Avant Brands Inc. (TSX: AVNT) reported net income of $0.2 million for the third quarter ended August 31, 2026, marking a return to profitability from a net loss of $1.9 million in the same period last year. The turnaround was driven by a strategic pivot toward high-margin branded recreational products, which offset declines in lower-margin wholesale segments.

Adjusted EBITDA rose to $1.3 million, compared to $0.2 million in Q3FY25, reflecting improved gross margins and reduced operating expenses. While total gross revenue declined 16% to $9.0 million, the company emphasized that the quality of earnings improved significantly due to the changing sales mix.

Revenue mix shifts toward recreation

The company’s revenue profile underwent a notable transformation as recreational sales expanded while wholesale channels contracted. Recreational revenue increased 51% to $4.1 million, now representing more than half of Avant’s net revenue. This growth was supported by market share gains for its flagship brands, BLK MKT™ and Tenzo™, particularly in Ontario and British Columbia.

Conversely, export wholesale revenue fell 50% to $2.1 million, and domestic wholesale revenue dropped 52% to $1.1 million. The deliberate reduction in low-margin bulk wholesale transactions contributed to the overall decline in top-line figures but supported margin expansion.

Operational improvements and debt reduction

Avant completed a full LED retrofit at its Flowr facility in July 2026, costing approximately $2.04 million. The upgrade resulted in an immediate 57.5% sequential increase in kilograms harvested at Flowr, rising from 807 kg in Q2FY26 to 1,272 kg in Q3FY26. Management noted this is an early indication of yield improvement, with further optimization expected in subsequent crop cycles.

The company also strengthened its balance sheet, reducing interest-bearing debt from $8.1 million to $0.9 million over the past 24 months. Cash position stood at $1.1 million as of August 31, 2026, down from $1.5 million at fiscal year-end 2025. However, operating cash flow remained positive, with $2.7 million generated over the nine-month period.

What the numbers show

A divergence between volume and value highlights Avant’s successful pricing power and mix shift. While total cannabis sales volume fell 34% to 2,222 kg, recreational revenue grew 51%. This indicates that the company is selling fewer units but at significantly higher price points through branded retail channels, rather than bulk wholesale. The gross profit increase to $2.5 million despite a 22% drop in net revenue confirms that the margin expansion from the recreational segment is outpacing the revenue loss from wholesale exits.

Outlook and regulatory milestones

Avant is pursuing EU-GMP certification for the Flowr facility, having completed the on-site audit in August 2026. Certification, if granted, would allow direct control over processing and batch release for European medical markets. Management cautioned that certification is not assured and did not contribute to Q3FY26 revenue.

The company remains focused on branded recreational execution in Canada and disciplined capital allocation. No dividend was declared for the quarter.

Avant Brands Inc. (TSX: AVNT) (OTCQX: AVTBF) (FRA: 1BU) has completed the on-site European Union Good Manufacturing Practice audit at its largest cultivation facility, The Flowr Group Okanagan Inc., located in Kelowna, British Columbia.

The audit, conducted by a qualified German auditing body, evaluated operations including cultivation, harvesting, processing, and quality management. Completion of this step is part of Avant's effort to obtain EU GMP certification, which could support growth in international medical cannabis markets and provide greater control over its supply chain.

Capital Investment and Upgrades

Preparing for the audit required significant facility upgrades, process validation, and alignment with European requirements. Norton Singhavon, Founder & CEO of Avant Brands, noted that the company recently finalized a nearly $2.0 million capital improvement program at Flowr.

These improvements focused heavily on LED infrastructure and general facility enhancements. The company stated that its team invested significant time and resources in preparing for the process.

Certification Process Outlook

Avant emphasized that completing the audit does not constitute certification. The company will now focus on addressing observations arising from the audit and completing the required review and remediation process.

Management expects this stage to require continued work and engagement before a final certification determination is made. There can be no assurance that final EU GMP certification will be granted by applicable regulatory authorities or within the currently anticipated timeline.

Avant serves recreational, medical, and export markets with brands including blk mkt, Tenzo, Cognōscente, flowr, and Treehugger. Its international footprint spans Australia, Israel, and Germany.