Goodness Growth Posts Strong Sales, Increased Expenses

Board continues to evaluate strategic alternatives for the company after its deal with Verano fell apart.

Despite strong net revenue, profitability continued to elude Minneapolis-based Goodness Growth Holdings Inc. (CSE: GDNS) (OTCQX: GDNSF) during the third quarter of 2022.

Sales for the third quarter ended Sept. 30 climbed 41% from the same period a year ago, clocking in at $18.9 million. Excluding results from discontinued operations in Arizona, revenue jumped 59.6% year-over-year.

Revenue growth was driven by both retail and wholesale contributions. Retail operations climbed 60.1% to $16.4 million, while wholesale rose 56.1% to $2.5 million, driven by increased sales in Maryland and New York.

“Our third quarter results reflect continued revenue growth across each of our operating markets in Maryland, Minnesota, New Mexico, and New York, as well as consistency of our gross margin performance as compared to the prior quarter,” CEO Kyle Kingsley said in a news release.

Gross margin increased to 50.6% of revenue, compared with 38.3% a year ago.

“Margin performance in our home market of Minnesota has been especially strong following the commencement of flower and edibles sales earlier this year, and we are also pleased with substantial increases in wholesale volumes in New York. We expect both of these positive trends to continue as we work toward the expected launch of adult-use sales in New York next year.”

Despite the positive momentum, net loss for the third quarter increased to $8.4 million, compared with $6.9 million for the same period a year ago. Adjusted EBITDA held steady in a year-over-year comparison at a loss of $1.9 million.

Year-to-date, revenue increased 36% to $55.6 million, with a gross margin of 40.3%. Net loss for the nine-month period climbed to $29.2 million, from $20.8 million a year ago.

Failed Verano deal

Total operating expenses in the third quarter were $9.7 million, an increase of $0.5 million as compared to $9.2 million in the third quarter of 2021. This increase was primarily attributable to an increase in professional fees related to the former agreement to be acquired by Verano Holdings Corp.

“While we are experiencing positive momentum in our business, we were extremely disappointed by Verano’s decision to wrongfully repudiate our transaction, which we previously anticipated would close during the fourth quarter,” Kingsley said.

The company couldn’t provide much detail on the failed deal due to ongoing litigation but stood by its declaration that the “termination was unlawful” and that it was continuing to pursue “significant damages” through the courts in British Columbia.

Goodness Growth continues to evaluate strategic alternatives for the company, which could include disposition of a material business or assets of the company. No timeline was provided for this additional review.

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