Cann Group Limited has reported its first-ever free cash flow positive quarter, following a significant debt restructuring and a $9 million capital raise. Despite a softer quarterly revenue, the company is advancing new product launches and export partnerships, positioning itself for growth.
- First positive free cash flow quarter including R&D tax credit refund
- Debt reduced by $55.6 million through successful restructuring
- Capital raise of $9 million completed to strengthen balance sheet
- Quarterly revenue softened to $1.6 million with improving momentum in January
- Progress on export partnerships and new product launches
Financial Milestone Achieved
Cann Group Limited (ASX – CAN) has marked a pivotal moment in its financial journey by reporting its first-ever free cash flow positive quarter for Q2 ending December 2025. This achievement was bolstered by a $1.8 million R&D tax credit refund, which contributed to net positive operating cash flow of $186,000. The milestone reflects the company’s ongoing efforts to stabilise its cash position and improve operational efficiency.
Alongside this, Cann Group successfully completed a major debt restructuring, slashing its borrowings from $70.4 million to $14.8 million. This was facilitated by a $15.3 million settlement payment to NAB and a new $9 million loan from a private credit lender, with the latter carrying a 9.5% interest rate over two years. The restructuring significantly reduces financial pressure and enhances liquidity, providing a more sustainable capital structure.
Revenue and Market Dynamics
Despite these positive financial developments, quarterly revenue softened to $1.6 million, down 34% from the prior quarter, influenced by seasonal delays over the Christmas period and a competitive market environment. Year-to-date revenue stands at $4.5 million. However, the company noted a pickup in momentum in January, driven by increased demand for its premium Lazer Fuel cultivar and new genetics.
The company’s gross margin improved to 55% in December, up from 48.5% year-to-date, reflecting effective cost restructuring and operational efficiencies. Payments to suppliers and staff were down 32% compared to the previous corresponding period, underscoring disciplined cost management.
Product Innovation and Export Expansion
Cann Group broadened its Botanitech product portfolio with the launch of three new flower SKUs and two new gummies targeting patient segments seeking balanced cannabinoid formulations. These products have been well received by prescribers and patients alike, reinforcing the company’s reputation for quality and clinical appeal.
Significant progress was made on the international front, with Cann advancing contractual partnerships to enter two European markets. Purchase order discussions are underway, expected to be finalised soon, marking a critical step toward export-led growth. The company also introduced operational initiatives such as a new sales channel for waste trim, generating incremental revenue while reducing costs.
Operational and Regulatory Updates
Production has returned to full capacity following seasonal adjustments, with new cultivars like Lazer Fuel and La Bomba ESE integrated into the crop cycle. Cann’s collaboration with La Trobe University continues to innovate with AI-driven hyperspectral crop monitoring technology, alongside sustainability initiatives like carbon dioxide recycling to reduce emissions and operating costs.
Regulatory audits by the Therapeutic Goods Administration and Office of Drug Control found no major compliance issues, with only a minor procedural deviation addressed promptly. This regulatory stability supports the company’s operational credibility.
Outlook and Guidance
While the company’s FY26 revenue guidance of $17 million is under review due to the softer Q2 performance, Cann remains optimistic about achieving breakeven EBITDA in the second half of the fiscal year. The strengthened balance sheet, improving margins, and renewed commercial focus are expected to drive sustainable growth. Investors will be watching closely for updated forecasts in the next quarterly report, alongside the impact of export contracts and new product launches.
Bottom Line?
Cann Group’s financial reset and operational strides set the stage for a critical growth phase, though near-term revenue uncertainties warrant close investor attention.
Questions in the middle?
- How will the finalisation of European export contracts impact revenue in FY26?
- What is the expected timeline and scale for breakeven EBITDA achievement?
- How will competitive pressures and regulatory scrutiny affect market share and pricing?