Roots (ROOT) Q1 2026 earnings summary

Executive summary

• Q1 2025 sales reached CAD 40 million, up 6.7% year-over-year, marking the third consecutive quarter of growth in sales, gross margin, and adjusted EBITDA, driven by strong DTC performance and strategic marketing initiatives.

• DTC comparable sales grew 14.1%, with double-digit growth in both physical and digital channels.

• Gross margin expanded by 250 basis points to 61.5%, supported by improved product costs and reduced discounting, partially offset by foreign exchange impacts.

• Adjusted EBITDA loss improved 16.8% (excluding DSU revaluation), reflecting operational improvements and cost discipline.

• Net debt declined 6.7% year-over-year to CAD 29.6 million, with a strong balance sheet and healthy inventory to support sales.

Financial highlights

• Q1 2025 sales: CAD 40 million (up 6.7% year-over-year); DTC sales: CAD 34.6 million (up 10.2%).

• DTC comparable same-store sales up 14.1%; partner and other sales down 11.3% due to Taiwan inventory optimization.

• Gross profit: CAD 24.6 million (up 11.2%); total gross margin: 61.5% (up 250 bps); DTC gross margin: 62.9% (up 80 bps).

• SG&A expenses: CAD 33.3 million (up 4.1%); adjusted EBITDA loss: CAD 7.1 million (improved from CAD 8 million loss).

• Adjusted net loss per share: CAD 0.18 (improved from CAD 0.20); excluding DSU revaluation, loss per share improved to CAD 0.17.

Outlook and guidance

• Strong DTC sales momentum continued into the first five weeks of Q2 2025, with no signs of consumer pullback and key sales periods ahead.

• Elevated marketing spend planned throughout the year, with ongoing monitoring of global market conditions.

• Partner and other segment expected to stabilize as Taiwan works through inventory overhang; continued growth anticipated in China and other markets.

• Management remains committed to balancing top-line growth with cost discipline to enhance long-term profitability.

• Strong balance sheet positions the company to respond to shifting market conditions and sustain momentum.