Key Highlights

• Q3 2026 Revenue from continuing operations reached $23.9 million, a 4% sequential increase from $23.0 million.

• THC beverage depletions surged approximately 185% year-over-year, reaching an annualized run rate of roughly 320,000 cases.

• Hemp-derived product revenue increased 15% sequentially to $6.4 million.

• Upcoming federal regulatory changes effective December 11, 2026, could prohibit current hemp-derived THC product sales, prompting the company to withhold Q4 guidance.

RYTHM, Inc.(NASDAQ:RYM), the THC-focused consumer company behind brands including RYTHM, Señorita, incredibles, Beboe, and Dogwalkers, reported its third-quarter 2026 results on November 4, 2026. While the quarter showcased growing traction in the THC beverage category, looming federal regulatory changes have introduced uncertainty around the company's near-term outlook.

Third-Quarter Financial Performance

Revenue from continuing operations totaled $23.9 million in Q3 2026, up 4% from $23.0 million in the prior quarter. The company posted Operating Income from continuing operations of $1.0 million, while recording a net loss of $0.5 million. Adjusted EBITDA came in at $5.9 million, down slightly from $6.4 million in Q2 2026. Cash increased to $48.2 million during the quarter, supported by $6.3 million in Cash Flow from operations. At quarter end, the company had approximately 2.2 million shares outstanding, along with 11.2 million warrants and 3.0 million shares issuable upon conversion of outstanding convertible notes.

THC Beverage Momentum

The most notable development in the quarter was the continued acceleration of RYTHM's THC beverage business. Depletions — representing distributor shipments to retailers — increased approximately 15% sequentially and approximately 185% year-over-year, reaching an annualized run rate of roughly 320,000 cases. The company ended the quarter with its THC beverages available in approximately 8,000 retail doors across 18 states.

Hemp-derived product revenue climbed 15% sequentially to $6.4 million. During the quarter, RYTHM launched Lifted Lemon, a new THC twist on iced tea and lemonade, expanding its beverage portfolio. Brand presence was bolstered through appearances at events including Lollapalooza and Riot Fest in Chicago, Shaky Knees in Atlanta, and through partnerships with the United Center and Opry Entertainment Group venues. RYTHM is also the official THC beverage partner of Chicago's Navy Pier.

Licensing Arrangement and Green Thumb Relationship

RYTHM further amended its licensing arrangement with a Subsidiary of Green Thumb Industries, adding the Señorita brand to the fixed-fee license structure. This increased the aggregate annual fee by $250,000 to $70.25 million, subject to contractual annual escalations, while preserving RYTHM's exclusive rights to commercialize Señorita outside state-regulated cannabis dispensary channels where legally permitted.

Following stockholder approval on August 10, 2026, certain convertible notes and pre-funded warrants were amended to remove the 49.99% beneficial ownership limitation, effective October 10, 2026. Green Thumb has disclosed that it will consolidate RYTHM's results in its financial statements beginning from that date, though RYTHM will continue to report independently through its own SEC filings.

Regulatory Uncertainty Ahead

The most significant overhang on the company's outlook comes from impending federal regulatory changes. Recent federal action extended the effective date of forthcoming changes to federal law affecting hemp-derived THC products from November 12 to December 11, 2026. Under current law, those changes would prohibit the company from selling its current hemp-derived THC products in their existing form, including through the retail and venue channels that have driven its growth. Certain state-level restrictions, including in Illinois, become effective earlier on November 12, 2026.

Given this regulatory uncertainty, the company declined to provide guidance for the fourth quarter of 2026. The potential impact is material, as hemp-derived products contributed $6.4 million in quarterly revenue and the broader THC beverage category has been the primary growth engine for the business.

What This Means Going Forward

RYTHM's Q3 results illustrate a company gaining traction in an emerging consumer category, with beverage depletions growing at a rapid pace and retail distribution expanding across 18 states. However, the regulatory environment remains the defining variable. Should the December 11 deadline pass without further legislative action, RYTHM's ability to sell its current hemp-derived THC products would be curtailed, potentially requiring reformulation, channel adjustments, or a pivot in strategy. The outcome of this regulatory process will likely determine the company's revenue trajectory in early 2027.