MediPharm Labs achieves 83% growth in international revenue, focusing on profitability and strategic expansion amidst competitive market challenges.

OPERATOR - (00:01:27)

Ladies and gentlemen, this is the Operator. Today's conference is scheduled to begin momentarily. Until that time, your lines will again be placed on music hold. Thank you for your patience, thank you for standing by and welcome to the MediPharm Labs conference call to discuss its third quarter 2025 results. Our speakers on today's call are David Pittock, President and Chief Executive Officer, and Craig Hunter, Chief Financial Officer. As a reminder, all participants are in listen only mode and the conference is being recorded. After management's presentation, we will take questions from the analyst community on the telephone and then take written questions through the Q and A feature on the webcast. The information during this call should be considered together with the more detailed information, disclosure, financial data and statements available on the Company's website and on its SEDAR profile@SEDARplus.com as set out on the webcast slide. I would like to note that remarks during this earnings call may contain forward looking information and forward looking statements within the meaning of applicable security laws. This includes without limitation statements about MediPharm Labs and its current and future plans, expectations, intentions, financial results, operations, levels of activity, performance goals or achievements, and other future events, profitability, business or developments. All statements other than statements of historical facts are forward looking statements. The statements made are based on the Company's current expectations, estimates and beliefs as of today's date. The Company's remarks may also contain references to certain non IFRS financial measures including adjusted EBITDA. These measures do not have any standardized meeting according to International Financial Reporting Standards or IFRS and therefore may not be comparable to similar measures presented by other companies. Please review the Company's most recent disclosure materials filed on SEDAR for the risk associated with forward looking information and the use of non IFRS financial measures, including the section titled Reconciliation of Non IFRS Measures in the Company's most recent MD&A available on SEDAR. Please note that all dollar amounts mentioned on today's call are in Canadian dollars unless otherwise noted. And now I would like to turn the call over to Mr. David Pittock. Please go ahead.

David Pittock - President and Chief Executive Officer - (00:05:16)

Good morning and thank you for joining us for MediPharm Labs' third quarter 2025 earnings call. As you saw in our news release earlier Today, in the third quarter of 2025, MediPharm continued to successfully execute against our strategic priorities, reducing costs while driving sales momentum and delivering 17% revenue growth year over year. This growth demonstrates the effectiveness of our strategy, highly differentiated capabilities and the dedication of our team. We continue to strengthen our position across complex regulated markets to deliver trusted pharmacEUtical grade cannabinoid solutions, advancing patient care and building a stronger global foundation for long term shareholder value. In Q3 2025, international medical cannabis revenue grew 83% compared to prior year, with international medical sales now representing 56% of our total revenues. This is a significant achievement and underscores the success of our international product and market expansion strategy. Our achievements in international markets are built on years of preparation, investment, operational execution and regulatory capabilities that are not easily replicated. MediPharm holds a unique and unrivaled suite of pharmacEUtical licenses and registrations in including an FDA inspected facility. We maintain a portfolio of GMP compliant products offered across the EU, UK, Australia, Brazil and other jurisdictions enabling us to operate confidently in complex regulatory environments. Our multiple GMP licenses are not just compliance check marks, they are strategic advantages that allow medifarm to compete in the highest value add segments of the global cannabis market. Our international capabilities position MediPharm as a trusted partner for delivering innovative pharma grade products globally and again represent years of rigorous quality and regulatory work. It takes significant time and expertise to achieve this level of licensing and to support clinical research partnerships with pharmacEUtical cannabis. Our infrastructure is purpose built for international success and our revenue results in Q3 demonstrate the impact of enduring partnerships, operational excellence and distribution networks that enable consistent and scalable growth. Financial stability has also made medifarm an appealing and reliable partner internationally. We have virtually no debt and remain committed to disciplined cost management, reducing Q3 2025 operating expenses by 19% year over year. At the same time, we are investing strategically to capture growth opportunities and meet rising demand in our core export markets including Germany, Australia and the United Kingdom. Our balanced approach allows us to strengthen our path to profitability while positioning the company for continued long term revenue growth. In addition to our international revenue success in Q3, we have several noteworthy international progress updates to highlight. In Q2 2025, we announced our plans to expand cultivation capacity by approximately 30% at our EU GMP certified Napanee facility. I'm pleased to share that our operations team delivered on this commitment, successfully completing the first harvest from our newly added grow room. Recently, we've begun production on our first purchase order for Toyota, a leading pharmacEUtical manufacturer and marketer in Brazil, and we plan to ship in Q4. While pricing pressure remains a challenge, we are working closely with partners to adjust positioning with launch timelines dependent on permits and partner compliance with authorization windows. MediPharm is one of just a few North American companies with partners to receive multiple sanitary authorizations for cannabis products while holding an ANVISA GMP license the Brazilian medical cannabis market is growing annually and is expected to exceed 260 million US by 2026. Subsequent to Q3, Medipharm also recently completed the company's first production order for France in partnership with an authorized distributor marking entry into one of Europe's most promising emerging medical cannabis markets. This collaboration underscores our ability to develop new pathways to market for the company and ability to supply pharmacEUtical grade products that meet stringent European standards. France is the largest consumer of cannabis in Europe and has been gradually expanding its medicinal cannabis market. The French medicinal cannabis market is projected to reach revenues of over 250 million in 2025 and is poised to grow as new legislation develops. Looking ahead to 2026, we have partnered with a top tier distributor in New Zealand which in Q4 received approval to launch MediPharm products in the new year. We expect this partnership will position us to enter New Zealand a developing, highly regulated market with strong growth potential. We are confident that these new market entries into Brazil, France and New Zealand will contribute to continued international growth in 2026. We also continue to monitor the US market as earlier this year communication from the US federal government and various media reports indicated the current administration is reviewing the rescheduling of cannabis federally in the U.S. speculation is that this could mean the U.S. government potentially changing the classification of cannabis from a Schedule 1 drug to a Schedule 3 drug, though this is not confirmed. If this were to occur in the future, we expect that the rescheduling may signify some recognition of the medical benefits of cannabis at the federal level in the United States. Schedule 3 classification could expand the possibility for US based research on medical cannabis products. Medipharm has gone through the complex process of foreign drug manufacturing site registration with the US FDA and has already shipped medical cannabis active pharmacEUtical ingredients, API and cannabis products to the US for research including a National Institutes of Health NIH funded clinical trial. MediPharm was the first Canadian company to register a CBD API DMF with the US FDA with the possible rescheduling of cannabis. MediPharm Labs holds existing licenses and expertise to serve the anticipated expansion of US Based research beyond new market entries. We continue to diversify our product mix internationally in our core regions of focus, including expanding our portfolio in Australia to include new flower strains, additional inhalable cartridges, edibles and novel metered dose inhalers. These innovations strengthen our leadership in advanced delivery technologies as discussed in our Q2 25 earnings call. The launch of our metered dose inhalers aligns with our strategy to deliver innovative pharma quality cannabinoid products globally. In Q3 2025, we launched these inhalers in Australia and in Canada. We extended our inhaler portfolio to include minor cannabinoid formulations. Our metered dose inhalers offer patients a discreet, precise smoke free delivery method supporting both medical and wellness applications. The inhaler provides a fast onset format without smoke or vapor. It features direct to lung delivery for higher bioavailability of cannabinoids compared to ingested formats and the metered dosing feature helps ensure greater precision and repeatability in dosing for more consistent outcomes. I'm especially excited about the transformative potential of our inhaler technology to meet consumer needs for a smoke free, controlled experience with fast onset. We envision a future where this format could become an attractive option for consumers who are seeking alternatives to combustible products offering convenience and consistency that traditional consumption methods cannot match. As we prepare to launch our metered dose inhalers in additional international markets including the UK, we see meaningful opportunities to make this innovation more widely available and to explore how it can fit into evolving consumer preferences across both medical and wellness applications. We remain committed to offering a diverse range of products tailored to the evolving needs of patients and consumers, with the metered dose inhaler offering more rapid onset while our other products like tinctures, soft chews and softgels allow for a slower onset and longer duration of effects. MediPharm's wellness focus combines innovative delivery technologies with patient focused services and education. In Canada we operate our own clinic network to provide direct access and support for patients, while internationally we advance education through clinic partnerships and physician outreach. This commitment to education enhances patient engagement and informed prescribing and it complements our role in supporting research by supplying pharmacEUtical grade products for studies aimed at improving patient outcomes. We are proud to support cannabinoid based pharmacEUtical research by supplying pharmacEUtical grade products for over 10 clinical studies and trials. On our Q2 earnings call, I spoke about the Libby Alzheimer's clinical trial. Today I'd like to highlight another important research initiative. MediPharm is supplying clinical materials for the Can Dray Epilepsy trial. This triple blind placebo controlled study is led by Dr. Lauren Kelly at the Children's Hospital Research Institute of Manitoba and spans multiple sites from Alberta to Nova Scotia. The trial is expected to enroll 90 participants to evaluate changes in seizure frequency across three formulations, a placebo, a highly purified CBD isolate and a cannabis herbal extract. Safety profiles will also be assessed. This is the first head to head comparison of isolate versus full spectrum formulations addressing a key hypothesis supported by emerging clinical evidence. We value the opportunity to contribute to research that could shape future treatment options for patients. It has been estimated that almost one out of every 100 people in Canada have epilepsy and about 30% of people with epilepsy do not respond well to conventional therapies. Drug resistant epilepsy is when people do not achieve sustained seizure freedom after the use of several seizure medications. This clinical trial is being done to compare changes in seizure frequency reported at maintenance phase compared to baseline. Our collaborations with leading universities, medical institutions and pharmacEUtical companies across Canada and internationally aim to advance the science of cannabinoid therapies and generate evidence that improves patient outcomes. These partnerships demonstrate our leadership in pharmacEUtical cannabinoid solutions and highlight our commitment to driving innovation that matters for patients and partners. While international medical cannabis remains our priority growth driver, we continue to support partners, patients and wellness consumers with exceptional products and services in Canada and abroad. Our domestic strategy emphasizes margin accretive products and prioritizes profitability over top line growth. I will now turn the call over to Greg Hunter, our CFO to provide a detailed overview of our Q3 financial performance.

Greg Hunter - (00:16:23)

Thanks Dave and good morning everyone. As Dave noted, MediPharm continues to execute on our strategy to grow revenue and expand internationally and drive operational efficiency to become profitable and cash flow positive. Our Q3 2025 results reflect meaningful progress on these priorities. Revenue for Q3 was 11.4 million, an increase of 1.6 million or 17% versus prior year driven by strong growth in our international medical cannabis business. International medical Cannabis revenue increased 2.9 million or 83% year over year to 6.4 million in the quarter with broad based growth across our German, Australia and United Kingdom customer base. International medical Cannabis accounted for 56% of total revenue this quarter up from 36% a year ago. Canadian medical cannabis revenue was 3.0 million in the quarter and decreased versus prior year driven by sales to third party medical channels. While our Canndoc Farms medical channel remains stable. Canadian adult use and Wellness revenue was 1.8 million in the quarter, up 4% year over year and 9% sequentially versus Q2. Gross profit for the quarter was 2.6 million reflecting margin pressure from product mix with our international business, we remain focused on optimizing product mix and production efficiency to improve margins. A key part of this strategy is the introduction of innovative products such as our metered dosed inhalers as Dave noted, these inhalers represent a novel pharmaceutical grade delivery technology that offers patients a precise smoke free option. By expanding this differentiated portfolio, we believe we are creating value through innovation and thus improving our margin profile. General and administrative expenses of 3.2 million in the quarter decreased 19% versus prior year and 40% versus prior quarter. Marketing and selling expenses of 1.2 million in the quarter decreased 17% versus prior year and 15% versus prior quarter. Total operating expenses which include G&A, marketing and selling and R and D was 4.4 million in Q3 and decreased 1 million or 19% versus prior year and 2.3 million or 35% versus prior quarter. Management continues to focus on further expense reduction opportunities. Adjusted EBITDA loss of 1.1 million in Q3 was impacted by product mix, while year to date adjusted EBITDA improved 0.3 million compared to the prior year. Net loss for the quarter was 2.2 million, an improvement of 0.6 million year over year and 1.6 million versus Q2 2025. While we don't provide formal guidance, we are encouraged by our revenue trajectory and expect continued progress. Though we anticipate some variability as international markets mature, our focus remains on driving profitable growth and achieving cash flow positivity. Turning to our balance sheets and liquidity, we ended the quarter with $10.6 million in cash, up 0.2 million from Q2 2025 to driven by disciplined cash management and supported by 0.4 million in redundant asset sales. Trade and other receivables were 7.7 million with 90% aged 60 days or less. Trade and other payables were 8 million and unlike many other cannabis companies, we are up to date on cannabis excise duties, sales taxes and trade payable obligations. The company has virtually no debt and owns two production facilities with an appraised value exceeding 15 million. In summary, Q3 was a step forward for Medipharm. We delivered strong revenue growth, improved our cost structure and maintained a robust balance sheet. We are well positioned to invest in both organic and inorganic growth opportunities as the industry evolves. To Summarize, revenue in Q3 increased 17% versus prior year and year to date revenue increased 14%. International medical cannabis revenue in the quarter increased 83% versus prior year and 71% year to date. Adjusted EBITDA in Q3 was impacted by margin pressure, but year to date it improved 0.3 million versus prior year. Net loss of 2.2 million in the quarter improved 0.6 million versus prior year and improved 1.6 million versus Q2 2025 Year to date net loss of $6.3 million improved $2.6 million versus prior year and finally, we have a strong balance sheet relative to our peers with $10.6 million in cash and virtually no debt. We remain focused on innovation, expanding our international footprint, strategic M and A and supporting clinical research partnerships that differentiate MediPharm in the market. Also turn it back to Dave to close this portion of our call before taking questions.

David Pittock - President and Chief Executive Officer - (00:21:38)

Thank you Greg. As you have heard today, MediPharm is delivering on the company strategy and we are making measurable progress on our key priorities. International revenue continues to represent more than half our business and these results reflect years of investment in infrastructure, compliance and partnerships that position us uniquely in the pharmaceutical cannabinoid space. Our long term vision is clear. We aim to lead globally in delivering pharmaceutical grade cannabinoid solutions that improve patient outcomes and create sustainable value for shareholders. We are uniquely positioned to lead in global medical markets as governments around the world continue to raise the quality and regulatory bars even higher. We enjoy the advantages of our two owned facilities with GMP certifications across multiple jurisdictions, our strong balance sheet and including $10.6 million in cash, our commitment to furthering clinical research and our proven ability to drive revenue in highly regulated environments while implementing cost savings. On our last call, I also discussed MediPharm's successful M&A track record, the most significant to date being our 2023 vivo transaction which has been a key strategic pillar in our international growth and profitability. We continue to engage in meaningful M and A discussions with select partners where we believe a potential transaction and could deliver significant cost synergies, revenue opportunities and enhance shareholder value. While the global cannabis sector remains complex and challenging, MediPharm's pharmaceutical capabilities and strong financial position give us a distinct advantage. We are well positioned to pursue both non organic growth through strategic acquisitions and organic growth through continued execution of our global strategy. As we look forward, MediPharm is committed to scaling responsibly, innovating meaningfully and strengthening our presence in the highest value segments of the industry. Our differentiated licensing foundation, operational excellence and combined focus on profitability and cash flow gives us confidence in our ability to deliver long term growth and value for shareholders. Thank you for your continued support as we execute on this vision. The operator will now begin our Q and A session.

OPERATOR - (00:23:48)

At this time I would like to remind everyone in order to ask a question, press Star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q And a roster. We do have a question from Troy. It is what specific actions will management take to reverse the gross margin compression from 39% in Q1 to 22% in Q3?

David Pittock - President and Chief Executive Officer - (00:24:25)

Yeah, thanks for the question, Troy. We, as you saw, we had a margin that was lower than we had in previous quarters. And I think we have a lot of variability depending on the mix. And the mix comes from both a product perspective in terms of which high volume products are coming through and what the mix is between international business and our other business. So we have seen variability in revenue and we've seen variability in margin. In this quarter we had a, our plant was shut down for a week and that impacts somewhat on the margin and we expect that the mix going forward will be healthier and that we'll see stronger margins going forward. And I don't, Greg want to build on that? want to build on that.

Greg Hunter - (00:25:21)

Yeah, I can just add to that. So, you know, we like to think Q3 was a low watermark on our margin, as you indicated, you know, 22%. You know, there are a couple, as Dave mentioned, a couple, I would say, anomalies in the quarter impacting it. One being the shutdown of two of our plants in August. So if you were to adjust for that factor, margin would have been more in the line of 26%, which is still lower than we've seen. And a lot of that was impacted by mix. We had a lower mix of some of our higher margin international products like Dronabinol and oil within the quarter. And so go forward, you know, what is management doing on, I mean, as you've seen it with our margin profile over the last quarters, we've been ruthlessly focused on improving that through cost reductions which we did implement some additional ones in late Q2, early Q3, which will spill over into Q4. So we should get the benefit of that as well. As we said in our prepared remarks with product mix, as we look at new international markets with higher margin products, whether that be Brazil, New Zealand, France and with new products such as inhalers, you know, the last thing I'd just add on some of the things we're looking at on investments to drive operational efficiencies within the plant around automation. So rest assured, you know, we believe it is the low watermark and we are ruthlessly focused on not just improving margin but overall cost structure within Medipharm.

UNKNOWN - (00:26:54)

And maybe.

David Pittock - President and Chief Executive Officer - (00:26:54)

Thanks, Greg. One more thing, I'll add to that, which was in our, in our remarks, products like the inhaler which have our differentiated innovative and launching both in Canada and in other markets, they tend to come with higher margins. So as the mix goes to newer launch product and we're more successful, and the same thing goes of new markets. That we're entering, generally, when you're entering. Into a new market, it's earlier in its life cycle, and we can expect higher margins from there. So I think that combination with what Greg's talking about, we're optimistic that the margin profile is going to improve. And as you noted, our cost structure continues to be ratcheted down. And so those together, we'll see improving margins going forward.

OPERATOR - (00:27:41)

And there are no further questions at this time. Ladies and gentlemen, that concludes today's call. We thank you all for joining. You may now disconnect. Sam.