FOR IMMEDIATE RELEASE
CALGARY, AB (May 16, 2022) — Sundial Growers Inc. (NASDAQ: SNDL) (“Sundial” or the “Company”) reported its financial and operational results for the first quarter ended March 31, 2022. All financial information in this press release is reported in millions of Canadian dollars unless otherwise indicated.
The Company will hold a conference call and webcast at 10:30 a.m. EDT (8:30 a.m. MDT) on Tuesday, May 17, 2022. Please see the dial-in details within the release and additional details on Sundial’s website at www.sndlgroup.com.
This press release is intended to be read in conjunction with the Company’s Financial Statements and Notes for the period 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 on EDGAR at www.sec.gov/edgar.shtml.
Sundial has also posted a supplemental investor presentation on its website which can be found at https://sndlgroup.com/investors.
“The first quarter of 2022 was both transformational and transitional for Sundial,” said Zach George, Chief Executive Officer. “We are now Canada’s largest private sector distributor of both liquor and cannabis with 354 retail locations and have quickly benefitted from collaboration with our new legacy Alcanna colleagues. Sundial’s regulated products platform provides unique insights into evolving consumer preferences and value propositions. We continue to strengthen and transform our business while benefitting from vertical integration across our segments under a shared services model. In less than two months, we have been able to increase branded product distribution by shipping products to Value Buds stores and have started to realize synergies against an integration plan that will be a focus for the balance of the year. Through cost structure improvements in our cannabis operations, we have created a more balanced and diverse product mix that focuses on higher-margin, higher-quality cannabis. In addition, the current rising interest rate environment has led us to make non-cash accounting adjustments to our largely fixed-rate SunStream portfolio, resulting in muted adjusted EBITDA contribution for the quarter.”
Commenting on the current market environment, Mr. George added ”While our shares have outperformed global and Canadian cannabis indices on a year-to-date and a one-year basis through May 13, we are focused on sustainable absolute returns and committed to the relentless pursuit of shareholder value creation. Sundial’s debt-free balance sheet and ample cash reserves place us in an enviable position as we witness a reckoning taking hold in the Canadian cannabis market. Continued aggressive cash consumption by our peers, reduced access to capital, and waning investor risk appetite is likely to accelerate sector rationalization as the industry slowly moves towards the formation of an oligopoly.”
|($000s)||Cultivation and||Retail||Liquor Retail||Investment||Corporate||Total|
|As at March 31, 2022|
|Three months ended March 31, 2022|
|Interest and fee revenue||—||—||—||3,861||—||3,861|
|Loss on marketable securities||—||—||—||(17,710)||—||(17,710)|
|Share of profit of equity-accounted investees||—||—||—||4,091||—||4,091|
|Depreciation and amortization||68||595||—||—||76||739|
|Earnings (loss) before tax||(9,190)||131||(73)||(9,758)||(19,150)||(38,040)|
|As at December 31, 2021|
|Three months ended March 31, 2021|
|Interest and fee revenue||—||—||—||2,849||—||2,849|
|Gain on marketable securities||—||—||—||12,900||—||12,900|
|Share of profit of equity-accounted investees||—||—||—||—||—||—|
|Depreciation and amortization||954||—||—||—||104||1,058|
|Earnings (loss) before tax||(9,172)||—||—||14,300||(139,573)||(134,445)|
Sundial is comprised of four segments: Cannabis Cultivation and Production, Cannabis Retail, Liquor Retail, and Investments.
Sundial remains focused and committed to its cultivation and processing activities, including continuous improvement of its product offerings for customers while focusing on cost optimization and the most competitive and profitable strains and brands.
Gross revenue from branded cannabis products was $9.7 million for the first quarter of 2022, an increase of 8% compared to the first quarter of 2021. The increase in branded sales as part of the company's product mix reflects the progress and commitment to executing its retail vertical integration strategy across Western Canada and Ontario. Total gross revenue from the cultivation and product of cannabis was $11.3 million for the first quarter of 2022, a decrease of 3% compared to the first quarter of 2021. The decline in gross revenue was driven by a 42% decrease in wholesale sales to other Licensed Producers in the first quarter of 2022 versus the first quarter of 2021.
Average net selling price per gram was $2.60 in the first quarter of 2022, an increase of 5%, compared to $2.48 per gram in the first quarter of 2021. The increase was due to higher prices for provincial board sales. Provincial board prices have increased due to the shift of the mix of Sundial offerings from value products to core products as well as lower price discounts and concessions compared to the prior period.
In the first quarter of 2022 gross revenue from Sundial’s formats was:
|Three months ended|
|Revenue from dried flower||8,853||9,716|
|Revenue from vapes||531||1,413|
|Revenue from oil||27||181|
|Revenue from edibles and concentrates||1,536||438|
|Revenue from services||358||—|
The Company’s expanded retail network creates an opportunity to own the relationship with cannabis consumers and showcase both Sundial’s branded products and the best offerings from other Canadian licensed producers.
Gross revenue from the cannabis retail segment for the three months ended March 31, 2022 was $7.5 million, including $0.7 million representing one day of sales for Nova.
System-wide retail sales at were $34.6 million for the first quarter of 2022 compared to $41.4 million in the fourth quarter of 2021. System-wide retail sales represent the aggregate revenue earned by franchised Spiritleaf retail cannabis stores and corporate-owned Spiritleaf retail cannabis stores and do not represent revenues that accrue to the Company. The Company receives all revenues from corporate-owned Spiritleaf retail cannabis stores, and royalties and advertising fees in respect of the franchised Spiritleaf retail cannabis store revenue.
The Nova retail stores results are comprised of one day of operations following the acquisition on March 31, 2022, and were as follows:
While Sundial does not account for the results of the Nova retail stores prior to the acquisition date, the results for the period from January 1, 2022 to March 31, 2022 were as follows:
With the Alcanna acquisition on March 31, 2022, Sundial is now Canada’s leading regulated products platform. Sundial has commenced and will continue the post-acquisition integration work throughout the remainder of 2022.
The retail liquor segment results are comprised of one day of operations following the acquisition on March 31, 2022 and are as follows:
While Sundial does not account for the results of the liquor retail segment prior to the acquisition date, the results of Alcanna’s retail locations for the period from January 1, 2022 to March 31, 2022 were as follows:
Revenue from investments in the first quarter of 2022 was negative $17.7 million, including unrealized losses on marketable securities of $17.8 million, due to fluctuations in share prices from our strategic equity portfolio of Canadian cannabis-related investments.
|Three months ended|
|Interest and fee revenue|
|Interest revenue from investments at amortized cost||995||113|
|Interest and fee revenue from investments at Fair Value Through Profit or Loss||2,116||2,182|
|Interest revenue from cash||750||554|
|Unrealized (losses) gains||(17,834)||4,881|
|Revenue from direct investments||(13,849)||15,749|
|Share of profit of equity-accounted investees||4,091||—|
|Total investment activities||(9,758)||15,749|
General and administrative expenses for the three months ended March 31, 2022 were $10.7 million compared to $7.1 million for the three months ended March 31, 2021. The increase of $3.6 million was mainly due to increases in salaries and wages, office and general and professional fees. The increases in salaries and wages and office and general expenses were due to the acquisition of Inner Spirit Holdings in July 2021. The increase in professional fees was largely due to an increase in accounting services fees relating to the completion of the Company’s 2021 year-end audit.
The $96.4 million improvement in net loss is primarily due to the higher net revenue of $7.7 million, share of profit from SunStream of $4.1 million and change in fair value of derivative warrant liabilities of $121.6 million, partially offset by investment losses of $30.6 million and higher general and administrative expenses of $3.6 million.
Adjusted EBITDA was a loss of $0.7 million for the three months ended March 31, 2022 compared to positive Adjusted EBITDA of $3.3 million for the three months ended March 31, 2021. The decrease was due to the following:
A decrease in realized gains on marketable securities.
The decrease was partially offset by:
An increase in net revenue, primarily as a result of the inclusion of cannabis retail revenue; and
Share of profit from the SunStream joint venture.
Sundial remains focused on building long-term shareholder value through vertical integration, accretive deployment of cash resources, expansion of its retail distribution network, further streamlining of the Company’s operating structure, and enhanced offerings of high-quality brands.
With the acquisition of Alcanna, Sundial has gained significant retail experience and expertise. The Company’s Board of Directors has appointed the following management team:
Certain specified financial measures in this news release, including adjusted EBITDA and system-wide retail sales, 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 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 similar manner 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 change in fair value of biological assets, change in fair value realized through inventory, unrealized foreign exchange gains or losses, unrealized gains or losses on marketable securities, change in fair value of derivative warrants, 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.
|($000s except percentages)||Q1 2022||Q4 2021||% Change||Q1 2021||% Change|
|Change in estimate of fair value of derivative warrants||8,300||(8,200)||201%||129,944||-94%|
|Loss on cancellation of contracts||—||5,116||-100%||—||0%|
|Depreciation and amortization||739||352||110%||1,058||-30%|
|Income tax recovery||—||7,787||-100%||—||0%|
|Change in fair value of biological assets||(3,690)||(2,158)||-71%||94||4026%|
|Change in fair value realized through inventory||1,561||1,756||-11%||50||3022%|
|Unrealized foreign exchange (gain) loss||16||(1)||1700%||1,905||-99%|
|Unrealized loss on marketable securities||17,834||43,750||-59%||(4,881)||465%|
|Loss on disposition of PP&E||—||(374)||-100%||117||-100%|
|Cost of sales non-cash component (1)||—||772||-100%||826||-100%|
|Transaction costs (2)||6,481||7,837||-17%||3,648||78%|
|(1) Cost of sales non-cash component is comprised of depreciation expense|
|(2) Transaction costs relate to financing and investing activities related to acquisitions|
System-wide retail sales is a non-IFRS measure which the Company uses to evaluate the performance of its retail operations. System-wide retail sales represent the aggregate revenue earned by both franchised and corporate-owned retail cannabis stores and do not represent solely the retail segment’s revenue. The Company only receives royalties, advertising and franchise fees in respect of franchised Spiritleaf retail cannabis store revenue. The system-wide retail sales measure is useful to management in evaluating brand scale and market penetration and is used by management to assess the financial and operating performance of the Company and the strength of the Company’s market position relative to its competitors.
|Three months ended|
|Franchise store sales||29,165||—|
|System-wide retail sales||34,604||—|
Sundial will host a conference call and webcast at 10:30 a.m. EDT (8:30 a.m. MDT) on Tuesday, May 17, 2022.
To access the live webcast of the call, please visit the following link:
The webcast archive will be available for three months via the link provided above.
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: 8957#
ABOUT SUNDIAL GROWERS INC.
Sundial is a public company whose shares are traded on Nasdaq under the symbol "SNDL." Its business is reported and analyzed under four segments: Cannabis Production and Cultivation, Cannabis Retail, Liquor Retail, and Investments.
As a licensed producer that crafts small-batch cannabis using state-of-the-art indoor facilities, Sundial's 'craft-at-scale' modular growing approach, award-winning genetics, and experienced growers set us apart. Sundial's brand portfolio includes Top Leaf, Sundial Cannabis, Palmetto, Spiritleaf Selects and Grasslands. Sundial has acquired Alcanna and is now the largest private sector cannabis and liquor retailer in Canada as the Company retail banners now include Spiritleaf, Value Buds, Ace Liquor, Liquor Depot, and Wine & Beyond.
Sundial's investment portfolio seeks to deploy strategic capital through direct and indirect investments and partnerships throughout the global cannabis industry.
For more information on Sundial, please go to www.sndlgroup.com.
For more information:
Sophie Pilon, Corporate Communications
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