CALGARY, AB, Aug. 1, 2024 /CNW/ - SNDL Inc. (NASDAQ: SNDL) ("SNDL" or the "Company") reported its financial and operational results for the second quarter ended June 30, 2024. 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, found at https://sndl.com.
The Company will hold a conference call and webcast presentation at 10:00 a.m. EDT (8:00 a.m. MDT) on Friday, August 2, 2024. The conference call details can be found below.
SECOND QUARTER 2024 FINANCIAL AND OPERATIONAL HIGHLIGHTS
"The second quarter of 2024 confirms our progress and path to profitability, including an all-time record gross margin of 25.5%", said Zach George, Chief Executive Officer of SNDL. "As we continue making progress on our long-term strategic plan, we are gaining sharper focus on key priorities, allowing us to effectively deploy capital to support organic and inorganic growth. This sharper focus, and our continuous pursuit of greater efficiency, led to the recent announcement of a restructuring project that is expected to deliver over $20 million of annualized savings, some of which are starting to materialize in the third quarter of 2024. Our unique investment portfolio gives us additional optionality to close on U.S. assets currently under restructuring and become a leading global cannabis company. We look forward to sharing our long-term strategic plan in detail with investors in the coming months."
SECOND QUARTER 2024 KEY FINANCIAL METRICS
OPERATING SEGMENTS | ||||||||||||||||||
($000s) | Liquor Retail | Cannabis Retail | Cannabis Operations | Investments | Corporate | Total | ||||||||||||
Three months ended June 30, 2024 | ||||||||||||||||||
Net revenue | 140,560 | 76,069 | 24,976 | — | (13,478) | 228,127 | ||||||||||||
Gross profit | 35,713 | 19,268 | 3,183 | — | — | 58,164 | ||||||||||||
Operating income (loss) | 8,481 | 3,902 | (1,916) | 8,456 | (23,757) | (4,834) | ||||||||||||
Adjusted operating income (loss) (1) | 8,481 | 3,902 | (1,916) | 8,456 | (23,536) | (4,613) | ||||||||||||
Three months ended June 30, 2023 | ||||||||||||||||||
Net revenue | 151,690 | 71,881 | 20,940 | — | (12,595) | 231,916 | ||||||||||||
Gross profit | 35,360 | 17,780 | (1,207) | — | — | 51,933 | ||||||||||||
Operating income (loss) | 8,207 | 2,335 | (14,206) | (1,660) | (24,242) | (29,566) | ||||||||||||
Adjusted operating income (loss) (1) | 8,207 | 2,335 | (12,924) | (1,660) | (21,482) | (25,524) |
(1) | Adjusted operating income (loss) is a specified financial measure that does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures reported by other companies. See "Non-IFRS Measures – Adjusted operating income (loss)" below. |
SECOND QUARTER 2024 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 168 locations, predominantly in Alberta, under its three retail banners: "Wine and Beyond", "Liquor Depot", and "Ace Liquor".
As of August 1, 2024, the Ace Liquor store count was 135, the Liquor Depot store count was 20, and the Wine and Beyond store count was 13.
Cannabis Retail
With its 65% ownership interest in Nova Cannabis Inc. ("Nova"), SNDL is Canada's largest private-sector cannabis retailer by number of stores, operating 187 locations under its four retail banners: "Value Buds", "Spiritleaf", "Superette", and "Firesale". The Company's Cannabis Retail strategy is based on several pillars, including the quality of its store locations, its range of products, and the unique experiences provided to 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.
As of August 1, 2024, the Spiritleaf store count was 82 (20 corporate stores and 62 franchise stores), the Superette store count was 4 corporate stores, the Firesale store count was 1 corporate store, and the Value Buds store count was 100 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 and plans to continue evolving toward a cost-effective cultivation and manufacturing operation, the Cannabis Operations segment is a key enabler of SNDL's vertical integration strategy. Cannabis Operations include the operations of The Valens Company Inc. as of January 18, 2023.
Investments
Equity Position
This press release is intended to be read in conjunction with the Company's condensed consolidated interim financial statements and the notes thereto for the three and six months ended June 30, 2024, and the accompanying Management's Discussion and Analysis. These documents are available under the Company's profile on SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov/edgar.shtml.
CONFERENCE CALL
The Company will hold a conference call and webcast presentation at 10:00 a.m. EDT (8:00 a.m. MDT) on Friday, August 2, 2024.
WEBCAST ACCESS
To access the live webcast of the call, please visit the following link:
https://edge.media-server.com/mmc/p/7jsrnxfd
REPLAY
A replay of the webcast will be available at https://sndl.com/financials/quarterly-results/default.aspx
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, Superette and Firesale. SNDL is a licensed cannabis producer and one of the largest vertically integrated cannabis companies in Canada specializing in low-cost biomass sourcing, indoor cultivation, product innovation, low-cost manufacturing facilities, and a cannabis brand portfolio that includes Top Leaf, Contraband, Citizen Stash, Sundial Cannabis, Palmetto, Spiritleaf Selects Bon Jak, Versus, Value Buds, Namaste, Re-up, Grasslands and Vacay. 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, the Company's margin improvement initiatives, the Company's ability to achieve long-term, sustainable profitability, growth and efficiencies, the Company's long-term strategic plan, expectations with respect to the restructuring project, the benefits of the Company's Investment Segment portfolio, expectations with respect to sharing information with investors, the Company's approach to its Wine and Beyond banner, the Company's retail strategy, expectations with respect to the Company's Cannabis Operations segment, the Company's vertical integration strategy, expectations with respect to the Company's pursuant of EU-GMP certification, expectations with respect to the ability of the Company's to expand its international export footprint, the Company's proprietary data licensing program, expansion of product offerings (including the expected expansion of the Company's private labels), performance of the Company's investments, including through the SunStream joint venture and SunStream USA Group, expectations with respect to the SunStream USA Group, the timing and closing of the transactions with Parallel and Skymint, potential local and international regulatory changes, the share repurchase program, including the anticipated benefits thereof, and any other potential forms of shareholder value creation. Forward-looking statements are frequently characterized by words such as "aim", "anticipate", "assume", "believe", "contemplate", "continue", "could", "due", "estimate", "expect", "goal", "intend", "may", "objective", "plan", "predict", "potential", "positioned", "pioneer", "seek", "should", "target", "will", "would", and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the Company's business and the industry in which it operates and management's beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond its control. 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 "Risk Factors" in the Company's Annual Information Form dated March 20, 2024, and the risk factors included in our other public disclosure documents 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 | ||||||||
2024 | 2023 | |||||||
Net revenue | 228,127 | 231,916 | ||||||
Cost of sales | 169,963 | 179,983 | ||||||
Gross profit | 58,164 | 51,933 | ||||||
Investment income (loss) | 3,204 | (599) | ||||||
Share of profit of equity-accounted investees | 5,252 | (936) | ||||||
General and administrative | 48,036 | 52,727 | ||||||
Sales and marketing | 3,439 | 4,104 | ||||||
Research and development | 109 | 20 | ||||||
Depreciation and amortization | 13,519 | 13,443 | ||||||
Share-based compensation | 4,883 | 3,893 | ||||||
Restructuring (recovery) costs | 221 | 4,042 | ||||||
Asset impairment | 919 | 1,658 | ||||||
Loss on disposition of assets | 328 | 77 | ||||||
Operating income (loss) | (4,834) | (29,566) | ||||||
Other income (expenses) | (1,417) | (422) | ||||||
Loss before income tax | (6,251) | (29,988) | ||||||
Income tax recovery | 1,284 | — | ||||||
Net loss from continuing operations | (4,967) | (29,988) | ||||||
Net loss from discontinued operations | — | (3,170) | ||||||
Net loss | (4,967) | (33,158) | ||||||
Equity-accounted investees - share of other comprehensive income (loss) | 4,300 | (11,621) | ||||||
Gain on translation of foreign operations | — | (5) | ||||||
Comprehensive income (loss) | (667) | (44,784) | ||||||
Net loss from continuing operations attributable to: | ||||||||
Owners of the Company | (5,772) | (29,350) | ||||||
Non-controlling interest | 805 | (638) | ||||||
(4,967) | (29,988) | |||||||
Net loss attributable to: | ||||||||
Owners of the Company | (5,772) | (32,520) | ||||||
Non-controlling interest | 805 | (638) | ||||||
(4,967) | (33,158) | |||||||
Comprehensive income (loss) attributable to: | ||||||||
Owners of the Company | (1,472) | (44,146) | ||||||
Non-controlling interest | 805 | (638) |
Condensed Consolidated Interim Statement of Financial Position
(Unaudited – expressed in thousands of Canadian dollars)
As at | June 30, 2024 | December 31, 2023 | ||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | 182,934 | 195,041 | ||||
Restricted cash | 19,972 | 19,891 | ||||
Marketable securities | 156 | 225 | ||||
Accounts receivable | 22,361 | 27,059 | ||||
Biological assets | 868 | 429 | ||||
Inventory | 132,912 | 129,060 | ||||
Prepaid expenses and deposits | 19,303 | 22,464 | ||||
Investments | 28,514 | 3,400 | ||||
Assets held for sale | 19,051 | 6,375 | ||||
Net investment in subleases | 2,819 | 2,970 | ||||
428,890 | 406,914 | |||||
Non-current assets | ||||||
Long-term deposits and receivables | 6,232 | 4,837 | ||||
Right of use assets | 119,473 | 129,679 | ||||
Property, plant and equipment | 132,362 | 152,916 | ||||
Net investment in subleases | 16,572 | 18,396 | ||||
Intangible assets | 73,961 | 73,149 | ||||
Investments | 835 | 29,660 | ||||
Equity-accounted investees | 571,178 | 538,331 | ||||
Goodwill | 124,552 | 119,282 | ||||
Total assets | 1,474,055 | 1,473,164 | ||||
Liabilities | ||||||
Current liabilities | ||||||
Accounts payable and accrued liabilities | 62,389 | 68,210 | ||||
Lease liabilities | 32,618 | 30,537 | ||||
Derivative warrants | 3,900 | 4,400 | ||||
98,907 | 103,147 | |||||
Non-current liabilities | ||||||
Lease liabilities | 124,994 | 136,492 | ||||
Other liabilities | 6,236 | 4,185 | ||||
Total liabilities | 230,137 | 243,824 | ||||
Shareholders' equity | ||||||
Share capital | 2,380,753 | 2,375,950 | ||||
Warrants | 667 | 2,260 | ||||
Contributed surplus | 79,568 | 73,014 | ||||
Contingent consideration | 2,279 | 2,279 | ||||
Accumulated deficit | (1,269,177) | (1,260,851) | ||||
Accumulated other comprehensive income | 33,751 | 19,417 | ||||
Total shareholders' equity | 1,227,841 | 1,212,069 | ||||
Non-controlling interest | 16,077 | 17,271 | ||||
Total liabilities and shareholders' equity | 1,474,055 | 1,473,164 |
Condensed Consolidated Interim Statement of Cash Flows
(Unaudited – expressed in thousands of Canadian dollars)
Three months ended June 30 | ||||||||
2024 | 2023 | |||||||
Cash provided by (used in): | ||||||||
Operating activities | ||||||||
Net loss for the period | (4,967) | (33,158) | ||||||
Adjustments for: | ||||||||
Income tax recovery | (1,284) | — | ||||||
Interest and fee income | (3,218) | (3,421) | ||||||
Change in fair value of biological assets | (336) | 1,413 | ||||||
Share-based compensation | 4,883 | 3,893 | ||||||
Depreciation and amortization | 14,139 | 14,674 | ||||||
Loss on disposition of assets | 328 | 77 | ||||||
Inventory impairment and obsolescence | 1,069 | 4,291 | ||||||
Finance costs, net | 2,157 | 2,458 | ||||||
Change in estimate of fair value of derivative warrants | (1,800) | (2,240) | ||||||
Unrealized foreign exchange loss | 51 | (72) | ||||||
Asset impairment | 919 | 1,658 | ||||||
Share of (profit) of equity-accounted investees | (5,252) | 936 | ||||||
Realized loss on settlement of marketable securities | — | 48,988 | ||||||
Unrealized (gain) loss on marketable securities | 14 | (44,968) | ||||||
Proceeds from settlement of marketable securities | — | 3,437 | ||||||
Interest received | 2,649 | 3,217 | ||||||
Change in non-cash working capital | (4,650) | (14,193) | ||||||
Net cash provided by (used in) operating activities from continuing operations | 4,702 | (13,010) | ||||||
Net cash provided by operating activities from discontinued operations | — | 4,167 | ||||||
Net cash provided by (used in) operating activities | 4,702 | (8,843) | ||||||
Investing activities | ||||||||
Additions to property, plant and equipment | (1,190) | (1,247) | ||||||
Additions to intangible assets | — | (39) | ||||||
Changes to investments | 1,235 | 125 | ||||||
Changes to equity-accounted investees | — | (9,443) | ||||||
Proceeds from disposal of property, plant and equipment | 188 | 55 | ||||||
Acquisitions, net of cash acquired | (1,654) | — | ||||||
Change in non-cash working capital | 75 | 1,586 | ||||||
Net cash used in investing activities from continuing operations | (1,346) | (8,963) | ||||||
Net cash used in investing activities from discontinued operations | — | — | ||||||
Net cash used in investing activities | (1,346) | (8,963) | ||||||
Financing activities | ||||||||
Change in restricted cash | 150 | (76) | ||||||
Payments on lease liabilities, net | (9,706) | (10,116) | ||||||
Proceeds from common shares, net of costs | (57) | — | ||||||
Issuance of common shares by subsidiaries | 174 | — | ||||||
Change in non-cash working capital | 63 | 200 | ||||||
Net cash used in financing activities from continuing operations | (9,376) | (9,992) | ||||||
Net cash used in financing activities from discontinued operations | — | — | ||||||
Net cash used in financing activities | (9,376) | (9,992) | ||||||
Change in cash and cash equivalents | (6,020) | (27,798) | ||||||
Cash and cash equivalents, beginning of period | 188,954 | 213,253 | ||||||
Cash and cash equivalents, end of period | 182,934 | 185,455 |
NON-IFRS 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 reported 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 OPERATING INCOME (LOSS)
Adjusted operating income (loss) is a non-IFRS financial measure which the Company uses to evaluate its operating performance. Adjusted operating income (loss) provides information to investors, analysts, and others to aid in understanding and evaluating the Company's operating results in a similar manner to its management team. The Company defines adjusted operating income (loss) as operating income (loss) less restructuring costs (recovery), goodwill and intangible asset impairments and asset impairments triggered by restructuring activities.
The following tables reconcile adjusted operating income (loss) to operating income (loss) for the periods noted.
($000s) | Liquor Retail | Cannabis Retail | Cannabis Operations | Investments | Corporate | Total | ||||||||||||
Three months ended June 30, 2024 | ||||||||||||||||||
Operating income (loss) | 8,481 | 3,902 | (1,916) | 8,456 | (23,757) | (4,834) | ||||||||||||
Adjustments: | ||||||||||||||||||
Restructuring costs (recovery) | — | — | — | — | 221 | 221 | ||||||||||||
Adjusted operating income (loss) | 8,481 | 3,902 | (1,916) | 8,456 | (23,536) | (4,613) |
($000s) | Liquor Retail | Cannabis Retail | Cannabis Operations | Investments | Corporate | Total | ||||||||||||
Three months ended June 30, 2023 | ||||||||||||||||||
Operating income (loss) | 8,207 | 2,335 | (14,206) | (1,660) | (24,242) | (29,566) | ||||||||||||
Adjustments: | ||||||||||||||||||
Restructuring costs | — | — | 1,282 | — | 2,760 | 4,042 | ||||||||||||
Adjusted operating income (loss) | 8,207 | 2,335 | (12,924) | (1,660) | (21,482) | (25,524) |
FREE CASH FLOW
Free cash flow is a non-IFRS financial measure which the Company uses to evaluate its financial performance. Free cash flow provides information which management believes to be useful to investors, analysts and others in understanding and evaluating the Company's ability to generate positive cash flows as it removes cash used for non-operational items. The Company defines free cash flow as the total change in cash and cash equivalents less cash used for common share repurchases, dividends (if any), changes to debt instruments, changes to long-term investments, net cash used for acquisitions plus cash provided by dispositions (if any).
The following table reconciles free cash flow to change in cash and cash equivalents for the periods noted.
Three months ended June 30 | ||||||
($000s) | 2024 | 2023 | ||||
Change in cash and cash equivalents | (6,020) | (27,798) | ||||
Adjustments: | ||||||
Repurchase of common shares | — | — | ||||
Changes to long-term investments | (1,235) | 9,318 | ||||
Acquisitions, net of cash acquired | 1,654 | — | ||||
Free cash flow | (5,601) | (18,480) |
Last Trade: | US$1.80 |
Daily Change: | 0.07 4.05 |
Daily Volume: | 2,473,311 |
Market Cap: | US$478.010M |
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