Hello everyone, and welcome to Organigram Global's 2026 investor session. Many of you watching today I already speak to fairly regularly, but for those I haven't met yet, my name is Max Schwartz, and I'm the Director of Investor Relations at Organigram. Thanks again for joining us today. Before we get started, I'll quickly cover the standard cautionary statement, so just bear with me a moment. Today's event was pre-recorded and is current as of September 14, 2026. Watchers and listeners should be aware that today's session will include estimates and other forward-looking information from which Organigram's actual results could differ. Please review the cautionary language in our public disclosures 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 session, including adjusted EBITDA and adjusted gross margin. These measures do not have any standardized meaning under IFRS and are intended to provide additional information. As such, these 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 such measures may not be directly comparable. Please see our public disclosures for more information about these measures. You should also be aware that Organigram relies on reputable third-party providers when making certain statements relating to market share data, and 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.
Now, with that out of the way, a lot has changed at Organigram since our last Investor Day. We've got a new CEO in James Yamanaka. We've acquired Sanity Group, establishing a significant operating business in Europe. We've added new leadership and capabilities across the organization. Most importantly, the business itself looks quite different today than it did just six months ago. Today is really about highlighting how things have changed and laying out where we go from here. You'll hear from our CEO, James Yamanaka, our CFO, Greg Guyatt, and Finn Hänsel, Founder of Sanity Group and now Organigram's President, Rest of World and Chief Strategy Officer. We're also going to take you inside several of our facilities to hear directly from the people running different parts of the business.
The overarching theme of today's session comes down to four strategic priorities: a rock-solid Canadian business, international expansion, manufacturing excellence and innovation, and disciplined ROI-focused capital allocation. All of these, we believe, support our ability to generate consistent profitability and increase shareholder value. We're going to come back to those four priorities throughout the session, but rather than spend any more time setting it up, I'll hand it over to James Yamanaka, CEO of Organigram Global, and I'll be back shortly to moderate our fireside chat. James.
Thank you, Max, and thank you all for joining us as we begin what I believe is an important new chapter for the company. Many investors will know the Organigram name from the last five or six years. Over that period, Organigram has been known for a lot of things. At different points in our history, we have been known for medical cannabis, indoor cultivation, plant science, and innovation. More recently, we have become the Canadian recreational market share leader, and now with the Sanity acquisition, a leader in the two large out of all parts of our evolution, but ultimately, none of them is the end goal. The goal is to build a global business that can translate our market positions and our capabilities into sustained profitable growth, consistent cash generation, and shareholder value.
When I joined Organigram in January, what stood out to me was the quality of the underlying pieces. A strong domestic business, world-class cultivation and product science, nationally recognized brands, increasingly sophisticated manufacturing capabilities, strong R&D and innovation capabilities, a strong partnership with BAT, and now, through the Sanity Group acquisition, a significant international commercial platform. The ingredients are here. Our job now is to connect these ingredients into one coherent global strategy that drives sustainable growth and value to our shareholders. What is our strategy? I think the easiest way to explain how we get there is through three key questions. Number one, where and how do we compete? Number two, what capabilities allow us to win? Ultimately, how do we allocate capital behind these choices to create the greatest value?
As Max mentioned, I like to think about these questions within the framework of four connected pillars. Let me start with Canada. Our Canadian operations are the foundation of the company. Canada is a place where we have built strong brands, where we have become the market share leader, and where we have established leading capabilities in cultivation, R&D, innovation, and plant science. We have also gained expertise across all non-combustible categories, from flower to vapor and edibles, as our Canadian business has grown. Expertise that we can leverage in Canada and in other markets around the world. Canada is also a jurisdiction where the cannabis industry has been firmly established from a regulatory and public acceptance perspective, with relatively lower risk of shocks than countries where legal cannabis is more nascent. Let us be honest.
While we are very proud of our market share leadership in Canada, we know that we need to improve our profitability in the market. We are determined to remain the market share leader in Canada. With that said, we have also made some clear choices not to chase revenues in segments that do not have the potential to drive overall margin. In line with this, we are already being more selective about the number of brands and SKUs our dollars support. A more focused portfolio allows us to concentrate on building brand equity while significantly lowering complexity and cost across our operations. We have already reduced our SKU count over the past year by roughly 10% and completely exited certain wholesale white label segments. Both of these actions have supported improvement in margins and will continue to rationalize and simplify our portfolio as we move forward.
We'll increasingly focus our investments on our big, powerful brands like SHRED, BOXHOT, and Big Bag O' Buds, all of which have become some of the most recognizable brands in Canada, commanding strong positions in the categories and consumer segments they serve. In sum, we will not lose our focus on our core Canadian business, but we will shift our focus to driving profitable, quality growth. Moving on to pillar two, international expansion and vertical integration. Global cannabis markets continue to grow, and OGI is well-positioned to participate in this growth. The acquisition of the Sanity Group has already transformed the business and significantly strengthened our ability to grow globally. Just six months ago, Organigram was a leading Canadian player with a small but growing export business, but very limited commercial capabilities on the ground outside of Canada.
With the Sanity Group, Organigram continues to have a strong business in Canada, but now also has a leading medical platform in Germany, a significantly strengthened ability to develop new markets in Europe, and regulatory engagement capabilities in Europe that did not previously exist. The scale of the change is significant. In fiscal 2025, only about 10% of Organigram's net revenue came from non-domestic sales. With the addition of Sanity Group in Q3, roughly 35% of OGI's revenue was international, and this proportion is growing. In Q4 2025, the pre-acquisition Sanity business generated EUR 19 million in revenue. Just two quarters later, the Sanity Group segment of OGI reported revenues of EUR 25.5 million, a 34% increase. If this trajectory continues, pace our domestic sales in the not-too-distant future.
This will, of course, be driven in the near term by the German market, but we expect to build on our positions in other markets, both organically and, should the right opportunity arise, via inorganic avenues. All of this growth will be supported by our operational capabilities in Canada. To continue growing our international business, we brought in Sanity's Founder and CEO, Finn, as our new President, Rest of World and Chief Strategy Officer. He'll talk much more about the opportunities he sees shortly. Now, moving on to pillar three, manufacturing excellence and innovation. In order to grow our domestic and international businesses, we will need to drive operational excellence across our supply chain. We'll need to improve our operational costs and gross margins. We'll need to ensure that we deliver high-quality products consistently to our consumers and patients.
And of course, we'll need to drive innovations that can grow the business. So what are we doing to drive manufacturing excellence and innovation in OGI? First of all, we've appointed Adrian Frenzel, the former Managing Director and COO of Sanity Group, as the new Chief Operating Officer at Organigram. Adrian brings a strong record of success in operations from previous roles as a McKinsey operations consultant and as co-CEO of HelloFresh U.S.A. I'm fully confident that Adrian will drive significant improvement in our operational efficiency and effectiveness. Adrian and the team will be laser-focused on improving operational efficiencies. They'll ensure that we realize gross margin improvements that stem from our SKU reductions and simplification. They'll simplify production flows, increase automation, and introduce more standardization into our processes to drive efficiency.
They will continue to improve the global supply chain. Of course, they will ensure strong, consistent, and consumer-relevant quality in all of our product lines. Finally, we will continue to focus on driving relevant innovation. Innovation for us is not just about the next novel recreational product. It is about building an ecosystem innovation, including process improvements, plant science and genetics, product science, and the technical building blocks for innovation across our categories. Pillars one and two were about where we compete and how we win. Canada is a bedrock, Germany is a current growth opportunity, and prudent expansion in current future markets.
Pillar three is about how we drive down costs and deliver the best quality to consumers and patients worldwide. Combined, these pillars are designed to help us grow profitably and deliver free cash flow, which we can then reinvest into other opportunities. Pillar four is a guardrail on our growth ambitions. We are determined to grow the business globally, but we will do this prudently, with disciplined capital allocation to ensure we do not overextend the business. Every acquisition, every brand, every production asset, every SKU, every commercial decision will continue to be evaluated through the lens of strategic importance, contribution to the bottom line, cash generation and liquidity, and of course, return on investment. Greg will walk us through this pillar in more detail shortly. That is an overview of how we are thinking about our strategic priorities moving forward.
Now, I want you to hear from some of the people supporting these priorities. First, let us head over to Moncton.
Thanks, James. Welcome to Moncton. I am Matt Carreau, and I run operations here. We are a 536,000 sq ft production facility with over four football fields of canopy, thanks to our three-tier grow system. 144 grow rooms, two rooms harvesting every single day. On-site testing, remediation, and state-of-the-art R&D labs, Moncton is a genuine world-class indoor facility. We have delivered some real achievements over the last year.
We have increased our yield by 30,000 kg through cultivation expertise alone, steadily raising average potency across the facility to a record of over 30% in Q3, and pioneering the advantages of seed-based production. But there is always room for improvement in operational innovation. That is really what my role is about. We are constantly asking: How do we increase room turnover, lower power consumption, sequence shifts to get the most from our automation lines, reduce waste and plant care expense, and save on inputs like nutrients?
These are all areas where we've made strong gains and keep optimizing. One initiative reduced our room turnaround from two days to less than 24 hours through better planning and coordination, creating capacity for more than 3,300 kg annually with virtually no capital investment. We've also shifted 95 grow rooms to day/night alternate schedules, reducing our electricity cost by roughly CAD 85,000 a month while maintaining our production performance. Those are just two examples of how we're constantly looking at smarter ways to operate, always challenging ourselves to find the next improvement. Another exciting development is our EU-GMP area behind me. This is where we dry and process all of EU-GMP flower. Awaiting certification from the regulator, we'll be able to ship directly to Europe and make Moncton an even bigger value engine for our international growth.
There's also a lot happening in our plant science and genetics department that feeds every pillar James talked about. I'll hand it off to Jonathan Montpetit, our Senior Director of Plant Science in the bio lab just down the hall.
Thank you, Matt. Behind me is Organigram's research genetic lab. In equipment and capability, based on the research infrastructure of BAT's own R&D headquarters in Southampton, our objective is not research for its own sake. It's to use plant science to improve product quality, cultivation economics, and the reliability of our commercial portfolio. One important example is powdery mildew resistance. We've identified genetic markers that allow us to screen young plants for resistance within the first 10 days, rather than waiting for an entire cycle, which can be up to 90 days, and where we would see the visible symptoms. This allows us to introduce resistance into commercial cultivars more rapidly, and over time, we've seen that resistant varieties reduce crop risk, labor, pesticide intervention, and product loss, while helping protect the yield and consistency.
We're extending this approach to other commercially important characteristics, including color, aroma, terpene expression, and several other agronomic traits. We're also evaluating differences in microbiological performance between cultivars, which is particularly important for demanding international medical markets. The second major opportunity is seed-based cultivation using F1 hybrids. We're one of the few producers investing in this space, and the benefits are significant. Faster room turns and higher yields because of shorter crop cycle and more vigorous plants, protection of our cultivars in international markets, and the ability to grow consistent cultivars in other facilities worldwide as we scale. If we acquired a facility in another country, we could grow the exact plants to the specs we need and developed here in Moncton. The work in this lab supports every pillar of our strategy: differentiated products, stronger cultivation margins, reliable international supply, and long-term innovation.
And on the subject of innovation, before I hand you back over to James in Toronto, I am going to introduce you to Nick Robertson. Over to you, Nick.
Thanks, Jonathan, and welcome to the sensory lab, where cultivation, science, and consumer insights converge and where a lot of our product innovation testing happens. During the past 12 months, we have tested over 120 products under our research license, and we are actively working on our first Schedule III study, which will allow us to actually measure the human effects of our products. Our sensory lab also supports the breeding program, where on a weekly basis, we are screening new varieties and producing a database of over 350 cultivars, capturing data on aroma, bud structure, and SHRED blend allocation. On that note, I would like to share the SHRED story because it is a great illustration of how we work. SHRED started with a question, what do Canadian cannabis consumers actually want? Not what the industry projected.
What did consumers tell us when we put product in front of them, watched them consume it, and listened? They told us they wanted convenience, value, versatility, and something that genuinely smelled like premium cannabis. We launched SHRED milled flower with aroma-specific blends, on its own, a novel concept at the time, and from there, the brand just took off. Today, SHRED spans several categories and is our highest revenue brand, selling over CAD 200 million a year in retail sales. To me, SHRED is the true CPG of cannabis, a product that is remarkably consistent, has a loyal following, and has expanded well beyond its original scope. SHRED also carries innovations that we are excited about. Last year, we launched our FAST nanoemulsion technology, and this year we are rolling it out to SHRED gummies and beverages, like shots and sodas.
FAST is not just a technology platform, it is an ingredient brand, like GORE-TEX or Intel, and one day we envision it powering multiple brands and products across the globe, providing consumers with a science-backed, clinically validated indication of effect. Our clinical study on FAST supports a clear, compelling claim, faster onset and higher plasma concentrations in the bloodstream, which make it attractive to medical markets and prescribing physicians. And we are not stopping there. Our pipeline will continue solving consumer pain points, creating additional strategic advantages, both medical and recreational markets. And with that, back to James in Toronto.
I think what you just saw gives you a better sense of what we mean when we talk about operations in general, and there are some genuinely impressive capabilities in Moncton, which as you can see, we are constantly trying to improve. We have other facilities across our cultivation and manufacturing network with similar focus on continually improving. Let's take a look at what's happening at our Aylmer facility.
Thank you, James. I'd like to welcome you to Aylmer, the location of Organigram's material production facility. My name is Nick Balint, and I am the Facility Manager at the site. Our operation focuses on three key manufacturing areas, vape filling, infused pre-rolls, and hydrocarbon extraction. We are home to approximately 120 Organigram employees, many of whom focus on product quality, ensuring throughput and process efficiency. Data collection and the effective use of manufacturing principles has been key in our continued growth. To provide you further information, I'd like to pass it on to Michelle, our Senior Manager, Operations.
Thanks, Nick. Now we'll head into our pre-roll area. In this production space, we have three automated pre-roll machines. These machines can make up to the capacity of 4 million pre-rolls every month. This process follows two different biomass streams, the dry infused biomass or regular biomass that can get infused later with the formulation to enhance the potency of the pre-rolls. The machines will actively weigh both incoming biomass and the pre-roll itself at the end of the machines to ensure consistency, quality, and good units are what pass. From this, those pre-rolls will either go to the injection machine to put that enhanced formulation flavor into the pre-roll as well as give it that higher potency. After that, it's onto the coating phase. Our pre-rolls can be coated with both kief, bubble hash, or isolate. Now, onto the vape room.
Now in this room, we can fill up to 1.5 million vapes in a month off of our three automated robo fillers. We fill 510s or our exclusive all-in-ones on these machines to make sure that we bring the flavor, experience, and enhancement to our customers. We fill multiple SKUs across these robo machines of different flavors. The rest of the facility is dedicated to hydrocarbon extraction and purification. In this part, we refine our extracts to give pure material. This is where we also extract our THCA powder, which is essentially pure THC, and we use that to infuse our pre-rolls. On that note, I'm going to hand it over to Anna Maveal, Senior Director of Engineering. She will talk you through the continuous improvements that we have going across both Aylmer and London.
Thanks, Michelle. Welcome to the London Distribution Center. I'm Anna Maveal, the Senior Director of Engineering. My team is responsible for continuous improvement, capital expenditure projects, and engineering support across the organization. Our focus is on improving product quality, increasing operational efficiency, and ensuring our facilities can scale profitably as the business grows. Over the last year, we've transformed the engineering department from several site-based groups with different priorities to one centralized function with one mandate. Engineering, supply chain, operations, and quality are working together to improve unit economics while maintaining the quality standards that consumers expect from Organigram. With Adrian joining us from Sanity as our COO, we're building on a foundation that we've already created while leveraging his experience to improve our processes after the Sanity acquisition.
As you've heard, Q2 presented challenges in both our vapes and infused pre-roll categories, which has reinforced the importance of strengthening our quality control systems. A number of automation projects will be coming online over the next few months, which will improve our COGS while maintaining consistent product quality. We focused on eliminating root causes rather than treating symptoms. These efforts are already producing results. From the end of Q2 to the end of Q3, we've seen a reduction of complaints by 28% for vapes and 29% for pre-rolls. The operation we're running today is much stronger than the one we started the year with.
We have a robust pipeline of initiatives and a strong team, which we believe will deliver on improvements in quality, efficiency, and profitability going forward. Back to you, James.
Thanks, team. We've now covered cultivation, plant science, and manufacturing consistency. We've shown you Moncton and Aylmer, covering pillars supporting our business and operational initiatives. We have another cultivation and derivatives facility in Lac-Supérieur, Quebec, which is strategic to our growing success in the Quebec market. In Lac, we mainly grow flower and manufacture hash, leading to our leadership in the concentrates category. In the interest of time, though, I want to finish these pillars with one last stop at our Winnipeg facility. Going from Moncton to Aylmer to Winnipeg gives you a view across our supply chain, from cultivation through extraction and manufacturing, all the way to finished products like beverages and edibles. Beverages are a relatively new capability for OGI that we're excited about. Let's check it out.
Usually when you go to an edibles facility, they would have a very manual process. We are the only automated edibles facility in all of Canada.
I started four years ago. It was between 30 and 40 people. I believe we are up to 100 now. Everybody is trying to play a part and make sure that we are as efficient as possible, as effective of a team as possible.
In a typical day, it starts with our distillates and our isolates that we get from our sister site in Aylmer, in London, where they do the extraction for the oils. Then we put that through the different types of edibles that we have, whether it is in gummy production or in shots or in the candy line. We implemented so many technologies and sought out experts in their field. We brought in German technicians from the equipment manufacturer to help us troubleshoot and establish parameters for the cooking line. We installed a continuous data monitoring for the gummy line so that we can track the pressure and the temperature all throughout the production run. We went from 1,000 gummies in one day to now 250,000.
The sheer quantity of product that we are making, 1,200 kg in a day, is really more about time management, multitasking. We have a lot of weight checkpoints, both through manual weight checks, through check weighers for our finished goods.
There is quality parameters that are tested and developed by our R&D team, and we subject our whole production from beginning, middle, end to potency testing.
We do test potency in-house, so we can get same-day results. We do need all of our documents, all the testing performed before we will allow something to ship to the customer.
The edibles and beverages category in Canada are underdeveloped relative to what we believe they can be. Today, edibles are only about 5% of total retail sales. In the U.S., that number is closer to 15%, making edibles a much more significant category. On beverages specifically, the category is just 1%-2% of Canadian retail sales, but we believe there is a significant potential opportunity ahead. We have seen in the U.S. that when beverages move outside the dispensary model, as hemp-derived beverages have, the category can scale quickly, with some analysts estimating close to $1 billion in sales in 2025. Both categories are still constrained by regulation in Canada, and we are actively advocating for changes through ongoing government relations efforts.
As consumer preferences continue to evolve, we believe cannabis beverages have the potential to participate in something that is already a deeply social behavior, having a drink with your family and friends. Let me pull this first part together through the lens of our four strategic pillars. Canada remains our foundation and the place where we will continue to grow our business. What you have seen today is the cultivation, brands, plant science, and infrastructure supporting that business, along with the work underway to make it more focused, efficient, and profitable. Importantly, Canada provides a stable regulatory environment that reduces the risk in our operation. The German market and further international expansion will be our future growth driver.
With Sanity, we are a transformed business with a meaningful commercial platform in Europe, and we are already connecting demand in Germany and beyond with capabilities we have already built in Canada. Manufacturing excellence and innovation are the connective tissue between these two businesses. The work happening across our facilities is about improving quality, lowering cost, developing differentiated products, and getting more out of the assets we already own. Underpinning all of this is disciplined capital allocation, making sure the capital we deploy behind Canada, international growth, innovation, and our operating platform is prudent and directed toward opportunities that can generate attractive returns. We are going to hold the deeper international discussion for just a moment and hear from Greg on our recent performance, our expectations for the rest of the year and beyond and how we are applying that capital allocation discipline across the business.
Finn will take you much deeper into the international opportunity. Greg?
Thanks, James. The long-term vision and the pillars James and the team just laid out are designed to produce one thing: sustained free cash flow. Cash we can reinvest into the business at attractive returns, or use to secure strategic advantages that themselves can eventually earn attractive returns. That is our fourth pillar, disciplined capital allocation. Historically, Organigram invested to build cultivation and manufacturing capability and gain market share through acquisitions, a broad brand portfolio to hold shelf space, and a steady stream of new products to reach different consumers. We did all that well, expanding into new categories, improving efficiency, and generally protecting share gains. That strategy suited a market that was still taking shape, where a large brand portfolio and a steady stream of new products was strategically important.
That kind of optionality did bring with it additional costs we have already begun reining in, as James outlined. However, it also helped us to build the capabilities and competitive position we are going to need going forward. Before I get into our expectations about how we are thinking about the business going forward, let me quickly review our financial trajectory and put our recent consolidated results, including Sanity, into context. Organigram's long-term trajectory tells a very clear story, and it helps to zoom out past the quarter-to-quarter noise as our business is seasonally weighted towards Q3 and Q4. Time, with rising adjusted gross margins and higher adjusted EBITDA. Just to be clear, fiscal 2026 on this chart represents only the first nine months of the year.
Between fiscal 2023 and fiscal 2024, net revenue rose about 6%, adjusted gross margin expanded by 9 percentage points, and adjusted EBITDA grew by 55%. The growth continued between fiscal 2024 and 2025, where net revenue rose 62%, adjusted gross margin held roughly steady as a percentage of net revenue, while gross margin dollars grew substantially, and adjusted EBITDA increased 160%. The large step-up in fiscal 2025 was driven in part by the acquisition of Motif, which took our vape business from almost nothing to number one in the category, while also substantially growing our pre-roll and infused pre-roll businesses. With a greater mix of ready-to-consume products post the Motif acquisition, efficiencies in cultivation and production, and the realization of net synergies, year-over-year gross profit and adjusted EBITDA both stepped up meaningfully.
What is more telling for where we are today regarding our pre-Sanity business is the revenue ramp-up through fiscal 2025 and the performance that we achieved in Q4. Let us come back to the quarterly view. Our fourth quarter of fiscal 2025 set several records, and we have just surpassed them again in Q3 of this year. This view also puts the first half of fiscal 2026 into context. We dealt with the B.C. labor disruption, lower international volumes related to out-of-spec flower, increased competition, and the now-resolved issues in vapes and infused pre-rolls that we discussed in our Q2 conference call. Those factors affected our historical product mix and compressed gross margin and adjusted EBITDA.
I have said this before, but as a reminder, Q1 and Q2 are also typically our seasonally lower quarters, so the aforementioned issues had a more pronounced impact in the first half of this year than they would have otherwise. We viewed many of those issues as temporary, and our record Q3 showed meaningful progress in areas within our control. Vapes and infused pre-rolls began recovering, with both continuing to gain share post Q3, while we also saw continued growth in flower, concentrates, and beverages. Q3 was also our first full quarter consolidating Sanity Group, which contributed almost CAD 40 million of net revenue and was accretive to both gross margin and adjusted EBITDA. The result was the highest quarterly net revenue and adjusted EBITDA in Organigram's history, with adjusted EBITDA margin returning to approximately 13%.
We think the Sanity business, given its trajectory, can grow our international revenue contribution to the point where, by the end of fiscal 2027, our overall business could become much more balanced between Canadian and international revenue. Looking beyond that, we see a path to a geographically diversified business with revenue streams that are predominantly international and higher margin. I would like to talk about cost discipline for a moment. From the second quarter of fiscal 2025 through the second quarter of this year, our SG&A held in a relatively tight band of roughly CAD 22 million-CAD 27 million a quarter, demonstrating a relatively stable cost base given the size of our business. As a result, our SG&A expense ratio moved largely with the top line.
The ratio reached a low in our record fourth quarter of FY 2025 and rose again in the first half of this year due to sequentially lower revenue. Our SG&A dollars actually declined over that period, with the expense ratio reaching a new low due to our Q3 recovery. In this case, a new low is a good thing. In Q3, we consolidated Sanity for the first full quarter. SG&A dollars increased as we brought that business into our results, but revenue increased substantially more. As a result, our SG&A expense ratio fell to about 31%, which is its lowest level in at least two years. The picture gets even clearer when you exclude non-cash expenses like depreciation and amortization. With the addition of Sanity, we did begin amortizing the acquired intangibles associated with that business.
Excluding non-cash expenses like depreciation and amortization, our SG&A expense ratio actually fell to about 26% in Q3 after adjusting for a roughly CAD 3 million benefit from bad debt recovery that we achieved during the quarter. With the lower SG&A expense ratio and growing international contributions, the business has greater potential to convert future revenue into cash flow. A relatively stable SG&A structure doesn't mean we think the work is finished. We continue to see opportunities for additional cost discipline. The company is progressing through initiatives designed to reduce complexity, support higher velocity products, and build fewer, more powerful brands, all while reducing overhead expenses. One avenue James mentioned is reducing our SKU count along a gradual glide path. Another is rationalizing the brand portfolio itself to focus on fewer, stronger brands.
As the company expands internationally, we'll be extremely thoughtful about how we launch products in new jurisdictions, balancing where incremental SG&A investment makes sense, and where we can leverage existing infrastructure to control our costs. With Organigram's current structure, we believe there's an opportunity to bring total SG&A down further, inclusive of Sanity, while simultaneously improving our gross margins over time. As James mentioned, our new Global COO, Adrian Frenzel, will be guiding many of those initiatives. Now I'd like to talk about how our capital philosophy has evolved alongside the transformation of the business. A couple of years ago, we probably would have been talking about launching new brands and innovative SKUs. Today, we'd rather strengthen our core brands, which include SHRED, Big Bag O' Buds, and BOXHOT, three Canadian power brands, all among the top 10 national brands.
Generally speaking, we're concentrating our capital behind fewer opportunities with clearer paths to attractive returns while building more diversified revenue streams across geographies and between medical and recreational cannabis. That said, every investment we evaluate has to answer four key questions, and you'll recognize them because they're essentially the four pillars that James already laid out. Does it strengthen our Canadian business? Does it accelerate our international business? Does it improve our manufacturing advantage? Does it generate attractive long-term returns? Those questions give us a consistent framework for deciding where that capital should go. Sanity is a great example of how we apply that framework. We see Sanity as critical infrastructure for a European medical platform, bringing our distribution, regulatory expertise, pharmacy and physician relationships, and market access in one of the world's fastest-growing medical cannabis markets. The strategic fit starts with international growth.
Sanity gave Organigram an established commercial platform in Europe immediately, rather than requiring us to build one customer by customer, market from market, from the ground up. It also creates a direct connection between our Canadian capabilities and European demand. As our supply chain becomes increasingly integrated, including through our expected EU-GMP certification in Moncton, we believe more Organigram-grown flower can move through that platform from plant to patient. The longer-term return on that investment will ultimately be measured by what we do from here, how quickly we grow the business, how successfully we integrate our supply chain, and how much cash flow the combined platform can generate. Let's step back for a moment and look at Organigram's investment thesis today from my perspective. We are a leading Canadian business, which is focused on translating its capabilities into higher margins and cash flow.
We have a rapidly growing international medical cannabis platform, giving us exposure to markets like Germany that are at a much earlier stage of development than Canada, as well as other EU markets. We are increasing vertical integration between those businesses with the ability to connect our Canadian cultivation and product capabilities directly to international demand. We've got a relatively stable underlying cost structure that creates meaningful operating leverage as revenue grows, alongside additional opportunities to reduce our cost of goods sold and SG&A over time. We're being more disciplined about how we allocate capital. Finally, I can't overstate the importance of the unparalleled innovative research we conduct and commercialize through our product development collaboration with our largest shareholder, BAT, who have provided over CAD 400 million in strategic capital to Organigram over the last few years.
Put together, we believe that's a fundamentally different business than Organigram was even just a couple of quarters ago. We're operating against the backdrop of regulated cannabis frameworks continuing to develop across major international markets. So what should Organigram look like over the next few years? I think it's the following. A meaningfully higher share of revenue from international markets. Stronger gross margins supported by medical cannabis mix, operational efficiency and manufacturing scale. Fewer, stronger brands. Higher returns on invested capital, and a diversified business less dependent on any single market. For the near term, our priorities remain consistent with what we laid out on our Q3 earnings call a couple of months ago. We expect to generate positive free cash flow in Q4, and for fiscal 2026, we continue to expect revenue of about CAD 350 million, with adjusted EBITDA and adjusted gross margin above fiscal 2025 levels.
Looking into fiscal 2027, our focus is on continuing to improve profitability, expanding the contribution from international markets, and further refining our Canadian operations. James described Organigram's strategy and the assets we have to execute against it. I've described the financial trajectory and what we believe that strategy can mean for the economics of our business. Now, I'll hand it over to the person responsible for leading our international growth strategy, Finn Hänsel.
Thank you, Greg, and thanks to everyone watching. To start, I want to tell you why a digital entrepreneur ended up in cannabis, and then why I am excited to lead Organigram's international strategy. In Germany, people know me for digital entrepreneurship. I built and exited several companies before Sanity, always asset-light and always digital-first. Sanity thinks the same way: digital in how we reach the patient, how we manage the journey, and how we facilitate access to medical cannabis. We are deeply engaged in the regulatory and political landscape, which matters in a market built by regulation. So cannabis. Why? I was an active member of the Young Conservatives in Germany, and within that circle, a physician I knew was diagnosed with cancer and unfortunately passed away. After his passing, the role that cannabis played had changed my perspective on cannabis.
The necessity of having to treat himself with cannabis without his physician's knowledge because there was no legal medical access, he had really got me thinking. I began to lend my voice to the chorus of people pushing for responsible, patient-oriented cannabis regulation. Then in 2017, Germany significantly expanded access to medical cannabis, allowing physicians to prescribe it more broadly and creating the foundation for the market we see today. I think here is a good place to explain how a company that generated EUR 9 million revenues in 2023 became Organigram's European platform, and where that business is going. I founded Sanity Group in Berlin in 2018 with my co-founder, Fabian Friede. When we founded Sanity, the German medical cannabis market was small, fragmented, and stigmatized, even within the healthcare system.
Patients faced bureaucratic barriers, doctors were reluctant to prescribe, pharmacies were unprepared, and the product was largely inconsistent and very expensive. That is why we built Sanity based on three beliefs. First, the patient need was real. Chronic pain, neurological conditions, oncology. Existing treatments were leaving too many patients without adequate care. Second, the regulatory direction in Germany was toward liberalization. We could not know the timing, but the direction could be expected. Third, the companies that would win this market were the ones that understood regulatory matters and actively engaged with policymakers. That means responding quickly and responsibly to expected changes in regulatory landscape, and persistently building out the capacity to meet patient needs through pharmacy partnerships, consistent quality supply, and reducing barriers to access. Doing all of this before the real volume arrived, not after.
In April 2024, Germany removed cannabis from the so-called Betäubungsmittelgesetz, AKA the Controlled Substance Law, and the volume finally arrived. In 2023, Sanity generated EUR 9 million in revenue. In 2024, EUR 19 million. In 2025, EUR 60 million . We went from the fifth-largest medical cannabis brand in Germany to the leading brand in 12 months. That trajectory is the result of over seven years of relationship building, brand investment, and medical positioning, culminating at the moment we had been preparing for. The trajectory remains strong. We exited fiscal 2025 with a Q4 revenue of EUR 19 million, the same level of revenue we generated in all of fiscal 2024. While triple-digit growth is not something we assume going forward, over the following two quarters, we still grew revenue by a very solid 34%, while delivering very positive EBITDA, including our first consolidated quarter as part of Organigram.
Let me explain Sanity's, and now Organigram's, current European business. In Germany, we can operate across two primary medical cannabis channels: the private pay market and the reimbursed market. Avaay Medical is our premium medical cannabis brand. It is clinically positioned and it carries the strongest recognition among patients and physicians. We estimate avaay is now the number one medical cannabis brand in Germany by market share, and because patients using avaay predominantly pay privately for their prescriptions, it represents our highest-margin commercial channel. Vayamed, meanwhile, gives us the broad access to the reimbursed market and an extensive network of German pharmacies. As our pharmaceutical development and distribution business, it supplies pharmacies with medical cannabis sourced from a range of producers, allowing us to serve accounts that want access to a broad portfolio rather than only our proprietary brands.
That business currently has lower margins than avaay, but the pharmacy relationship and market access it provides is strategically important. Over time, we see two opportunities to improve the economics of that platform. First, as avaay's share grows within the pharmacies we serve, our mix shifts towards our higher margin proprietary brand. Second, Vayamed can increasingly source product from Organigram's Canadian cultivation platform, particularly following EU-GMP certification, allowing us to capture more of the economics across the value chain. Even before considering underlying market growth, we see a clear path to improving the margin profile of the existing Sanity business through both mix and greater vertical integration. Germany is the foundation of our European business. The medical market continues to grow as patient volumes expand and prescribing becomes normalized.
The adult use framework through social clubs under 2024 law is live, but a commercial retail pathway hasn't been established, and we are not building forecasts around a timeline that hasn't been confirmed. But we have a number of expansion opportunities outside Germany that are already underway. We are taking our regulatory expertise, medical brands, procurement, and pharmacy relationships into other attractive European markets. In Switzerland, we've established both medical and recreational channels. On the medical side, we are building our presence through local partnerships and began participating in government-authorized scientific pilot programs that give us direct experience operating retail locations in a regulated adult use environment. Based on the data we've seen from these projects, we are very optimistic that Switzerland could adopt the full adult use model within the next two to three years.
Switzerland is our proof of concept for the pilot-to-policy journey we anticipate other European markets will follow. Our Grashaus Projects pilot stores have now served thousands of participants under the Swiss Federal pilot program. Our data on illicit market displacement is compelling. We've seen illicit sourcing among participants decline by roughly 50%. That's exactly the kind of data that can help inform cantonal governments and ultimately federal frameworks as they consider broader access. Ours is also the only pilot project run commercially by a company. We operate two dispensaries today, potentially more very soon, and if Switzerland moves to adult use, we believe that experience positions us well for what could have becomes Europe's next potential recreational market. In the U.K., we've begun introducing our branded medical products through strategic distribution partnerships, giving us access to another large and developing medical cannabis market without requiring significant infrastructure investment upfront.
In the U.K., the market runs through specialist prescription and private pay pathways. It is at an earlier stage than Germany, but moving in the very similar direction. We are building the pharmacy and the clinical relationship now before the volume arrives, the same playbook that has worked very well in Germany for us. The Czech Republic, Poland, Slovenia, and Ukraine are in active development on different timelines. We believe the German precedent can travel across borders faster than many outside observers expect, and we expect all three to be generating revenues within the next 18 months. I think our European portfolio in four buckets. Germany is our scale market today. Switzerland gives us both medical and recreational growth and direct experience operating regulated adult use retail. The U.K. is an opportunity to replicate the medical playbook we built in Germany.
Markets including Poland, Czech Republic, Ukraine, Slovenia, and possibly later, countries like Spain and France represent the next, the fourth bucket of expansion. There is a very deliberate and repeatable model we intend to apply in Europe. We do not need to recreate Sanity Group in every country. We can use the infrastructure, the brands, the regulatory capabilities, and supplier relationships we already built, enter new markets through the right local partnerships, and scale our investment as those markets develop. Now, I have just been appointed as President, Rest of World of Organigram, not just Europe, and there are, of course, also opportunities elsewhere. In Australia, we already sell a number of branded vape and pastille products under our BOXHOT and Edison brands and are evaluating opportunities to expand within that market.
In the U.S., we began selling branded hemp-derived THC beverages and gummies with other functional ingredients for various consumer mood states shortly before a hemp-derived THC ban was announced last year. We expect that ban to go into effect in December but are watching to see how regulations in this area unfold. As the U.S. market shifts in response to the expected rescaling of cannabis, we are watching closely and will respond to opportunities as they unfold. I think the U.S. medical market is very interesting, but we will need to find avenues of participation that support our near-term business opportunities. As Greg said, every dollar of capital spent on one strategy is a dollar we cannot spend on another. So we need to be selective about where capital goes to support yielding cash flow that we can reinvest in the business in the near term.
The best near-term opportunity in our current view and given our structure right now remains Europe. That said, we continue to monitor developments in places like Brazil, Thailand, and many places more. To put this all into perspective, Germany alone remains a large growth opportunity for Organigram. We expect the German medical market to double by 2028, and Sanity is already operating at an annualized revenue run rate of more than EUR 100 million. Several other European markets, some of which we are actively developing, provide further additional upside. As these markets grow and medical cannabis demand increases, Organigram can participate in both directions. We can be vertically integrated supplier, connecting Canadian production directly to our European distribution platform, while also sourcing EU-GMP compliant flower from other producers as European demand dictates. That could potentially include U.S. sources if future regulations allow.
Since we are here for an investor session, here is my investment thesis. I believe the European cannabis market will likely be measured in tens of billions of EUR within this decade. The companies that lead it will be the ones that build the brands, pharmacy relationships, medical credibility, and patient trust before the real volume arrives, just like we did it. That is a position Organigram, through Sanity, has a meaningful headstart in building. With the two companies now integrated and focused on operational execution and global growth, not just in Europe, but Australia and the U.S., we believe we have the platform capabilities and market position to turn that early advantage into sustainable-
All right. Thank you very much for waiting as we begin the fireside chat portion of our Investor Day. We are doing things a little bit differently this year. Last year, we had a live Q&A with pre-submitted questions and live submitted questions from investor. This year, we got pre-submitted questions, and in addition to that, there are a number of topics that I think are really relevant to today's keynote. I would like to get a little deeper into those. Why do not we kick things off. James, you have described Canada as the stable foundation and international becoming a much larger part of Organigram. Does that mean that profitability now matters more than defending every point of Canadian market share? Do you think it was a mistake to invest so heavily in gaining market share at what seems like the expense of profitability in the past?
Right. Let me answer that in a couple ways. Put it this way. If Finn came to me tomorrow and said, "Do you want share in revenue or do you want profitability?" The answer will be, I want both. I think in today's current context, where we are trying to get to is a point where we want to consolidate the portfolio, make it simpler, build a strong set of SKUs and brands, so that over time, we will have a smaller set of brands, and we will grow more profitably. For the current moment, yes, profitability is a priority. If I look back, prior to the time I was here, I do not think it was a mistake. I think it was a certain point in the evolution of the industry, in Canada, where building that market share, building those revenues were something that helped to attract strategic capital.
It was how you were rewarded in the day. I think as the industry has evolved, matured, it is now the time for us, and probably for a lot of our other companies as well, to solidify portfolios and really to focus on growing profitability in the market.
Got you. You mentioned SHRED, BOXHOT, and Big Bag O' Buds and portfolio rationalization. Right now, I think Organigram has something like 10+ brands. How far are you willing to take the rationalization piece of that? Is it going to be concentrated into those three brands, or are there any more that you're thinking about keeping in the portfolio?
Yeah. First of all, whatever transition we do will be gradual and over time because you can't consolidate your entire portfolio in one go. As of today, those will be the three key brands plus some of our regional brands, such as the brands that we have in Quebec. If I really project it out over four or five years, I could easily see having half the brands and half the SKUs that we have today. But it will be a transition over time to make sure that we continue to drive revenues, that we have time to make sure the investments in our brands are really building those brands, building the stickiness, building the premiumness of those brands, so that you have a smooth transition. At the same time, you get better marginal along the way.
Every time you reduce a portfolio, simplify it'll be a lot easier for Adrian and the COO's job to drive better margins for the group as a whole.
Got it. Speaking about margin, obviously we've just made this acquisition of Sanity Group. International cannabis tends to have higher margin than domestic cannabis.
Right.
Finn, to you, Germany is a really rapidly growing market. It seems like it is attracting a lot of competitors. There is more consolidation happening in the space. So what does Organigram have today that would actually make it difficult for, say, a well-capitalized competitor to replicate what we have in Europe now?
Yeah. First of all, it is not only about capital, right? So there is a lot of different aspects that make you successful in the market. There is pharmacy relationships, there is reputation, there is marketing, there is your brands, there is your network you are building up. So obviously, you cannot really replicate this from one day to another, no matter how much capital you have. However, now with the combination of Sanity Group and Organigram, I really think we build a strong vertically integrated model now. So on the one hand, the cultivation that actually allows us to directly import from Canada into Europe and then actually marketing it through market access to the patients. So I think that kind of customer journey or patient journey, really from cultivation to the brand to the patient access, that is nothing that anyone can replicate easily.
I think that is quite unique of what we built here in the market.
Mm-hmm. A big part of that sort of value proposition moving forward is obviously Organigram's ability to supply EU-GMP-compliant flower. Greg, I want to just pass this over to you. So you have described EU-GMP as a margin working capital unlock. So walk us through exactly how the economics change once Moncton can supply Sanity directly.
Yeah. It is a significant benefit to us when we get EU-GMP. I think for starters, today, we take our GACP flower and ship it to a third party for GMP conversion. There is a cost to that, roughly CAD 0.50 a gram, so that is a material part of the value chain that we are not capturing today. The other part is not directly visible on the P&L, but it is the speed to market. Today, sending it to that third party actually adds about, I will call it four to six weeks or more, of working capital that is being tied up while this is happening.
By having EU-GMP, it allows us to get the product directly from Canada into the target market that much faster, and we turn into cash that much faster, which is a huge advantage to us.
If I can add to that, it is also about the freshness of the product itself.
It is not purely economic, but also from a patient perspective, the fresher the product is, the more the customer likes it, and that is the reason why this is also a very big advantage for us if that happens.
You actually do see a difference in terms of product that is EU-GMP supplied directly from Canada.
Yes.
Versus something that has gone through other—
Absolutely.
—conversion?
Yeah.
Interesting. Overall, would you say that the EU-GMP compliant is there a supply constraint across the market for EU-GMP-compliant flower?
Well, I would say the whole market at the moment has a challenge to get enough EU-GMP product into the country, where having a direct partner who has EU-GMP without all the different pathways of getting it into the country makes it much easier for us.
I think there are only very few companies right now that have a direct relationship with an EU-GMP manufacturer, maybe three or four out of 200 companies in the market. Having that in the future will bring us big benefits in the market.
Right. You also have a unique perspective because being part of Sanity Group, you're also a buyer of EU-GMP compliant—
Yeah.
—flower. I understand what you're saying in response to Organigram's ability to supply the flower directly. As a buyer, how are you seeing the market right now? Is it tight? Are you having trouble meeting demand?
Yeah. The demand in Germany is growing very fastly. However, there's not enough EU-GMP flower in the market. Obviously we need to process GACP flower into GMP flower, so that is something that adds a lot of complexity right now. Once we have enough EU-GMP cultivators who are EU-GMP qualified, like Organigram in the future, that will help us to have a competitive advantage against—
Yeah.
—all our competitors who don't have that.
On EU-GMP, James.
We applied for our EU-GMP certification a couple of years ago, and it's been significantly delayed. What's your level of optimism in achieving the certification over the next, say, two to three to four, five, six months?
Okay. I think, first of all, look, I think it's a brave man to be betting on this sort of thing because it really does depend on the regulator and if there's any specific issues in the market at that time. But I think from our point of view, what I am very confident is after the audit we had last November, we have addressed all the concerns that the regulator brought up to us. We've completed all of the remedial efforts, everything that they pointed out at that time. And I think, we have not heard anything negative, and right now, it's just a matter of really keeping that engagement, working with the regulator, pushing it as much as we can. Of course, with the help from Finn, who's sitting in Germany, which does help.
I am confident we will get it, but am I confident enough to give you an exact date today? I think enough of myself and my predecessors have been burned that we will see.
We are pushing, and I am very confident that we have done the work that we need to do on our side.
I recently had an investor ask me whether or not our delay in EU-GMP was a factor contributing to the accelerated earn-out in Sanity. Can you speak to that a little bit?
No, that is really not a factor. Finn mentioned a couple seconds ago, EU-GMP-compliant flower is a general constraint across the market in Germany and in Europe as a whole. I do not think this was something that made that happen. What really drove the earn-out was a couple things. Number one, the earn-out did create different incentives within the company, where Finn and the team really had to focus on the earn-out.
Yes.
From an OGI perspective, there were more things we would have wanted to do to integrate, to bring people like Finn and Adrian directly into the company, to be able to really lead the company forward. That was really the driver we wanted to do it, and the earn-out was the mechanism where we needed to give to make sure that we gave the best deal to the former Sanity shareholders as well as OGI shareholders, and I think we have done that well. I think the real benefit now, even one month in, having Finn directly on the team, be able to drive the rest of the world, plus the strategy, and having Adrian, who has a great track record of what he has done in Sanity, plus his previous roles.
I think we have, now a team that can really drive not just the top-line growth, the future-looking expansion in Europe, but also really drive those efficiencies to make sure we have a great supply chain that can supply wherever we happen to move into the world.
Interesting. Speaking about bringing in new talent to the team, Finn, I want to direct this to you. You have been an entrepreneur, you have had multiple exits. Now you are joining a larger public company. I am curious what kind of experiences you believe that you can infuse into the Organigram culture. You have obviously worked with Adrian for a number of years. What gives you confidence that he is the guy to come in and streamline operations in a way that improves cost of goods sold and increases gross margin?
Look, at the end of the day, a startup is a very different culture from a corporate, right? That is a fact. However, I strongly believe that there is no right or wrong. I am very far away from saying the startup is doing everything right and the corporate is doing everything wrong.
I think it's the mix of the two that brings out the best out of both companies. Organigram has implemented processes, years of experience, a lot of actually knowledge about things that we even don't even know, for example, the recreational market. But then you also have the culture of being very fast, very dynamic, break things fast, fix them faster. All this kind of dynamic I think is also very strong for a startup to have because what the advantage of a startup is that it could always react quickly to changing market circumstances. I think if we combine those two cultures, like the knowledge, the processes, and the experience in the market, plus the dynamic culture of a startup that basically reinvents itself from time to time, I think only then you can create something really superior.
I think we are about to do this right now at Organigram.
Yeah, that's an interesting point. I've observed a lot of strategic investments and a lot of M&A over the years. I want to throw this question over to Greg. You mentioned that Organigram invested heavily in optionality. In looking back at investments like Phylos, Greentank, OBX, Collective Project, et cetera, which investments have actually earned an acceptable return in your view? Are there any investments you wouldn't make again under today's new capital allocation framework?
Yeah, look, whenever you make an investment, there's not 100% guarantee that investments will pan out. That's what we do. We take on a certain amount of risk and hope that the return comes from that. I think the vast majority of the investments we have made have been successful. Look at Phylos as an example. Phylos is what allowed us to really develop the seed-based cultivation methods that really was novel within the industry. It reduced the amount of time from start to finish in the cultivation cycle and also reduced the amount of labor that we were incurring. I'd say that one's a fantastic investment. On the other side, we have an OBX as an example. At the time, the hypothesis was solid.
Unfortunately, that one hasn't panned out quite as well because there's been regulatory changes in the U.S. that have really had a negative impact on that business. By and large, the other investments we've made, Greentank, I think that's been successful. We've made certainly capital appreciation on that, but also gained access to vape technology that we've been able to participate in as a business. I think we've also done some other significant acquisitions that were not just investments, but full company acquisitions, where we had EIC, which was our edibles business in Winnipeg.
We had Lac in Mont-Tremblant for our hash business that we acquired, hugely successful. Collective Project got us into the beverage category, very successful. Motif was very successful as well, went from zero in vapes to leader in vapes across the industry. Then finally culminating with the Sanity Group acquisition, which we're only one quarter in, but I've been very happy with how it's performed. The first quarter under our belts did around CAD 40 million , which is really where we expected it to be. And the growth profile is really fantastic. Accretive to EBITDA, accretive to earnings.
I'd say by and large, I think we've really demonstrated a solid track record of being able to execute and deliver on the investments that we've made so far.
Mm-hmm. Speaking of future investments, investors are always worried about dilution. When it comes to thinking about the next strategic investment, the next M&A opportunity, can you talk a little bit about how you think about the cost benefits of, say, raising equity versus debt—
Yeah.
—and how the company intends to compete with its peers on a balance sheet basis given the landscape right now?
Yeah. First of all, we all know that debt is cheaper than equity, because debt can be paid back, equity can't, unless you're doing a share buyback program.
But whenever we're looking at an investment, whether or not that investment is successful is not totally dependent on how it's financed. It's what's the net impact of that investment on our cash flow, on our adjusted EBITDA? Is it accretive? That's really been our focus, is doing accretive transactions that facilitate the growth of the company, and also further our overall corporate objectives. We may issue shares again in the future to fund an acquisition or for general corporate purposes, but it's only done with future growth opportunities in mind. We're not going to just issue more shares for the sake of it because we feel like we need more cash on the balance sheet.
We'll issue shares when our strategy suggests it's the right approach and that it's accretive to revenue, EBITDA, cash flow, and creating value for our shareholders.
Mm-hmm. Speaking of those kind of opportunities, Finn, please chime in if anyone else wants to contribute here, but what would OGI look for with you as Chief Strategy Officer, in potential M&A targets now that you're in the mix?
Yeah. If you really think about a proactive M&A strategy going forward, I would say there are three pillars that are very important to be matched by those potential targets. Either you go in market share in markets where we are not strong yet. For example, countries like Poland, Slovenia, where we are just getting started.
To acquire someone who's already there, so winning market share in existing markets. The second one would be increasing our footprints, so really look into markets where we're not even present right now. Let's think about Brazil, let's think about maybe France going forward. Really acquire something that would add to our footprint. Or thirdly, really strengthening our supply chain. Really thinking about how can we become more flexible in supply chain. We talked about EU-GMP, what's actually the right way of remaining flexible in a global supply chain. Also, always having in mind that Organigram is not only Canada anymore, and not only Germany, but hopefully, ideally 10+ countries going forward that are all run sustainably, and that requires a very strong supply chain that could be strengthened by potential acquisitions going forward.
Mm-hmm. Interesting. I want to talk about BAT for a second, but not in the sense that many investors will probably want me to ask. James Yamanaka, you worked at the company for 20 years.
You have experience in highly regulated markets.
Cannabis is no exception to that. I am curious, is there anything you learned from your 20 years at BAT that you intend to apply at Organigram or that you are already applying?
Yeah. I think from my time I learned that I would never want to apply. I would put it in a couple of ways. One, bigger companies and more complicated companies, you do need more process than you need to when it is a single market or a startup. When it is small groups of people, you can get things done on the fly. When I was in BAT, I probably thought there was too much, but landing here in Organigram, and especially as we have added new markets, the lack of more standardized processes becomes a bit of a barrier. So one thing is I do know how to do that, and I think it is something that you need to do selectively to make sure you get the true efficiencies and effectiveness that Adrian will be trying to do.
It doesn't mean that you overdo it, but I think you have to have some, the more complicated your business gets. That is number one. The second thing I would think about from my time at BAT was really around a fairly sophisticated government engagement strategy.
What I mean, it is about really making sure that whatever you are engaging for cannot be just a selfish industry look. You have got to take into account the views of all the stakeholders. So, in Canada, for example, you would have to think, is this something that Health Canada would accept?
Is this something that the ministries or the different provinces would accept? How do you make it something that is a win? The other side of that strategy as well is fighting everything and doing everything from a selfish, industry view is not going to get you anywhere. There are times, I think, as an industry, when you grow up, especially in an industry like cannabis, there are times where you probably should self-regulate and make sure you are doing the right thing proactively.
Obviously, you want the government to create a regulation and make sure they enforce it, but I think there are times where to be responsible, we need to take the lead, Organigram itself, and ideally more as an industry, to something where all the stakeholders can win.
And finally, I think the other thing I learned is really about the value of building a culture that is pretty consistent globally. The one thing that I loved about my time at BAT is you can walk into any market in the world.
The culture was similar, almost identical. The ways of working were identical. What people saw as important was identical, and it really enables you to get It is not just for simplicity and because I love places feeling the same.
What it meant, it was very easy to place your best talent anywhere in the market, get that experience, and you combine the best, in our context, somebody from Germany, somebody from Canada, somebody from whatever next market we are in, and bring them together and really grow the business. It just simplifies
the way you do it. So those are the bigger things I take from BAT. And they do not all apply. Some things you would not want to take. We are not that size. We are nowhere near the size of a BAT, so you wouldn't overdo it to that extent. But there's basics that I learned from BAT that I'd love to apply—
Yeah.
—in Organigram.
That's great. I want to zoom in on what you said about the regulatory consciousness of BAT.
Because as we focus on driving more profitability out of Canada, given the growth rate in Canada, I could see that being a difficult proposition. So in your view, what are the unlocks for Organigram, perhaps from a regulatory perspective or an operational perspective, that you think can help us drive further margin out of a market that is growing at a slower rate?
Yeah. I think there is a number of things. When I have engaged with different government entities in the provincial or at the federal level, I think some of the things that could really help the industry out, one is excise reform, two is standardization of the excise stamps across the different provinces, because it is just an unnecessary cost and bureaucracy. I think treating the industry as more normal from an export point of view would be fantastic and ideally from the two categories I mentioned in my speech were around edibles and beverages.
I think these are ones where there is demand that I think it is responsible. These are things people would choose, but if they have to go to a dispensary, it does not happen. It is an alternative in the case of beverages for alcohol consumption, for example. I think you can significantly grow the industry.
But I think to get any of those things done, you need to think about the industry differently than I think the regulators have done in the past, where it was about reducing illicit trade, it was about taking the criminal elements out of it. Think about these sorts of numbers for an industry and take the fact that it is cannabis out of it. It is an industry that contributes about CAD 8 billion to the economy directly, about CAD 16 billion when you put in sort of all the ancillary spend we do. We are the leading exporter to the biggest and fastest-growing market outside of Canada in the world that is federally legal. Canadian companies dominate. Well, they have 46% of those exports from 2025.
If you had that kind of industry in Canada today, where the whole goal of the government is to drive exports, to grow the economy, to reduce dependence on the U.S., just take the word out of cannabis, and this is something we should do. And all of those policies I mentioned, I think would make it more feasible for companies like Organigram as well as other companies in Canada to drive their profitability, to reinvest, to make sure that Canada does not lose that lead globally that it has today.
And as you mentioned, Canada is that stable, low-risk regulatory market that provides the foundation of the company. Curious, Finn, from your perspective, do you see any regulatory risks out of Germany? What is the regulatory framework there like as someone operating in the market?
I mean, we have a very solid medical framework these days. So obviously in 2024, as I mentioned earlier, the market opened up. The Controlled Substance Law was changed in a way that actually cannabis was not classified as a narcotic anymore, and this will not change anymore. So we are very confident that we can continue to run the company in Germany under the same legal framework as we do right now. So I do not think there is a big risk. I mean, obviously political majorities can change over time. You never know that. That can always happen in every country. But at the moment, I think Europe is going only one way, and that is more towards further liberalization.
We see Switzerland probably legalizing within the next two to three years. We see the Netherlands experiment going on. We see Czech Republic going forward. But I think we have a lot of reason to be optimistic about the regulatory framework in Europe going forward.
Are you also optimistic about some of the larger economies in Europe? Because you mentioned France, the U.K. I think when investors look at the portfolio that Sanity is starting to play in Czechia, Poland, Ukraine, they see those as smaller markets. I think investors look at markets like France and potentially Brazil in the future as sort of these big unlocks. How confident are you that that pans out over the next few years?
Well, to be very honest, I am very confident that these markets will develop, but the problem is always the timeline, because things take normally always longer than they expected. Cannabis, like for example, the Swiss government announced the legalization for 2027, then it was 2028, now it may be turned to 2029. That is something that obviously we have to price in, that you always have to wait a bit longer than you originally anticipate. However, I think the macro trend is clear. Most of the countries are thinking more towards liberalization than not towards restriction.
Regarding the big and the small markets, look, Poland might have been seen as a small market, but do not forget that Poland has 50 million people living there.
It is, I think, by population size, the third or the fourth biggest European country. So I would not underestimate the Eastern European countries in terms of size. Today, Poland is the third biggest market after Germany and the U.K. So I really think there is a lot of countries that are very attractive that are not obvious today.
Mm-hmm. I want to zoom back into the P&L for a second, Greg, and toss a question your way. So we talked about Canada as this mature, highly competitive, and heavily taxed market. If you were just to take Canada, I think we had 39% consolidated gross margin at the end of Q3. But if you were going to just look at Canada, I am curious what you think the margin profile of the business can look like once Organigram executes on its operational and sort of SKU and brand level optimizations.
Yeah. I mean, first of all, as James mentioned about regulatory reform in Canada, we spend a significant amount on excise duties, about CAD 40 million per quarter. That does have an impact on our margins. However, we have done some significant investments in our cultivation facility in Moncton that have really improved the efficiency over the last two years. Just last year, we did a significant investment in our LED lights that really improved our yields. So we are able to get more cultivation out of the facility the same size, without increasing our operating expenses, which is really a huge driver of future margins going forward. So in terms of where should margins be, in the mid-40s.
is what we are aiming for, and that is going to be achieved in a couple of ways. We have talked about SKU rationalization. What that means is we are going to be optimizing where the raw materials within our production processes go and making sure that we are really optimizing and prioritizing products that have higher profitability, which will drive towards that mid-40% margin. Then some products which maybe do not have enough volume or are more expensive to produce, we will get out of those products in a controlled fashion to take away some of the drag that those products can create.
Mm-hmm. So on improving fundamentals and operational performance, Organigram has clearly improved a lot on a year-over-year basis. But the equity valuation has not necessarily reflected that improvement. What specifically can management do over the next, say, 12 - 24 months to change the market's perception of the company?
Yeah. Look, we are delivering revenue growth, we are delivering improved gross margins, we are delivering improved EBITDA. Those are the three of the key metrics that our investors want to see and the capital markets want to see in terms of driving share price value. The challenge for us is to do this consistently. I think markets reward predictability, a demonstrable track record of delivering and executing on our strategy. So I think we are at the early stages of that. We have had a bit of volatility in our results.
I'm expecting to see a bit more stability subject to our normal seasonal variation, of course. I'm expecting to see more consistency with developing additional revenue growth, stabilizing and improving margins, and really driving positive adjusted EBITDA, which ultimately should result in improved cash flow, which we'll be able to invest back into the business.
Thanks for that color, Greg . You've had a lot of experience in capital markets, and you've seen how the investor landscape has evolved over time. Is it just consistency at the end of the day, or when do you see institutions and strategics coming back into play as they were, say, 2019, 2020?
Yeah. There's a couple of factors to think about. First, we have to get those basics right, being consistent and delivering and executing on our strategy, and gaining that credibility that investors want to see, so they don't think we're going to come out with a negative surprise at some point. But part of it's also a factor of size. Right now, our market cap is not that big. For us to really attract bigger investors, the company needs to be bigger.
We need to have a larger float. As the company grows, we're going to deliver on our results and what we're telling investors. Share price will go up, float will increase, and that can create an opening point for some bigger institutions to get into the stock. That doesn't apply just to us. That's all cannabis companies. As the sector grows, we'll grow with it, hopefully at a greater rate than many of our peers, and then it'll create openings for larger institutions to come in.
Mm-hmm. Speaking of investor sentiment, probably the biggest headline right now is what is going on in the U.S. with cannabis rescheduling, the potential for DEA export permits. Finn, I am curious how you view the U.S. and if federal reform creates an opening for Organigram. What parts of that market could we play in moving forward, and what parts of the portfolio, the infrastructure, are actually exportable to the U.S. market?
Yeah. I think, to be honest, it is probably quite depending on how the regulation will look like at the end.
I think there are a lot of different ways this can play out. However, I think what is pretty clear from what we see, number 1, what is definitely possible could be to import product from the U.S. So you have a lot of U.S. players who are very price efficient. Sourcing additional product that is GMP compliant for our global markets could be also a great opportunity for us to diversify our supply chain. On the other hand, what I also think will be definitely possible will be in the mid to the long term to play in the medical market in the U.S. So the medical market is seeing the biggest change right now, and there can be digital business models, for example, teleclinics, which can operate across different states, basically cultivate also across state in the U.S.
That might be also something that could be interesting at some point when you could theoretically also export into the U.S.
I think that is probably far in the future, but I think there is a lot of opportunities that might open up over the next two to three years, and I think we will be very curious to see what is happening. Obviously, we look very close at the U.S. market.
Mm-hmm. Predominantly medical for now. It seems like the majority of the world is sort of moving towards a medical framework. Just given all the capabilities that you have spoken of, James, when it comes to playing in every category, do you see a future where Organigram starts to be more of like a medical vehicle? Do all of the experiences and capabilities we have gained in recreational translate over to medical?
I think just the way the markets are evolving and regulations in different parts of the world, I think at least in the short term, there will be more momentum on the medical side. Naturally, I think the makeup of the Organigram business the more international we go is likely to become more medical than today. I think in terms of the capabilities we have built here in Canada, I think the experience in recreational across all of the different categories of products will put us in good stead for any sort of medical market out there. A lot of these are different formats that are not as popular in the recreational segment, but we have experience making distillates, different sort of drops, all sorts of things that we could do with our infrastructure. Yeah, I think it will.
I think combine that with sort of the experience that the team in Sanity has in medical markets, in addressing pharmacies, and knowing what sort of data, what sort of sales support you need, is something that we get from that side. I think combined the two, the company has that ability to grow medical.
I do, for the short term, I did say I think that international will probably outpace Canadian growth just because of the place that it's at and because of the fact that it's medical. I think the company will kind of inevitably become more medical in its footprint.
Mm-hmm. How does the product development collaboration with BAT play into that?
Yeah, it's a great collaboration. I think it's one of those things where we get the benefit of the science expertise from BAT because they have obviously quite a large R&D facility in Southampton and people and scientists who are working in our facilities. I think that combined with our own R&D plus the knowledge that's been built up in the Sanity Group, can help us build that R&D and scientific base that I think will hold us in good stead. It helps on engagement because we actually have the knowledge of what the products actually do that would be better than the industry when we're talking to doctors or pharmacists or patients.
Over time, you'll have more credibility. I think also, we have that ability with the PDC, with their testing and labs and those capabilities to really make sure whatever we are putting in the market, we are absolutely sure of the quality and the standards that go out there. I think that is a capability we need to lean on to build trust among all the stakeholders, whether it is the doctors and pharmacists or the patients themselves.
Mm-hmm. Speaking of stakeholders, we are here for an investor day.
We are also getting a little bit long in the tooth in terms of this entire presentation.
We are generally long in the tooth.
Are generally long in the tooth. I would like to hand it over to you, Finn, and maybe we will work our way back this way. Can you leave us with one thing that you are really excited about in terms of Organigram and the future of cannabis?
I really think that Organigram is a very strong player in the Canadian market historically, and I think what happened over the last one to two years, Organigram really turned global. With the acquisition of Sanity Group, now more than 30% of the sales of Organigram are already outside Canada. I think going forward, what I am really excited about, I really believe that the macro situation is that the cannabis industry will grow globally, and I think that we grow stronger than our peers over the next years. That is what I am really excited about, and I think if we are smart, and if we do the right things and have the right expansion strategy, I am really excited for the next years within Organigram.
Thank you. Greg?
I think when you look at the cannabis market globally, Canada is a more mature market today. It is growing at roughly 3-odd percent per year. We are growing at a rate in excess of that. So we are going to continue to defend our Canadian base, with the SKU rationalization we talked about. But where I am really excited is the future growth that is going to come from global markets. Our name is Organigram Global.
We are planning on expanding in as many global markets as we can.
We started with Germany, and that is really going to be the launch pad for the rest of our European and global ambitions. The global cannabis markets are growing at tremendous rates, and we have already seen the benefit of that in our last quarter.
Sanity contributing about CAD 40 million to our net revenue. That is what really gets me excited about the future, is the growth that is going to come as we rebalance that portfolio i nto a diversified global business split between Canada and the rest of the world.
Thank you, James.
Yeah, I am really excited. I only joined the company eight months ago now. I think when I joined the company, it was a Canadian business, a strong Canadian business with good capabilities and a little bit of international exports, which was growing already.
I think it was a fantastic place to join because the opportunity is to build the business and to shape the industry itself. Just six months ago.
I think with the Sanity Group now part of Organigram Global, it is a completely different company, and I have said the word transform a few times. It is really a completely different company than it was before. Then you combine the footprint and the growing international part of the business with the fact that we now have brought in some fantastic capabilities with Finn and Adrian, and built the team around that, with a very clear plan on where we want to go. I am really, really excited, and I really believe we can deliver those consistent numbers, we can deliver the growth, and we have enough discipline across the entire team to make sure that we do not do that in a way that is not prudent or overstretches the business. I think we have the elements there.
There is still work to do, but I am really, really excited about where we can take this company and transform it once again.
Mm-hmm. Thanks, James, and thanks, gentlemen, for being here today. I also want to thank Carmel Labs, our production team, for helping put together this event, the broader team at Organigram, and of course, our investors, for helping support the company through the last several years. I just want to remind investors that should they have any questions that we did not answer in today's event, they can email me directly at investors@organigram.ca, and they can also follow us on all of our social medias, LinkedIn, X, Instagram. We are active pretty much everywhere. With that, I will conclude Organigram's second Organigram Global Investor Session. Thank you.