The Company achieves record net revenue and
gross margin results since its inception
CALGARY,
AB, Aug. 14, 2023 /PRNewswire/ - SNDL
Inc. (NASDAQ: SNDL) ("SNDL" or the "Company")
reported its financial and operational results for the second
quarter ended June 30, 2023. All
financial information in this press release is reported in millions
of Canadian dollars unless otherwise indicated.
SNDL has also posted a supplemental investor presentation on its
website, which can be found at https://sndl.com.
SECOND QUARTER 2023 FINANCIAL AND OPERATIONAL
HIGHLIGHTS
- Net revenue for the second quarter of 2023 of $244.5 million, compared to $223.7 million in the corresponding period of
2022, an increase of 9.3%. This marks an all-time high for the
Company, underscoring SNDL's strategic initiatives and operational
enhancements, which have led to financial and operational
improvements.
-
- Liquor Retail: Net revenue of $151.7 million for the second quarter of 2023, an
increase of 2.1% compared to the prior year.
- Cannabis Retail: Net revenue of $71.9 million for the second quarter of 2023, an
increase of 13.2% compared to the prior year.
- Cannabis Operations: Net revenue of $20.9 million for the second quarter of 2023, an
increase of 81% compared to the prior year.
- Record gross margin of $51.9
million in the second quarter of 2023, compared to
$43.1 million in the second quarter
of 2022. The 21% increase in gross margin year-over-year is driven
by cost-saving measures, supply chain efficiencies, improved
pricing strategies, economies of scale, and product mix
optimization.
- Net loss of $33.2 million for the
second quarter of 2023, compared to a $74.0
million net loss in the second quarter of 2022. The loss was
driven by one-time events, including the Valens Company
("Valens") integration and related costs, as well as by
realized losses from equity investments.
- Adjusted EBITDA of $2.2 million
for the second quarter of 2023, compared to a loss of $25.9 million from the second quarter of 2022,
reflecting the improvement in the financial performance of SNDL's
operating segments along with synergies realized through the
Company's vertical integration strategies.
- During the second quarter of 2023, a total of $8.8 million cash was used in operating
activities, compared to $17.9 million
in the same quarter of last year, an improvement of 51%, showcasing
the Company's enhanced operational efficiency.
- SNDL currently has five credit exposures in the SunStream
portfolio following the monetization of a credit exposure in
July 2023. The current portfolio
includes one credit under a court-supervised receivership process
and another in active restructuring negotiations.
- $754 million of unrestricted
cash, marketable securities and investments, and no outstanding
debt at June 30, 2023, resulting in a
net book value per share of $4.86;
and $182.6 million of unrestricted
cash at August 11, 2023. SNDL has not
raised cash through share offerings since June 2021.
"Our incredible two-year journey from less than $10 million of net revenue and negative gross
margin in Q2 2021 to our current trajectory of reaching an expected
$1 billion in annual revenue and
continued gross margin growth in 2023 is a testament to our team's
commitment to becoming a leader in Canadian regulated products,"
said Zach George, Chief Executive
Officer of SNDL. "We have taken decisive steps to simplify
operations throughout our business segments with a sharp focus on
the goal of reaching profitability in 2024. In Liquor Retail, we
are capitalizing on margin accretive product opportunities and
modest expansion. In Cannabis Retail, our data licensing program is
driving improved profitability and supplier relationships, and we
look to enhance consumer engagement through new loyalty
capabilities. In our Cannabis Operations, we have taken aggressive
cost-cutting measures, streamlined manufacturing operations, and
reduced reliance on high-cost cultivation. During this process, we
have maintained cannabis sales momentum and are actively exploring
B2B and international opportunities. We have also simplified our
investment portfolio by divesting from securities, prioritizing the
opportunity to return capital to our shareholders."
"Over the last two years, SNDL has grown both organically and by
acquisition while our leaders have implemented bold changes
throughout the business," added George. "We believe that we now
have the requisite scale and platform optionality to create
sustainable shareholder value. We expect our Canadian retail
network to continue to grow at a modest pace while our internal
focus on optimization is in the early stages of producing tangible
results. We look forward to updating investors on the closing of
the Nova transaction, and events related to our SunStream portfolio
as we focus on delivering improved performance in the second half
of 2023."
SECOND QUARTER 2023 KEY FINANCIAL METRICS
OPERATING
SEGMENTS
|
|
|
|
|
|
|
|
|
($000s)
|
|
Liquor
Retail
|
Cannabis
Retail
|
Cannabis
Operations
|
Investments
|
Corporate
|
|
Total
|
Three months ended
June 30, 2023
|
|
|
|
|
|
|
Net revenue
|
|
151,690
|
71,881
|
20,940
|
—
|
—
|
|
244,511
|
Gross margin
|
|
35,360
|
17,780
|
(1,207)
|
—
|
—
|
|
51,933
|
Earnings (loss) from
Operations
|
|
8,207
|
2,340
|
(14,134)
|
(1,660)
|
(24,242)
|
|
(29,489)
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30, 2022
|
|
|
|
|
|
|
|
|
Net revenue
|
|
148,637
|
63,494
|
11,564
|
—
|
—
|
|
223,695
|
Gross margin
|
|
33,528
|
13,897
|
(4,346)
|
—
|
—
|
|
43,079
|
Earnings (loss) from
Operations
|
|
11,288
|
1,476
|
(8,293)
|
(69,973)
|
(15,914)
|
|
(81,416)
|
SECOND QUARTER 2023 RESULTS
SNDL's business is operated and reported in four segments:
Liquor Retail, Cannabis Retail, Cannabis Operations and
Investments.
Liquor Retail
SNDL is Canada's largest
private sector liquor retailer, operating 170 locations,
predominantly in Alberta, under its three retail banners:
"Wine and Beyond", "Liquor Depot" and "Ace Liquor".
- Net revenue for Liquor Retail sales for the three banners
combined was $151.7 million for the
second quarter of 2023, an increase of 2.1% compared to the second
quarter of 2022.
- Same stores sales increased 1.7% across all liquor banners,
with Liquor Depot and Ace Liquor seeing 5.6% and 2.8% in same-store
sale increases, respectively.
- Gross margin in the Liquor Retail segment was $35.4 million, or 23.3% of sales in the second
quarter of 2023, compared to $33.5
million, or 22.6% of sales, in the second quarter of 2022.
The 5.5% gross margin growth is mainly driven by procurement
productivity and product mix management initiatives.
- Preferred label sales, which are a substantial driver of gross
margin growth, increased 28% compared to the second quarter of 2022
and 22% compared to the first quarter of 2023.
- SNDL's liquor banners' market share in Alberta was approximately 18% in the second
quarter of 2023, with Wine and Beyond representing approximately 3%
from only 11 stores in the province, showcasing the continued
success of the banner. Sales at the Wine and Beyond in Kelowna, British Columbia, continue to
increase year-over-year, further validating the banner's expansion
strategy into Saskatchewan in
2024.
- SNDL expects to launch an e-commerce platform for its Liquor
Retail banner, Wine and Beyond, which presents significant
opportunities to drive accretive revenues. It is expected to
provide the Company with a scalable and adaptable platform to
expand its market presence, increase customer engagement, and
capitalize on the growing trend of online shopping for liquor
products. The launch date is scheduled for the third quarter of
2023.
- As of August 11, 2023, the Ace
Liquor store count is 138, the Liquor Depot store count is 20, and
the Wine and Beyond store count is 12.
Cannabis Retail
With its ownership interest in Nova, SNDL is Canada's largest private-sector cannabis
retailer, operating 196 locations under its four retail banners:
Value Buds, Spiritleaf, Superette, and Firesale Cannabis. SNDL's
Cannabis Retail strategy is based on several factors, including the
quality of its store locations, the range of products it offers,
and the unique experiences it provides customers. Using data and
insights from a large volume of monthly transactions enables SNDL
to leverage technology and analytics to inform and improve its
retail strategy.
On July 25, 2023, SNDL and Nova
announced that while all other provincial approvals have been
received, the continued review by one provincial regulator has
necessitated the extension of the outside date for the closing of
the previously-announced strategic partnership (the
"Transaction"). SNDL and Nova anticipate that the
Transaction will close on or before August
25, 2023, subject to the receipt of regulatory approval and
the amendment to certain terms of the Transaction that are mutually
satisfactory to SNDL and Nova.
- Net revenue from the Cannabis Retail segment for the second
quarter of 2023 was $71.9 million,
compared to $63.5 million in the
second quarter of 2022, a 13.2% increase year-over-year and a
record for the segment since SNDL diversified into Cannabis
Retail.
- Same stores sales for the second quarter of 2023 increased 3.3%
across all Cannabis Retail banners, compared to the same period in
the year prior. Nova's same store sales increased 38% for the
period.
- Gross margin of $17.8 million, or
24.7% of sales, up by close to 28% compared to the second quarter
of 2022, showcasing the Company's efforts in continued margin
expansion initiatives.
- In the first half of 2023, SNDL took proactive steps to
optimize its proprietary data licensing program for the Cannabis
Retail segment, aiming to create mutually beneficial results for
its retail operations and licensed producer partners. This margin
accretive opportunity has resulted in revenue for the second
quarter of 2023 of $2.7 million,
compared to $1.3 million in the
second quarter of 2022, and represents growth of 80% compared to
the first quarter of 2023. By leveraging the volume of Nova's
retail locations and the Company's access to high-quality
analytics, it expects to deliver continued successful outcomes for
its partners and drive top-line revenue and margin growth.
- The Company partnered with Nova for Value Buds' private label
products, and sales of Value Buds products represented
approximately 6.6% of total 28-gram sales and 18.0% of 14-gram
sales in Value Buds locations nationwide.
- As of August 11, 2023, the
Spiritleaf store count is 98 (21 corporate stores and 77 franchise
stores), the Value Buds store count is 91 corporate stores, the
Superette store count is five corporate stores, and the Firesale
store count is two corporate stores.
Cannabis Operations
SNDL has a diverse brand portfolio from value to premium,
emphasizing premium inhalable formats and a full suite of 2.0
products. With enhanced procurement capabilities, premium
cultivation and manufacturing facilities, the Cannabis Operations
segment is a key enabler of SNDL's vertical integration
strategy.
- Net revenue from the Cannabis Operations segment for the second
quarter of 2023 was $20.9 million, an
81% increase compared to the second quarter of 2022, and a 9%
increase compared to the first quarter of 2023.
- Gross margin of negative $1.2
million in the second quarter of 2023, compared to negative
$4.3 million in the second quarter of
2022, and negative $9.5 million in
the first quarter of 2023. The improved results showcase the
Company's focus on bolstering margins through increased product
distribution and streamlining the Cannabis Operations segment.
- In the first half of 2023, SNDL implemented aggressive
cost-cutting measures and improved manufacturing efficiency. A key
initiative involved right-sizing cannabis cultivation in
Olds, Alberta to focus on
producing premium products.
- Subsequently, SNDL successfully centralized most manufacturing
activities and consolidated processing, labelling, and excising at
its Kelowna facilities. This move
optimizes resource allocation and streamlines operations to
significantly reduce costs.
- Following the Valens acquisition, the Company underwent a
meticulous evaluation of its portfolio, focusing on higher-margin
brands and products. SNDL's vertical integration capabilities
facilitate informed and data-driven product portfolio decisions.
This strategic alignment enables SNDL to effectively enhance
overall market positioning and product offerings.
- Market share in owned retail continues to scale through the
Company's vertical integration strategy. Driving increased owned
retail share is a key focus for the Company and a meaningful
contributor to overall margin and profit growth. As a supplement to
this strategy, SNDL partnered with ColdHaus Direct
("ColdHaus") in May of 2023 to manage the Company's
in-market sales and logistics execution for its branded cannabis
products.
Investments
- As of the end of the second quarter of 2023, the Company had
deployed capital on a portfolio of cannabis-related investments
with a carrying value of $569.0
million, including $532.8
million through the SunStream Bancorp Inc. joint venture
("SunStream").
- For the second quarter of 2023, the investment portfolio
generated a net loss of $1.5 million,
mainly driven by interest and fee revenue of $3.2 million, and an investment loss of
$3.8 million on marketable
securities. To streamline its business operations, SunStream made
the strategic decision to divest certain cannabis investments, and
as part of this process, the Company realized losses. The realized
loss on marketable securities and the reversal of the unrealized
loss on marketable securities was due to the disposition of shares
in cannabis-related investments.
- At the end of the second quarter of 2023, SunStream's credit
portfolio comprised six investments: Jushi Holdings, SKYMINT Brands
("Skymint"), Ascend Wellness Holdings, Parallel Inc.
("Parallel"), Columbia Care Inc., and AFC Gamma, Inc. The
AFC Gamma, Inc. investment was monetized above carrying value
subsequent to the end of the second quarter of 2023.
- SunStream is actively implementing a stock-exchange compliant
structure to facilitate participation in US cannabis companies. In
connection, SunStream is exploring the restructuring and transfer
of certain credit interests in Skymint and Parallel to a new US
holding entity ("Sunstream USA"). The SunStream USA structure is expected to allow SNDL to
participate in SunStream assets while complying with all US federal
and state laws. This SunStream USA
structure is anticipated to include the issuance of securities upon
the equitization of specific credit instruments held by SunStream.
In turn, SNDL would hold non-voting shares in SunStream
USA, with the right to exchange
such shares into common shares in the future, if certain conditions
are met. As such, the Sunstream USA structure is expected to allow SNDL to
participate in SunStream assets through a revamped capital
structure. The proposed Sunstream USA structure will be reviewed by Nasdaq, as
the relevant listing authority for SNDL, prior to its execution.
SNDL anticipates providing further details on progress with the
Skymint and Parallel restructuring initiatives in the third quarter
of 2023.
|
Three months
ended
June 30
|
|
Six months ended
June 30
|
($000s)
|
2023
|
2022
|
|
2023
|
2022
|
Interest and fee
revenue
|
|
|
|
|
|
Interest revenue from
investments at amortized cost
|
922
|
818
|
|
1,928
|
1,813
|
Interest and fee
revenue from investments at Fair
Value Through Profit or Loss
|
250
|
543
|
|
874
|
2,659
|
Interest revenue from
cash
|
2,014
|
1,216
|
|
4,595
|
1,966
|
Total interest
and fee revenue
|
3,186
|
2,577
|
|
7,397
|
6,438
|
Investment revenue
(loss)
|
|
|
|
|
|
Realized (losses)
gains
|
(48,988)
|
265
|
|
(92,792)
|
389
|
Unrealized gains
(losses)
|
45,182
|
(35,338)
|
|
84,100
|
(53,172)
|
Total investment
revenue/(loss)
|
(3,806)
|
(35,073)
|
|
(8,692)
|
(52,783)
|
|
|
|
|
|
|
Share of profit (loss)
of equity-accounted investees
|
(936)
|
(37,978)
|
|
8,580
|
(33,887)
|
Total investment
activities
|
(1,556)
|
(70,474)
|
|
7,285
|
(80,232)
|
Liquidity Position
- As at June 30, 2023, and
August 11, 2023, the Company had
unrestricted cash balances of $185.5
million and $182.6 million,
respectively, and a total of approximately 260 million shares
outstanding as at August 11,
2023.
- The Company's share repurchase program continues to be
available to lower the outstanding share float and increase the
earnings per share for shareholders. SNDL will continue to assess
opportunities to utilize the program to the extent that management
believes SNDL's shares are undervalued. For the three months ended
June 30, 2023, the Company did not
purchase or cancel common shares.
STRATEGIC AND ORGANIZATIONAL UPDATE
SNDL remains focused on building long-term shareholder value
through vertical integration, the accretive deployment of cash
resources, expansion of its retail distribution network, the
further streamlining of the Company's operating structure, and
enhanced offerings of high-quality brands within the Liquor Retail,
Cannabis Retail and Cannabis Operations segments.
Integration Initiatives
The Company has achieved $18.2
million in annualized cost savings since the Valens
acquisition in January 2023. These
initiatives surpass the Company's original $10 million cost savings target. Most of the cost
savings have been realized through SG&A, public company costs,
as well as supply chain consolidation and operational efficiency.
By 2024, run-rate synergies are expected to exceed $30 million annually, and proceeds from asset
sales are expected to total $9
million.
The integration work has allowed the Company to undertake a
comprehensive organizational design update, restructuring certain
departments to achieve scale, support growth, and reinforce key
initiatives. The organizational design work supports a more
efficient structuring of SNDL's shared service teams to realize
additional cost savings and enable targeted focus on key
initiatives, such as loyalty, e-commerce, increasing market share
within owned retail, and manufacturing, cultivation and processing
improvements.
The Company's integration initiatives are critical to SNDL's
vision of establishing Canada's
largest regulated products platform and generating sustainable free
cash flow.
SNDL's strategy is predicated on the below key
objectives:
- Generate positive cash flow from all operating segments by
2024.
- Maximize the profitability and sustainability of SNDL's Liquor
Retail segment.
- Establish a dominant multi-banner cannabis retail platform with
a national presence.
- Streamline SNDL's cannabis production and drive profitable
market share.
This press release is intended to be read in conjunction with
the Company's Financial Statements and Notes for the period ended
June 30, 2023, and the accompanying
Management's Discussion and Analysis ("MD&A"). These
reports are available under the Company's profile on SEDAR at
www.sedar.com and EDGAR at www.sec.gov/edgar.shtml.
CONFERENCE CALL
The Company will hold a conference call and webcast at
10:30 a.m. EST (8:30 a.m. MST) on Monday,
August 14, 2023.
WEBCAST ACCESS
To access the live webcast of the call, please visit the
following link:
https://services.choruscall.ca/links/sndl2023q2.html
REPLAY
A telephone replay will be available for one month. To access
the replay, dial:
Canada/USA Toll Free: 1-800-319-6413 or International
Toll: +1-604-638-9010
When prompted, enter Replay Access Code: 0323#
The webcast archive will be available for three months via the link
provided above.
ABOUT SNDL INC.
SNDL is a public company whose shares are traded on the Nasdaq
under the symbol "SNDL."
SNDL is the largest private-sector liquor and cannabis retailer
in Canada with retail banners that
include Ace Liquor, Wine and Beyond, Liquor Depot, Value Buds,
Spiritleaf, and Firesale Cannabis. SNDL is a licensed cannabis
producer and one of the largest vertically integrated cannabis
companies in Canada specializing
in low-cost biomass sourcing, premium indoor cultivation, product
innovation, low-cost manufacturing facilities, and a cannabis
brand portfolio that includes Top Leaf, Contraband, Citizen Stash,
Sundial Cannabis, Palmetto, Bon Jak, Spiritleaf Selects, Versus
Cannabis, Value Buds, Vacay, Grasslands and Superette. SNDL's
investment portfolio seeks to deploy strategic capital through
direct and indirect investments and partnerships throughout the
North American cannabis industry. For more information on SNDL,
please go to https://sndl.com/.
Forward-Looking Information Cautionary Statement
This news release includes statements containing certain
"forward-looking information" within the meaning of applicable
securities law ("forward-looking statements"), including,
but not limited to, statements regarding the Company's operational
goals, demand for the Company's products, the Company's ability to
achieve profitability or its goal of sustainable, positive gross
margin and positive free cash flow, the development of the legal
cannabis industry, performance of the Company's investments,
including through the SunStream joint venture, any potential forms
of shareholder value creation, the ability to realize expected cost
savings and the expansion of product offerings, brand and market
share and retail networks, and the closing, integration and
realization of expected benefits of, as applicable, the acquisition
of The Valens Company, Zenabis and Superette. Forward-looking
statements are frequently characterized by words such as "plan",
"continue", "expect", "project", "intend", "believe", "anticipate",
"estimate", "likely", "outlook", "forecast", "may", "will",
"potential", "proposed" and other similar words, or statements that
certain events or conditions "may" or "will" occur. These
statements are only predictions. Various assumptions were used in
drawing the conclusions or making the projections contained in the
forward-looking statements throughout this news release.
Forward-looking statements are based on the opinions and estimates
of management at the date the statements are made and are subject
to a variety of risks and uncertainties and other factors that
could cause actual events or results to differ materially from
those projected in the forward-looking statements. Please see "Item
3.D.—Risk Factors" in the Company's annual report on Form 20-F,
filed with the Securities and Exchange Commission ("SEC") on
April 24, 2023, and the risk factors
included in our other SEC filings for a discussion of the material
risk factors that could cause actual results to differ materially
from the forward-looking information. The Company is under no
obligation, and expressly disclaims any intention or obligation, to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
expressly required by applicable law.
Condensed Consolidated Interim Statement of Loss and
Comprehensive Loss
(Unaudited - expressed in thousands of
Canadian dollars, except per share amounts)
|
|
Three months
ended
June 30
|
|
Six months ended
June 30
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Gross
revenue
|
|
257,425
|
|
227,557
|
|
470,324
|
|
247,684
|
Excise taxes
|
|
12,914
|
|
3,862
|
|
23,361
|
|
6,392
|
Net
revenue
|
|
244,511
|
|
223,695
|
|
446,963
|
|
241,292
|
Cost of
sales
|
|
188,922
|
|
174,291
|
|
347,071
|
|
188,617
|
Inventory impairment
and obsolescence
|
|
4,291
|
|
3,871
|
|
13,468
|
|
5,852
|
Gross margin before
fair value adjustments
|
|
51,298
|
|
45,533
|
|
86,424
|
|
46,823
|
Change in fair value of
biological assets
|
|
(1,413)
|
|
(388)
|
|
(4,948)
|
|
3,302
|
Change in fair value
realized through inventory
|
|
2,048
|
|
(2,066)
|
|
2,998
|
|
(3,627)
|
Gross
margin
|
|
51,933
|
|
43,079
|
|
84,474
|
|
46,498
|
|
|
|
|
|
|
|
|
|
Interest and fee
revenue
|
|
3,421
|
|
2,577
|
|
7,632
|
|
6,438
|
Investment
loss
|
|
(4,020)
|
|
(35,073)
|
|
(9,189)
|
|
(52,783)
|
Share of profit (loss)
of equity-accounted investees
|
|
(936)
|
|
(37,978)
|
|
8,580
|
|
(33,887)
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
52,727
|
|
40,293
|
|
101,300
|
|
50,975
|
Sales and
marketing
|
|
4,104
|
|
3,132
|
|
7,490
|
|
4,243
|
Research and
development
|
|
20
|
|
390
|
|
160
|
|
485
|
Depreciation and
amortization
|
|
13,443
|
|
8,800
|
|
29,911
|
|
9,539
|
Share-based
compensation
|
|
3,893
|
|
438
|
|
6,102
|
|
4,642
|
Restructuring
costs
|
|
4,042
|
|
(882)
|
|
5,578
|
|
(882)
|
Asset
impairment
|
|
1,658
|
|
1,850
|
|
2,465
|
|
1,850
|
Loss from
operations
|
|
(29,489)
|
|
(81,416)
|
|
(61,509)
|
|
(104,586)
|
|
|
|
|
|
|
|
|
|
Transaction
costs
|
|
(173)
|
|
7,938
|
|
(2,213)
|
|
1,457
|
Finance costs,
net
|
|
(2,458)
|
|
(26,505)
|
|
(7,631)
|
|
(26,444)
|
Change in estimate of
fair value of derivative warrants
|
|
2,240
|
|
23,656
|
|
7,042
|
|
15,356
|
Foreign exchange gain
(loss)
|
|
(31)
|
|
161
|
|
(194)
|
|
11
|
Gain (loss) on
disposition of assets
|
|
(77)
|
|
402
|
|
(261)
|
|
402
|
Loss before income
tax
|
|
(29,988)
|
|
(75,764)
|
|
(64,766)
|
|
(113,804)
|
Income tax
recovery
|
|
—
|
|
1,791
|
|
—
|
|
1,791
|
Net loss from
continuing operations
|
|
(29,988)
|
|
(73,973)
|
|
(64,766)
|
|
(112,013)
|
Net loss from
discontinued operations
|
|
(3,170)
|
|
—
|
|
(4,535)
|
|
—
|
Net
loss
|
|
(33,158)
|
|
(73,973)
|
|
(69,301)
|
|
(112,013)
|
|
|
|
|
|
|
|
|
|
Equity-accounted
investees - share of other
comprehensive income (loss)
|
|
(11,621)
|
|
12,727
|
|
(12,006)
|
|
5,994
|
Gain on translation of
foreign operations
|
|
(5)
|
|
—
|
|
—
|
|
—
|
Comprehensive
loss
|
|
(44,784)
|
|
(61,246)
|
|
(81,307)
|
|
(106,019)
|
|
|
|
|
|
|
|
|
|
Net loss from
continuing operations attributable to:
|
|
|
|
|
|
|
|
|
Owners of the
Company
|
|
(29,350)
|
|
(73,301)
|
|
(63,553)
|
|
(111,205)
|
Non-controlling
interest
|
|
(638)
|
|
(672)
|
|
(1,213)
|
|
(808)
|
|
|
(29,988)
|
|
(73,973)
|
|
(64,766)
|
|
(112,013)
|
Net income (loss)
attributable to:
|
|
|
|
|
|
|
|
|
Owners of the
Company
|
|
(32,520)
|
|
(73,301)
|
|
(68,088)
|
|
(111,205)
|
Non-controlling
interest
|
|
(638)
|
|
(672)
|
|
(1,213)
|
|
(808)
|
|
|
(33,158)
|
|
(73,973)
|
|
(69,301)
|
|
(112,013)
|
Comprehensive income
(loss) attributable to:
|
|
|
|
|
|
|
|
|
Owners of the
Company
|
|
(44,146)
|
|
(60,574)
|
|
(80,094)
|
|
(105,211)
|
Non-controlling
interest
|
|
(638)
|
|
(672)
|
|
(1,213)
|
|
(808)
|
|
|
(44,784)
|
|
(61,246)
|
|
(81,307)
|
|
(106,019)
|
Condensed Consolidated Interim Statement of Financial
Position
(Unaudited - expressed in thousands of Canadian
dollars)
As at
|
|
June 30,
2023
|
|
December 31,
2022
|
|
|
|
|
|
Assets
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
185,455
|
|
279,586
|
Restricted
cash
|
|
19,456
|
|
19,338
|
Marketable
securities
|
|
3,535
|
|
21,926
|
Accounts
receivable
|
|
32,661
|
|
22,636
|
Biological
assets
|
|
1,330
|
|
3,477
|
Inventory
|
|
160,407
|
|
127,782
|
Prepaid expenses and
deposits
|
|
21,792
|
|
10,110
|
Investments
|
|
23,038
|
|
6,552
|
Assets held for
sale
|
|
8,391
|
|
6,375
|
Net investment in
subleases
|
|
3,656
|
|
3,701
|
|
|
459,721
|
|
501,483
|
Non-current
assets
|
|
|
|
|
Long-term
deposits
|
|
9,766
|
|
8,584
|
Right of use
assets
|
|
136,947
|
|
134,154
|
Property, plant and
equipment
|
|
181,841
|
|
143,409
|
Net investment in
subleases
|
|
18,918
|
|
19,618
|
Intangible
assets
|
|
74,446
|
|
74,885
|
Investments
|
|
9,638
|
|
90,702
|
Equity-accounted
investees
|
|
532,818
|
|
519,255
|
Goodwill
|
|
147,680
|
|
67,260
|
Total
assets
|
|
1,571,775
|
|
1,559,350
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
62,557
|
|
48,153
|
Lease
liabilities
|
|
35,982
|
|
30,206
|
Derivative
warrants
|
|
3,960
|
|
11,002
|
|
|
102,499
|
|
89,361
|
Non-current
liabilities
|
|
|
|
|
Lease
liabilities
|
|
136,136
|
|
139,625
|
Other
liabilities
|
|
5,252
|
|
2,709
|
Total
liabilities
|
|
243,887
|
|
231,695
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
Share
capital
|
|
2,365,845
|
|
2,292,810
|
Warrants
|
|
2,260
|
|
2,260
|
Contributed
surplus
|
|
73,636
|
|
68,961
|
Contingent
consideration
|
|
2,279
|
|
2,279
|
Accumulated
deficit
|
|
(1,156,279)
|
|
(1,091,999)
|
Accumulated other
comprehensive income
|
|
20,182
|
|
32,188
|
Total shareholders'
equity
|
|
1,307,923
|
|
1,306,499
|
Non-controlling
interest
|
|
19,965
|
|
21,156
|
Total liabilities
and shareholders' equity
|
|
1,571,775
|
|
1,559,350
|
Condensed Consolidated Interim Statement of Cash
Flows
(Unaudited - expressed in thousands of Canadian
dollars)
|
Three months
ended
June 30
|
|
Six months ended
June 30
|
|
2023
|
2022
|
|
2023
|
|
2022
|
Cash provided by
(used in):
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
Net loss for the
period
|
(33,158)
|
(73,973)
|
|
(69,301)
|
|
(112,013)
|
Adjustments
for:
|
|
|
|
|
|
|
Income tax
recovery
|
—
|
(1,791)
|
|
—
|
|
(1,791)
|
Interest and fee
revenue
|
(3,421)
|
(2,577)
|
|
(7,632)
|
|
(6,438)
|
Change in fair value
of biological assets
|
1,413
|
388
|
|
4,948
|
|
(3,302)
|
Share-based
compensation
|
3,893
|
438
|
|
6,102
|
|
4,642
|
Depreciation and
amortization
|
14,674
|
10,538
|
|
32,933
|
|
12,977
|
Loss (gain) on
disposition of assets
|
77
|
(402)
|
|
261
|
|
(402)
|
Inventory
obsolescence
|
4,291
|
3,871
|
|
13,468
|
|
5,852
|
Finance
costs
|
2,458
|
26,505
|
|
7,631
|
|
26,444
|
Change in estimate of
fair value of derivative warrants
|
(2,240)
|
(23,656)
|
|
(7,042)
|
|
(15,356)
|
Unrealized foreign
exchange loss (gain)
|
(72)
|
19
|
|
(24)
|
|
35
|
Asset
impairment
|
1,658
|
1,850
|
|
2,465
|
|
1,850
|
Share of (profit) loss
of equity-accounted investees
|
936
|
37,978
|
|
(8,580)
|
|
33,887
|
Loss on settlement of
marketable securities
|
48,988
|
—
|
|
92,792
|
|
—
|
Unrealized (gain) loss
on marketable securities
|
(44,968)
|
35,338
|
|
(83,603)
|
|
53,172
|
Additions to
marketable securities
|
—
|
(2,899)
|
|
—
|
|
(3,500)
|
Proceeds from
settlement of marketable securities
|
3,437
|
—
|
|
3,463
|
|
—
|
Income distributions
from equity-accounted investees
|
—
|
—
|
|
—
|
|
685
|
Interest
received
|
3,217
|
2,084
|
|
6,920
|
|
5,799
|
Change in non-cash
working capital
|
(14,193)
|
(31,584)
|
|
(56,755)
|
|
(46,434)
|
Net cash used in
operating activities from continuing operations
|
(13,010)
|
(17,873)
|
|
(61,954)
|
|
(43,893)
|
Net cash provided by
operating activities from discontinued operations
|
4,167
|
—
|
|
4,314
|
|
—
|
Net cash used in
operating activities
|
(8,843)
|
(17,873)
|
|
(57,640)
|
|
(43,893)
|
Investing
activities
|
|
|
|
|
|
|
Additions to property,
plant and equipment
|
(1,247)
|
(3,554)
|
|
(2,641)
|
|
(4,535)
|
Additions to
intangible assets
|
(39)
|
1
|
|
(56)
|
|
(55)
|
Additions to
investments
|
125
|
337
|
|
(702)
|
|
(14,094)
|
Additions to
equity-accounted investees
|
(9,443)
|
(36,880)
|
|
(16,989)
|
|
(94,200)
|
Proceeds from disposal
of property, plant and equipment
|
55
|
4,000
|
|
137
|
|
4,000
|
Acquisitions, net of
cash acquired
|
—
|
—
|
|
3,695
|
|
(31,149)
|
Change in non-cash
working capital
|
1,586
|
294
|
|
1,127
|
|
259
|
Net cash used in
investing activities from continuing operations
|
(8,963)
|
(35,802)
|
|
(15,429)
|
|
(139,774)
|
Net cash used in
investing activities from discontinued operations
|
—
|
—
|
|
—
|
|
—
|
Net cash used in
investing activities
|
(8,963)
|
(35,802)
|
|
(15,429)
|
|
(139,774)
|
Financing
activities
|
|
|
|
|
|
|
Change in restricted
cash
|
(76)
|
2,541
|
|
(118)
|
|
7,607
|
Payments on lease
liabilities, net
|
(10,116)
|
(9,177)
|
|
(19,607)
|
|
(9,624)
|
Repurchase of common
shares, net of costs
|
—
|
(2,053)
|
|
(1,536)
|
|
(2,053)
|
Repayment of long-term
debt
|
—
|
—
|
|
—
|
|
(10,000)
|
Change in non-cash
working capital
|
200
|
2,170
|
|
199
|
|
2,116
|
Net cash used in
financing activities from continuing operations
|
(9,992)
|
(6,519)
|
|
(21,062)
|
|
(11,954)
|
Net cash used in
financing activities from discontinued operations
|
—
|
—
|
|
—
|
|
—
|
Net cash used in
financing activities
|
(9,992)
|
(6,519)
|
|
(21,062)
|
|
(11,954)
|
Change in cash and cash
equivalents
|
(27,798)
|
(60,194)
|
|
(94,131)
|
|
(195,621)
|
Cash and cash
equivalents, beginning of period
|
213,253
|
422,824
|
|
279,586
|
|
558,251
|
Cash and cash
equivalents, end of period
|
185,455
|
362,630
|
|
185,455
|
|
362,630
|
SPECIFIED FINANCIAL MEASURES
Certain specified financial measures in this news release are
non-IFRS measures. These terms are not defined by IFRS and,
therefore, may not be comparable to similar measures provided by
other companies. These non-IFRS financial measures should not be
considered in isolation or as an alternative for or superior to
measures of performance prepared in accordance with IFRS. These
measures are presented and described in order to provide
shareholders and potential investors with additional measures in
understanding the Company's operating results in the same manner as
the management team.
ADJUSTED EBITDA
Adjusted EBITDA is a non-IFRS measure which the Company uses to
evaluate its operating performance. Adjusted EBITDA provides
information to investors, analysts, and others to aid in
understanding and evaluating the Company's operating results in a
manner similar to its management team. Adjusted EBITDA is defined
as net income (loss) from continuing operations before finance
costs, depreciation and amortization, accretion expense, income tax
recovery and excluding changes in fair value of biological assets,
changes in fair value realized through inventory, unrealized
foreign exchange gains or losses, unrealized gains or losses on
marketable securities, changes in fair value of derivative
warrants, share-based compensation expense, asset impairment, gain
or loss on disposal of property, plant and equipment, cost of sales
non-cash component, inventory impairment (recovery) and
obsolescence, restructuring costs and transaction costs. The
Company presents both consolidated or total Adjusted EBITDA and
Adjusted EBITDA by operating segment.
OPERATING
SEGMENTS
|
|
|
|
|
|
($000s)
|
Liquor
Retail
|
Cannabis
Retail
|
Cannabis
Operations
|
Investments
|
Corporate
|
Total
|
Three months ended
June 30, 2023
|
|
|
|
|
|
|
Net earnings
(loss)
|
6,714
|
1,221
|
(13,831)
|
(1,917)
|
(22,175)
|
(29,988)
|
Adjustments
|
|
|
|
|
|
|
Finance
costs
|
1,490
|
1,111
|
(400)
|
257
|
—
|
2,458
|
Change in estimate of
fair value of
derivative warrants
|
—
|
—
|
—
|
—
|
(2,240)
|
(2,240)
|
Depreciation and
amortization
|
8,161
|
3,361
|
650
|
—
|
1,271
|
13,443
|
Change in fair value of
biological assets
|
—
|
—
|
1,413
|
—
|
—
|
1,413
|
Change in fair value
realized through
inventory
|
—
|
—
|
(2,048)
|
—
|
—
|
(2,048)
|
Unrealized foreign
exchange (gain) loss
|
(2)
|
—
|
(70)
|
—
|
—
|
(72)
|
Unrealized (gain) loss
on marketable
securities
|
—
|
—
|
214
|
(45,182)
|
—
|
(44,968)
|
Realized loss on
marketable securities
|
—
|
—
|
—
|
49,093
|
—
|
49,093
|
Share-based
compensation
|
—
|
15
|
—
|
—
|
3,878
|
3,893
|
Asset
impairment
|
—
|
458
|
1,200
|
—
|
—
|
1,658
|
Loss (gain) on
disposition of PP&E
|
—
|
5
|
72
|
—
|
—
|
77
|
Cost of sales non-cash
component (1)
|
—
|
—
|
969
|
—
|
—
|
969
|
Inventory impairment
(recovery) and
obsolescence
|
—
|
—
|
4,291
|
—
|
—
|
4,291
|
Restructuring
costs
|
—
|
—
|
1,282
|
—
|
2,760
|
4,042
|
Transaction
costs
|
—
|
—
|
—
|
—
|
173
|
173
|
Adjusted
EBITDA
|
16,363
|
6,171
|
(6,258)
|
2,251
|
(16,333)
|
2,194
|
(1) Cost of sales
non-cash component is comprised of depreciation expense
|
OPERATING
SEGMENTS
|
|
|
|
|
|
($000s)
|
Liquor
Retail
|
Cannabis
Retail
|
Cannabis
Operations
|
Investments
|
Corporate
|
Total
|
Three months ended
June 30, 2022
|
|
|
|
|
|
|
Net earnings
(loss)
|
8,379
|
447
|
(8,036)
|
(90,487)
|
15,724
|
(73,973)
|
Adjustments
|
|
|
|
|
|
|
Finance
costs
|
2,874
|
1,070
|
195
|
22,305
|
61
|
26,505
|
Change in estimate of
fair value of
derivative warrants
|
—
|
(56)
|
—
|
—
|
(23,600)
|
(23,656)
|
Depreciation and
amortization
|
5,315
|
3,370
|
—
|
—
|
115
|
8,800
|
Income tax
recovery
|
—
|
—
|
—
|
(1,791)
|
—
|
(1,791)
|
Change in fair value of
biological assets
|
—
|
—
|
388
|
—
|
—
|
388
|
Change in fair value
realized through
inventory
|
—
|
—
|
2,066
|
—
|
—
|
2,066
|
Unrealized foreign
exchange (gain) loss
|
9
|
—
|
10
|
—
|
—
|
19
|
Unrealized (gain) loss
on marketable
securities
|
—
|
—
|
—
|
35,338
|
—
|
35,338
|
Share-based
compensation
|
—
|
(180)
|
—
|
—
|
618
|
438
|
Asset
impairment
|
—
|
—
|
1,850
|
—
|
—
|
1,850
|
Loss (gain) on
disposition of PP&E
|
35
|
15
|
(452)
|
—
|
—
|
(402)
|
Cost of sales non-cash
component (1)
|
—
|
—
|
3,440
|
—
|
—
|
3,440
|
Inventory impairment
(recovery) and
obsolescence
|
—
|
—
|
3,871
|
—
|
—
|
3,871
|
Restructuring
costs
|
—
|
—
|
—
|
(882)
|
—
|
(882)
|
Transaction
costs
|
—
|
—
|
—
|
—
|
(7,938)
|
(7,938)
|
Adjusted
EBITDA
|
16,612
|
4,666
|
3,332
|
(35,517)
|
(15,020)
|
(25,927)
|
(1) Cost of sales
non-cash component is comprised of depreciation expense
|
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SOURCE Sundial Growers Inc.