Shares of RYTHM, Inc. (RYM Quick QuoteRYM - Free Report) have declined 6.5% since the company reported earnings for the quarter ended March 31, 2026, compared with the S&P 500 index’s 2.9% growth over the same period. Over the past month, the stock has gained 9.1% compared with the S&P 500’s 8.6% change, reflecting investor caution despite improving operating trends and upbeat near-term revenue expectations.

RYTHM reported first-quarter 2026 earnings per share from continuing operations of $1.33 against a loss of $1.68 per share a year ago.

Revenue from continuing operations of $13.3 million indicated a sharp increase from $0.5 million in the year-ago quarter. 

Gross profit climbed to $10.4 million from $0.09 million a year earlier, while gross margin came in at 78%. 

Net income from continuing operations totaled $19.9 million compared with a loss of $3.3 million in the prior-year period, aided by a $25.6 million non-cash income tax benefit.

RYTHM, Inc. Price, Consensus and EPS Surprise

RYTHM, Inc. price-consensus-eps-surprise-chart | RYTHM, Inc. Quote

Other Key Business Metrics

Adjusted EBITDA was approximately breakeven at a loss of $0.02 million, improving significantly from a loss of $2.8 million in the year-ago quarter. EBITDA loss narrowed to $0.5 million from $2.9 million a year earlier, underscoring operating leverage as revenues scaled. Operating cash flow turned positive at $1 million compared with an outflow of $6.7 million in the prior-year quarter.

The company ended the quarter with cash and cash equivalents of $33.3 million. At quarter-end, RYTHM had approximately 2.1 million shares outstanding, alongside 11 million warrants and 3 million shares issuable upon conversion of outstanding convertible notes, excluding interest. Total assets stood at $127.5 million, while total equity was $36.6 million.

Management Commentary

Chairman and interim chief executive officer Ben Kovler said the company carried momentum into 2026, supported by sequential revenue growth, strong gross margins and a solid cash position. He emphasized that the company’s licensing structure with Green Thumb Industries provides predictable annual revenue streams and positions the company to benefit from rising consumer demand for THC products.

Management also highlighted growth opportunities in THC beverages, noting that demand remains robust despite uncertainty tied to a potential federal hemp ban. Kovler said the company’s products are increasingly available in mainstream retail channels such as grocery stores, convenience stores, arenas and concert venues. He added that THC beverages are emerging as a major category, with Señorita and RYTHM positioned as leading brands.

Factors Influencing Quarterly Performance

The quarter’s results were driven by expanding distribution, stronger brand penetration and the benefits of the company’s licensing agreements. Revenue growth was accompanied by higher gross margins, reflecting operating efficiencies and a favorable product mix. The company also benefited from a substantial non-cash tax benefit that boosted reported profitability.

RYTHM continued broadening its product portfolio during the quarter. The company expanded its incredibles product lineup with Peanut Buddah Cups and Strawberry Supernova Comets. It also launched 1777 by Señorita, described as the company’s first non-alcoholic hemp-derived THC spirit.

Guidance

RYTHM expects second-quarter 2026 revenue of approximately $22 million, implying sequential growth of about 65% from the first quarter. Management pointed to continued momentum across THC beverages and branded products as key drivers of the outlook.

Other Developments

During the quarter, the company amended brand intellectual property license agreements with Green Thumb Industries to establish fixed annual cash licensing fees of $70 million, with annual increases linked to inflation.

Management said the revised structure provides greater predictability in annual revenue generation and supports long-term growth initiatives.