking the 20th consecutive quarter of positive adjusted EBITDA.
The company increased its national retail market share to 4.4%, maintaining its position as the number one licensed producer in Quebec, and launched several new products contributing to this growth.
Future strategic initiatives include expanding production capacity to 100,000 kg annually, investing in a new processing center at Valleyfield, and exploring international expansion opportunities, particularly in the European market.
Full Transcript
OPERATOR
Good morning everyone. Welcome to Cannara Biotech’s Q2 2026 earnings call for the three months ended February 28, 2026. Today’s presenter is Nicholas Sociak, CFO, joined by Zohar Kroborot, founder and CEO. At this time all participants are in a listen only mode. After the speaker’s presentation there will be a question and answer session. To ask a question during the session you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised to withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded before we begin. Please Refer to slide 2 and 3 for our caution regarding forward looking statements and non GAAP measures. I will now turn the call over to Nicholas. You may begin.
Nicholas Sociak (Chief Financial Officer)
Good morning everyone and thank you for joining our Q2 earnings call. Q2 reflects continued execution of a model that is delivering consistent and profitable growth for the quarter. Cannara Biotech delivered $27.2 million in revenue with strong margins and profitability, generating 6 million of adjusted EBITDA and 2.9 million of operating cash flow. This represents our 20th consecutive quarter of positive adjusted EBITDA and our 14th consecutive quarter of positive operating cash flow. Despite normal seasonality, we outperformed the market, increasing retail sales and expanding market share while maintaining profitability. We increased national retail market share to 4.4% and defended our position as the number one licensed producer in Quebec achieved in December of 2025. This performance reflects a system that is working. Our model is built on delivering premium quality cannabis at competitive price points supported by a structurally low cost vertically integrated platform. That model is translating into category leadership across Tribal Nuggs and Orchid CBD and was externally validated this quarter through industry recognition including pre roll of the year for Tribal Cuban Links Trifecta and Concentrate of the year for Nuggs Bubble Up Hash Rosin at the National Kind Awards. In Quebec, where no marketing spend is permitted, product quality stands on its own. This was evident in the launch of the VAPE category where we captured over 25% of the category share contributing to our number one overall market share position in the province. Operationally this is supported by a scalable full owned cultivation and processing assets. We are currently operating at approximately 50,000 kg of annualized capacity with a clear path to 100,000 kg aligned with demand. As Farnham reaches full processing capacity, we are investing in a new processing center at Valleyfield which will expand throughput and unlock additional cultivation within our existing footprint. In parallel, we are also preparing three additional grow rooms for activation heading into fiscal 2027, representing approximately 15,000 kilograms of incremental capacity with a high ROI capital investment of approximately $1 million per room. To note, each room has the potential to generate over $10 million in annual net revenue, highlighting the strong operating leverage of our model. This allows us to scale production in a disciplined, demand driven manner, growing revenue while maintaining margins without relying on external capital. That being said, as recently announced in February, we had the opportunity to complete a 6.3 million strategic investment with Venetian capital at a premium of $2.10 a share, further strengthening our balance sheet to support continued investment and future growth opportunities while reinforcing investor confidence in our operations. We also enhanced our capital markets profile with our uplift to the OTCQX market in the US and subsequent graduation to the Toronto Stock Exchange and in March 2026, increasing our visibility and accessibility to a broader institutional investor base. In summary, the takeaway is clear. Cannara Biotech is executing a proven scalable model of profitable growth combining brand leadership, cost advantage and capital efficient expansion. With that context, I’ll walk you through the financial performance for the quarter. Results this quarter reflects both continued growth and disciplined investment in the business. On the top line, gross cannabis revenues before excise Taxes increased to $37.8 million up 3% year over year, driven by a 7% increase in retail revenues offset by a decrease of $1.4 million in wholesale revenues. Total revenues increased to $27.2 million up 2% year over year. This growth was supported by deeper penetration in existing markets, addition of new genetics and continued product innovation across the portfolio. Importantly, this was achieved despite overall Canadian cannabis retail sales remaining essentially flat year over year for comparable periods, highlighting our ability to gain share in a stable market environment. From a profitability standpoint, performance remains strong. Gross profit before fair value adjustments increased to $11.6 million up 7% year over year with margins expanding to 43% compared to 41% in the prior year. This margin expansion was driven by improvement in cultivation yields, enhanced post processing efficiency and the benefits of scale across our platform. At the operating level, operating income was 3.3 million compared to 5.9 million in the prior year. This year over year decline reflects strategic growth, investments, sales and marketing expansion, ongoing research and development, uplifting related fees, scaling our G and A and higher non cash share based compensation. As a result, adjusted EBITDA was 6 million or a 22% margin compared to 7.1 million in the prior year. Net income for the quarter was $1.7 million compared to $3.3 million in Q2 of 2020 five more so we saw significant improvement in cash flow generation. Operating cash flow was $2.9 million compared to negative $2.6 million in the prior year, reflecting stronger underlying operating performance. Free cash flow was approximately negative $0.3 million compared to negative $4 million in the prior year, effectively break even despite higher capital expenditures of approximately 3.2 million compared to $1.5 million in prior year, primarily related to the Valley field expansion and post processing investments on a sequential basis. Gross cannabis revenues before Excise taxes declined 10% sequentially in Q2 from 41.8 million to 37.8 million, but this was primarily driven by normal post holiday seasonality provincial board purchasing patterns, especially in Quebec, along with lower wholesale revenues. Importantly, this was a timing issue in board ordering, not a demand issue. In fact, our underlying consumer performance remains strong with national retail market share increasing from 4.1% to 4.4%, estimated retail sales growing 5%, and that outperformance came during a period where when the overall Canadian Cannabis retail market declined 4%. Operating and net income improved quarter over quarter reflecting strong underlying profitability, while adjusted EBITDA and cash flow decreased primarily due to normalization from a strong first quarter and additional working capital movements. Looking at year to date performance, the underlying trend for 2026 is clear. Gross cannabis revenues increased 11% driven by 12% growth in retail sales, significantly outpacing the broader market which only grew by approximately 1%. Total revenues increased to 57.3 million, also up 11% year over year. Gross profit increased 21% year to date to 25 million, with margins expanding to 44% reflecting continued operating leverage and efficiencies of across cultivation and post processing year to date, operating income came in at 6 million versus 10.1 million last year. This year over year, change in operating income largely reflects accounting movements and intentional investment behind the business, particularly in commercial capabilities and research and development, rather than weakening in underlying operations. Adjusted EBITDA increased 14% year to date to 14.9 million and demonstrating the scalability of the platform despite continued investment. Operating cash flow reached 10.9 million more than tripling compared to the prior year, while free cash flow increased to 3.1 million even with a significant increase in capital expenditures of 7.9 million in the first six months of 2026 compared to 2.7 million in capital investment in the same period of prior year. Overall, the financial performance reflects a business that is scaling efficiently, expanding margins generating cash flow and investing in future growth in a disciplined manner and even within a seasonally softer environment. We continue to take share across the market, moving on to broader market conditions. The national retail environment experienced market softening in the quarter, reflecting normal post holiday consumer seasonality, with total estimated Canadian retail sales declining approximately 4% quarter over quarter. Despite that backdrop, Pitnera continued to grow. Our estimated national retail sales increased to approximately 55.7 million in Q2, up 2.7 million or 5% quarter over quarter, reflecting continued strength across our core markets and product categories. What’s particularly notable is our relative performance among Canada’s top 10 licensed producers. Canara was one of the few scaled operators to deliver positive sequential growth, while the majority of our peers experienced declines in a seasonally softer market environment. Canara is not just holding share, we are taking share. This outperformance is being driven by the strength of our branded portfolio, continued innovation in genetics and product formats, and disciplined execution across cultivation, production and distribution. At the national level, Canara’s estimated retail market share increased to 4.4% in Q2, up …
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