SLANG Worldwide Inc. (CSE: SLNG) (OTCQB: SLGWF) released its financial results in Canadian dollars for the first quarter ending March 31. Revenue rose 29% to $10.82 million, versus last year’s $8.37 million.
Slang attributed the boost in sales to increases in Vermont and Colorado, up $2.05 million and $780,000, respectively. However, the gains were offset by a reduction in Emerging Market sales.
The increase in Vermont was driven by the opening of the company’s CERES Collaborative dispensary on Oct. 1, 2022, Vermont’s first recreational cannabis store.
Losses were trimmed from last year’s first-quarter loss of $4.5 million to this year’s loss of $2.3 million.
“Our core markets of Vermont and Colorado continue to outperform expectations, with our portfolio of leading brands fueling solid sales growth,” CEO John Moynan said. “In fact, we achieved our strongest sales growth in Colorado in the first quarter with sales increasing 12% year-over-year. Our ability to continue driving high-margin revenue from our Core Markets positions these operations as the financial backbone of our Company, allowing us to be aggressive in driving brand performance nationally through our Emerging Markets.”
Slang reported that it had $11.67 million in cash and restricted cash on March 31, versus $11.92 million on Dec. 31, 2022. Excluding deferred cash consideration of $330,000 paid in connection with the company’s acquisition of High Fidelity Inc., Slang said it was operational cash flow positive in this quarter for the second consecutive quarter and was on track to generate positive operational cash flow in the second quarter.
“By operating in a flexible and scalable manner to effectively compete in each specific cannabis market where we operate, we have now produced positive Adjusted EBITDA, our first quarter of positive EBITDA, our second consecutive quarter of positive operational cash flow, and our highest quarterly adjusted margins to date, of 52%,” Moyan added. “We anticipate this positive momentum to continue through fiscal 2023 as we further elevate our market position and continue to drive top and bottom-line results.”
Slang’s decision to discontinue its THC operations in Oregon (CHC Laboratories Inc. and Hydra Oregon LLC) and its Colorado cultivation operations in 2021 contributed to increased margins, reduced costs, and an overall increase in comprehensive income throughout 2022.
Slang’s market in Vermont includes cultivation, branding, manufacturing, and distribution of its medical and recreational cannabis products to other retail customers, as well as through its owned medical and recreational retail dispensaries in the state.
Slang has two of Vermont’s five existing medical marijuana licenses and one retail marijuana license.
The company said it had immediate results from the high margins that accompanied Vermont’s direct-to-consumer sales through its three medical retail locations. In the company’s MD&A, it said that the high margins have brought a healthy and consistent gross profit to the company as a whole.
The retail dispensary is a 1,500 square foot recreational retail location in Burlington. The addition of Vermont also brought the opportunity to increase Slang’s product offering in the state, increasing brand penetration.
The company said it will be focusing on building out its wholesale channel within the state as more retailers receive licenses. Slang said it views this as one of its main catalysts for growth.
The company feels that it now has a strong balance sheet and cash position, and management is confident in its resources, people, and strategy to continue to succeed over the long term.
It noted in the latest MD&A: “We have begun to see positive sustained trends in various areas from steadily increasing margins and decreasing costs in recent months and quarters, which we expect will continue in the next quarters. Our ongoing cost monitoring and reduction program will allow us to pivot if necessary and continue to benefit from the recovery in consumer and business activity.”