November 13, 2019

Sundial Delivers Quarterly Net Revenue of $33.5 Million Representing 74% Sequential Growth

CALGARY, AB (November 13, 2019) – Sundial Growers Inc. (Nasdaq: SNDL) (“Sundial” or the “Company”) reported its financial and operating results for the third quarter ended September 30, 2019, as well as provided an update on its business.

“The increasing scale of our Canadian and new UK operations enabled us to significantly grow production and sales this quarter,” said Torsten Kuenzlen, Chief Executive Officer of Sundial. “Our focused and phased growth strategy remains on track - scaling and optimizing our Canadian business to gain profitable market share by deepening our branded product portfolio, expanding our geographic footprint and leveraging our differentiated CPG approach in the rapidly growing global cannabis industry.

“Our financial and operating results this quarter are the outcome of executing against the clear goals we set for our business this year,” continued Mr. Kuenzlen. “Increasing our harvests from 1,896 kilograms in the first quarter of 2019 to approximately 11,700 kilograms of premium cannabis in our third quarter, demonstrates our ability to rapidly scale our operation to the level of other leading Canadian LPs. Importantly, we step-changed production quantities while improving quality and growing a much larger variety of desirable premium cannabis strains. At the same time, we advanced operationally for effectiveness and efficiency and carefully managed our inventory levels. Production expansion went hand-in-hand with geographic expansion, as we increased coverage to additional Provincial boards and stores across Canada. This progress, combined with our focus on building out our brand story, not only delivered strong results this quarter, but also sets the stage for the profitable expansion of our business in 2020 and beyond.”

All information in this press release is in Canadian dollars unless otherwise indicated

• Delivered net revenue of $33.5 million, a 74% sequential quarterly increase, driven by a 41% growth in Canadian sales and the expansion into the UK, with the acquisition of Bridge Farm Group (“Bridge Farm”). • Sold 7,944 kilograms of cannabis in Canada, increasing almost 70% from the second quarter of 2019. • Average selling price per gram (“ASP”) for branded cannabis products for the quarter was $6.34, broadly consistent with ASP in the second quarter of $6.53. ASP for unbranded flower sales was $4.03, declining slightly from $4.46 in the second quarter.
  • Sundial's net loss for the third quarter was $97.5 million, driven by the acquisition and the termination of a royalty obligation. • Consolidated Adjusted EBITDA loss was $7.9 million. This was impacted by the scaling of operations, costs related to becoming a publicly traded company, acquisition and construction related expenses, and the impact from Sundial’s decision to manage inventory levels by wholesaling lower margin products. • Deepened our branded product portfolio by growing and beginning to commercialize 19 premium strains. This included Sundial’s Lemon Riot, a high-quality premium strain which has consistently sold out at retail as soon as it becomes available. • Expanded international footprint with the acquisition of leading UK-based agricultural indoor producer Bridge Farm in early July to secure low-cost production at scale and valuable commercial relationships in the UK, Europe and internationally. • Completed its IPO on Nasdaq on August 6th, raising approximately USD $143 million of gross proceeds. • Secured financing of up to $140 million in corporate credit facilities consisting of an initial $90 million senior secured term credit facility and the right to an additional facility to a maximum of $50 million. This financing, combined with the proceeds from its IPO, provides the capital to complete the Company’s expansion in Canada and the UK, as well as fund its business operations through to self-funding. • Remained focused on positioning Sundial as a leader in the global cannabis industry for 2020 and beyond with its branded product portfolio in the Heal, Help, and Play markets.

Subsequent to quarter end • Granted licence by Health Canada to produce and sell cannabis oil products which enable new Cannabis 2.0 formats to be sold in the near future. • Entered into strategic partnerships to broaden and enhance the Heal and Help product portfolios. • Launched Palmetto, a new brand in Sundial's Play brand portfolio. Palmetto is synonymous with high-quality and convenient cannabis, offering pre-rolls and vape pens for an effortless and exceptional consumer experience.

“We are firmly focused on profitable growth,” said Mr. Kuenzlen. “Going forward we will benefit significantly from the foundation we are laying. Optimizing our substantially complete, state-of-the-art flagship facility in Olds, will drive operational improvements, which translate into reduced cost of sales and enhanced profitability. We will also continue to be disciplined in our capital spending and cost structure. We expect to consistently grow our business and remain agile in the rapidly evolving and dynamic global cannabis industry. While short-term fluctuations are a challenge for the entire industry, our belief in the immense overall market opportunity remains unchanged.

  “Looking forward to 2020, there are a number of factors that will drive revenue and EBITDA growth for Sundial,” stated Mr. Kuenzlen. “In Canada, aligning production capacity with demand, a flexible approach to cultivation, and increased efficiency and cost management, will be key bottom line drivers. At the same time, higher branded sales through more Provincial boards and additional retail outlets and a strong profitable brand/product mix including the new Cannabis 2.0 products, commercialized efficiently, will drive the topline revenue. This, combined with the plans for our new UK operations to continue to grow our existing plant business and develop our new cannabis opportunities, will advance our international leadership position,” concluded Mr. Kuenzlen.


(1) Adjusted EBITDA gross margin before fair value adjustments and working capital do not have standardized meanings prescribed by IFRS and therefore may not be comparable to similar measures used by other companies. The non-IFRS measure of Adjusted EBITDA is reconciled to net loss in accordance with IFRS in the “NON-IFRS MEASURES” section of this news release and discussed further in the “ADVISORY” section of this news release.
(2) Net of marketing fees, salvage fees and early payment discounts with respect to sales under our supply agreements with Canadian provincial regulatory authorities.
(3) Gross selling price net of excise tax.

Consolidated net revenue increased 74% sequentially to $33.5 million. The Cannabis segment delivered a 41% increase in revenue to $28.0 million for the quarter, including $2.3 million in branded flower, $17.5 million in unbranded flower, and $8.2 million in winterized oil. The increase in cannabis flower sales was the result of the expansion of Sundial’s Canadian capacity and broadening geographical diversification. Sundial expanded its Canadian cannabis sales markets from Alberta into Ontario, British Columbia, Saskatchewan, Manitoba, and Nova Scotia. Subsequent to quarter end, the Company entered Prince Edward Island, and intends to be in all Canadian provinces. Sundial also recorded $5.5 million in revenue from its Bridge Farm acquisition from its existing plant and herb business.

Average selling price (ASP)
Sundial’s average gross selling price per gram for branded cannabis products was marginally lower at $6.34 compared to $6.53 in the second quarter. As part of Sundial’s growth strategy, it will pivot its focus from unbranded products to branded products through 2020, and expects branded product sales to grow materially during that time. Sundial’s unbranded flower average sales price was $4.03 in the third quarter compared to $4.46 in the second quarter of this year. Our average sales price for wintered oil in the third quarter was $0.03/mg.

Cost of sales
Overall cost of sales for the Cannabis segment was $20.3 million compared to $10.5 million in the second quarter of 2019. Dried cannabis cost of sales per gram were 13% lower at $1.91 compared to $2.20 in the prior quarter. Sundial’s dried cannabis cost of sales per gram benefited from increased efficiency of production which was offset by the impact of third-party extraction costs incurred to produce winterized oil as part of the Company’s focus on managing inventory levels, and the destruction of about 500,000 grams of control samples from inventory in the third quarter.

Gross margin
Sundial achieved strong gross margin performance for sales of cannabis flower. Gross margin for branded flower was 55% compared to 46% in the second quarter. Unbranded flower gross margin was 53% compared to 51% in the prior quarter. The Company produced winterized oil from flower inventory to proactively manage inventory, and as a result, incurred third-party extraction fees that affected gross margin. Sundial did not produce winterized oil in the second quarter. Gross margin for the UK business was 17% for the quarter, consistent with the expected economics for Bridge Farm’s existing plant and herb business.

Operating Expenses
General and administrative (“G&A”) expenses for the quarter grew to $14.6 million from $6.4 million in the prior period. This increase was the result of scaling of operations, costs related to becoming a publicly traded company, acquisition and construction related expenses. Sundial expects G&A expense to decline as a percentage of sales as the cannabis business scales. Sales and marketing expense of $2.5 million increased moderately relative to the second quarter, as a result of Sundial’s growth and expansion.
Capital expenditures Sundial made significant investments in its Canadian cannabis operations in 2019, and its investments related to increasing the Company’s production capacity are substantially complete.

During the third quarter, the Company invested $27.3 million in the continued expansion of Sundial’s Canadian facilities in Olds, Alberta and Merritt, British Columbia, including the construction of the fourth and fifth pods with 20 identical grow rooms each at Olds, and an extraction facility purpose-built for Cannabis 2.0 products. After expected licensing of the additional 40 rooms, the Olds facility will comprise 114 revenue generating grow rooms with 238,000 square feet of cultivation space, up from 125,000 at the end of the second quarter.

Consistent with Sundial’s international expansion and low-cost CBD production strategy, the Company invested $20.9 million in the UK for the phase 2 expansion of the new Clay Lake facility to enable the growth of Sundial’s current plant and future cannabis businesses. Upon completion of the phase 2 expansion by the first quarter of 2020, the Clay Lake facility will have 1.7 million square feet of growing space, increasing total UK growing space to 2.4 million square feet.

Liquidity and Capital Resources
Sundial has a proactive and prudent approach to its liquidity and financial capacity. The Company’s balance sheet is strong and had $142 million in cash at the end of the quarter. In addition to cash on hand, the Company has secured syndicated credit agreements to support growth and mid-term funding strategies. With the Canadian cannabis production facilities substantially complete, capital expenditures are expected to significantly decline in 2020.

Certain financial measures in this news release including adjusted EBITDA, working capital and gross margin before fair value adjustments 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 measures of performance prepared in accordance with IFRS.

Adjusted EBITDA
Adjusted EBITDA is a non-IFRS measure which the Company uses to evaluate its operating performance. Adjusted EBITDA provides useful information to investors, analysts and others in understanding and evaluating the Company’s operating results in the same manner as its management team. Adjusted EBITDA is defined as net income (loss) before finance costs, depreciation and amortization, accretion expense, income tax recovery and excluding change in fair value of biological assets, change in fair value realized through inventory, unrealized foreign exchange gains or losses, share-based compensation expense, asset impairment, gain or loss on disposal of property, plant and equipment and certain one-time non-operating expenses, as determined by management.

The following table reconciles Adjusted EBITDA to net loss.

(1) Cost of sales non-cash component is comprised of depreciation expense.
(2) Transaction costs are non-recurring costs related to the IPO and the acquisition of Bridge Farm.
(3) Adjusted EBITDA from ornamental flower operations does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures used by other companies. Adjusted EBITDA from ornamental flower operations is calculated based on a net loss of $9.8 million adjusted for finance costs of $0.6 million, loss on contingent consideration of $5.8 million, depreciation and amortization of $1.1 million, income tax recovery of $0.5 million, unrealized change in biological assets of $0.2 million, gain on investment of $0.2 million and transaction costs of $1.4 million.
(4) Adjusted EBITDA does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures used by other companies. The non-IFRS measure of Adjusted EBITDA is reconciled to net loss in accordance with IFRS in the “NON-IFRS MEASURES” section of this news release and discussed further in the “ADVISORY” section of this news release.

A complete copy of Sundial’s unaudited interim consolidated financial statements and related Management's Discussion and Analysis ("MD&A") for the three and nine months ended September 30, 2019 can be obtained through the Company's website at, EDGAR at and SEDAR at

Sundial will host a conference call and webcast at 5:00 pm ET (3:00 pm MT) on November 13, 2019. Callers may access the conference call via the following phone numbers:

Canada/USA Toll Free: 1-800-319-4610 International Toll: +1-604-638-5340 UK Toll Free: 0808-101-2791

Callers should dial in 5-10 minutes prior to the scheduled start time.

To access the live conference call webcast, please visit the following link: A replay will be available for three months following the conference call.

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