Shares fell 8.6% following Q2 results as investors reacted negatively to a notable revenue miss driven by the removal of retail revenue from consolidated results and margin compression caused by an unfavorable product mix. The cautious margin outlook and operational headwinds in California appear to have weighed heavily on sentiment.
- Reported revenue came in at $47 million, below prior guidance of $55–$60 million, primarily due to the deconsolidation of $10 million in retail revenue.
- Gross profit improved sequentially to $15.8 million from $4.1 million in Q1, but gross margin declined sharply to around 34% (implied from commentary), down from 55% in Q2 2025, driven by a higher proportion of low-value trim sales and increased production costs.
- Adjusted EBITDA was $5.7 million for the quarter, reflecting ongoing operating leverage despite margin pressure.
- The product mix shift to higher trim content, attributed to temporary genetics decisions post-2025 disruption, suppressed margins; management expects a return to more profitable historical genetics going forward.
- The company’s exit from retail operations and reliance on challenging California market conditions maintain uncertainty around near-term growth and margin expansion.
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