SNDL Inc.

Net revenue was $235.8 million, down 3.7% year over year. Gross profit was $56.3 million, down $11.3 million or 16.6%, and gross margin was 23.9%, down 3.7 percentage points. Operating loss was $7.8 million, and adjusted operating loss was $7.0 million. Free cash flow was negative $6.7 million, an improvement of $1.2 million year over year. Liquor retail revenue was $134.7 million, down 5.1%, with gross margin of 25.1%; cannabis retail revenue was $83.2 million, down 1.4%, with gross margin of 26.4%; cannabis operations revenue was $32.2 million, down 10.1%, with gross margin of 1.8%. For capital return, SNDL repurchased 11.7 million shares in the quarter for $23.3 million at a weighted average price of USD 1.43 per share, and since Q4 2024 has repurchased more than 29 million shares for about 64.5 million. Guidance was limited, but management reiterated expectations for positive full-year free cash flow, said Q2 free cash flow was seasonally pressured, and suggested the second half should be stronger for cash generation; they also said cost headwinds from cannabis production ramp-up could persist over the coming months. Management additionally said profit enhancement initiatives are expected to drive more than $20 million of incremental operating income, mostly over the remainder of the year.

Zachary George emphasized that the quarter was shaped by a challenging market environment, but said SNDL stayed focused on disciplined execution, cost optimization, and balance-sheet strength. He highlighted the parallel restructuring as a major strategic milestone that could expand SNDL’s U.S. medical cannabis footprint and create long-term optionality. His tone was constructive and opportunistic, repeatedly stressing share repurchases, capital flexibility, and the ability to invest selectively where returns are attractive.

Alberto Paredero-Quiros focused on the drivers of the quarter’s weaker profitability: lower net revenue, cannabis ramp-up costs, and the SunStream valuation impact. He quantified the core results, including $235.8 million of net revenue, $56.3 million of gross profit, 23.9% gross margin, and a $7.8 million operating loss, while noting free cash flow improved to negative $6.7 million from the prior year. He also pointed to segment details, including liquor retail margin pressure from promotions, cannabis retail margin expansion to 26.4%, and a sharp drop in cannabis operations gross margin to 1.8% due mainly to Jeeter ramp-up inefficiencies.

Analysts focused on whether capital allocation would shift after the parallel deal closes, and management said buybacks remain attractive because SNDL believes its equity trades below intrinsic value, while U.S. investment, debt, and equity all remain possible tools. On cannabis operations, management said roughly 80% to 90% of the gross margin shortfall was due to Jeeter ramp-up, and that the issues are fixable, though some cost headwinds may continue in the coming months. Questions on cannabis retail and liquor retail centered on market softness and M&A strategy; management said cannabis retail should improve in the second half as provincial markets normalize, while liquor remains a tough, broadly declining category but still offers room for mix and margin improvement.