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Decibel Cannabis Company Inc. (TSX-V: DB) (OTCQB: DBCCF) posted promising results as it continues to find gains in the Canadian market and overseas. The Alberta-based company delivered its financial report card using Canadian dollars in the period ending June 30, 2022.
Decibel reported approximately $18.6 million in net revenue during the period, up 11% since the previous quarter; and a gain of 49% since the same period last year. Total gross sales were $26 .2 million for the quarter. Additionally, the company reached 4.5% market share in July, rising 70% year over year.
Second-quarter net losses totaled $2.1 million, up 77% sequentially; versus a net loss of $620,000 in the same period last year. The earnings were a loss of one cent per share; in line with the previous quarter.
“Our second quarter results continue to demonstrate that Decibel is on the path we projected in our 2022 operational outlook,” said CEO Paul Wilson. “Our New Unique and Innovative product development and revenue generating initiatives have once again produced quarter-over-quarter record performance. This progress has been compounded by our productivity initiatives and record gross profit, now resulting in positive cash flow, putting us on track for another projected milestone.”
Decibel said that net revenue growth was driven by expanded distribution “particularly in the Ontario market, the continued launch of new General Admission and Qwest infused products in various provinces and continued growth in demand for derivative products.” The company said that net revenue would have been $18.9 million, however, $320,000 of discounts were provided related to discontinued products.
The company also posted record gross margins, a sequential improvement to 41% in the second quarter versus 35% in the previous quarter; and 41% in the same period last year. Decibel said that the increase was driven by “initiatives realized midway through the second quarter” — such as operational efficiencies, automation equipment commissioned and sourcing of more cost-effective components related to the manufacturing of cannabis products.
Adjusted EBITDA was $3.2 million, rising 31% since the previous quarter and 49% since the same time last year — marking Decibel’s eighth quarter of consecutive quarterly positive adjusted EBITDA.
Decibel reported $1.8 million of cash flow from operations in the quarter, a sequential decrease of $1.2 million since the previous quarter and an improvement of $4.8 million since the same time last year.
The company repaid its 9.5% convertible debentures in May with the draw-down of a $12 million term loan fixed at 4.75% — extending the maturity date of $12 million of debt by four years and avoiding approximately 6% of potential shareholder dilution; resulting in $0.6 million of annual interest expense savings.
“The cost engineering initiatives and capital investments impacted the later part of the second quarter, with additional equipment landed early August expected to drive continued sequential margin expansion,” the release said. The company said it achieved its previously stated target of 40 – 45% gross margin ahead of the second half of this year.
At the end of June, the company announced that is had received its certification to export its cannabis products internationally. The IMC-G.A.P certification will allow for a new international sales channels in Israel, and the company expects initial international export to occur in the second half of the year.
“With more highlights scheduled for the back half of 2022,” Wilson said. “Decibel is delivering exactly what we’ve planned and forecasted to the market, ourselves, and our shareholders.”
StaffAugust 15, 2022
The Daily Hit is a recap of cannabis business news for August 15, 2022.
ON THE SITE
Auxly Revenues Improve, Tries to Cut Costs
Auxly Cannabis Group Inc. (TSX: XLY) (OTCQX: CBWTF) released its financial results for the three months ending June 30, 2022. Total net revenues from the sale of adult-use cannabis in Canada were $27.3 million for the quarter, a 31% increase from the same period last year. The net losses for Auxly in the quarter almost doubled from last year’s $8.6 million to this year’s $14.2 million. Read more here.
Columbia Care Gets Boost From New Jersey Sales
Columbia Care Inc. (CSE: CCHW) (OTCQX: CCHWF) reported financial results for the second quarter ending June 30, 2022, with revenue rising 18% to $129 million over last year’s $109 million. Revenue grew 5% sequentially from the first quarter. The company reported a net loss of $54 million versus last year’s net loss of $18 million, higher than the previous quarter’s net loss of $27 million. This is also expected to be the last quarterly earnings report before the company combines with Cresco Labs. Read more here.
Agrify Reports Losses, Lowers Guidance
Agrify Corporation (Nasdaq: AGFY) up-ticked in early trading Monday despite the company posting results far below analysts’ expectations — showing the waning demand for hydroponics amid the economic slowdown. Red more here.
4Front M&A Strategy Pays Off, Plans for Bloom Farms Bought Deal
After the market closed on Monday, 4Front Ventures Corp. (CSE: FFNT) (OTCQX: FFNTF) posted positive results — buoyed by growth from lucrative M&A deals over the past year. The vertical multi-state operator announced its financial results for the second quarter ended June 30, 2022. Read more here.
IM Cannabis Revenues Rise as Company Burns Through Cash
IM Cannabis Corp. (CSE: IMCC) (NASDAQ: IMCC) reported financial results for its second quarter ended June 30, 2022. IMCC said that revenues rose 114% in the second quarter and were $23.8 million versus the same quarter last year. Total dried flower sold was 3,210 kilograms at an average selling price of $5.72 per gram, compared to 1,842 kilograms for the same period in 2021 at an average selling price of $3.92 per gram. Read more here.
Atai Life Cuts Expenses, Extends Cash Runway
Atai Life Sciences (NASDAQ: ATAI) announced fiscal second-quarter results today for the quarter ending June 30, 2022 with no revenue, but an update on expenses and cash levels. Read more here.
Rubicon Organics Sales Rise as Premium Brand Grows
Rubicon Organics Inc. (OTCQX: ROMJF) delivered mostly positive results on Monday as the company begins to post profits — buoyed by its premium flower and pre-roll line. The Vancouver cultivator released its financial results for the second quarter ending June 30, 2022. Rubicon reported approximately $8.8 million in net revenue during the period, a 92% gain versus the same period last year. Read more here.
Planet 13 Misses on Revenue Despite Quarter Uptick
Planet 13 Holdings (OTC: PLNHF) posted results that missed expectations — showing how waning demand and slimming margins are affecting even the largest operators. The Nevada-based cannabis superstore delivered its financial results for the second quarter ending June 30, 2021. Read more here.
Sundial Sees Record Revenue as Expansion Bid Pays Off
SNDL Inc. (NASDAQ: SNDL) posted positive results as the company reaps record revenue from this year’s M&A bets. The Canadian vice operator — formerly known as Sundial Growers Inc. — delivered its second-quarter results ending June 30, 2022. Read more here.
CV Sciences Misses Expectations as Hemp Demand Stutters
CV Sciences, Inc. (OTCQB: CVSI) sales fell in the quarter as demand for hemp-derived products continues to fade. The hemp operator announced its financial results for the quarter ending June 30, 2022. Read more here.
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IN OTHER NEWS
Avicanna Inc.
Avicanna Inc. (TSX: AVCN) (OTCQX: AVCNF) (FSE: 0NN), a commercial stage, international biopharmaceutical company focused on the commercialization of cannabinoid-based products, announced the filing of its interim financial statements for the three-month period ending June 30, 2022. Read more here.
TPCO Holding Corp.
TPCO Holding Corp. (NEO: GRAM.U) (OTCQX: GRAMF), a consumer-focused California cannabis company, today announced its financial results for the quarter ended June 30, 2022. All amounts are expressed in U.S. dollars. Read more here.
Ascend Wellness Holdings, Inc.
Ascend Wellness Holdings, Inc. (CSE: AAWH.U) (OTCQX: AAWH), a vertically integrated multi-state cannabis operator, today reported its financial results for the three months ended June 30, 2022. Financial results are reported in accordance with U.S. generally accepted accounting principles and all currency is in U.S. dollars. Read more here.
Flora Growth Corp.
Flora Growth Corp. (NASDAQ: FLGC), a manufacturer and distributor of global cannabis products and brands, reported today its financial and operating results for the six months ended June 30, 2022. All financial information is provided in U.S. dollars unless indicated otherwise. Read more here.
The Flowr Corporation
The Flowr Corporation (TSX.V: FLWR; OTC: FLWPF) announced the closing of the previously announced sale of the Flowr Forest property to an arm’s length third party for aggregate proceeds of $3.4 million. The company used a portion of the proceeds from the sale of this non-core asset to repay the outstanding balance of its ATB-led credit facility in full. The company, now bank debt free, intends to the use the remaining proceeds for working capital. Read more here.
InterCure Ltd.
InterCure Ltd. (NASDAQ: INCR) (TSX: INCR.U) (TASE: INCR) announced its financial results for the second quarter of 2022 and provided shareholders with a business update. All amounts are expressed in Canadian dollars or New Israeli Shekels (NIS), unless otherwise noted. Read more here.
Neptune Wellness Solutions Inc.
Neptune Wellness Solutions Inc., (NASDAQ: NEPT) (TSX: NEPT), a diversified and fully integrated health and wellness company focused on plant-based, sustainable and purpose-driven lifestyle brands, today announced its financial and operating results for the three-month period ending June 30, 2022. Read more here.
SpringBig Holdings, Inc.
SpringBig Holdings, Inc. (NASDAQ: SBIG), a provider of SaaS-based marketing solutions, consumer mobile app experiences and omnichannel loyalty programs to the cannabis industry, today announced its financial results for the second quarter ended June 30, 2022. Read more here.
TILT Holdings Inc.
TILT Holdings Inc. (NEO:TILT) (OTCQX: TLLTF), a global provider of cannabis business solutions that include inhalation technologies, cultivation, manufacturing, processing, brand development and retail, is reporting its financial and operating results for the three months and six months ended June 30, 2022. Read more here.
LiveWire Ergogenics Inc.
LiveWire Ergogenics Inc. (OTC: LVVV), a company focused on acquiring, leasing, licensing, and managing special purpose real estate properties conducive to producing sun-grown cannabis products for medical and recreational adult-use in California, reported financial results for the second quarter 2022. Read more here.
urban-gro, Inc.
urban-gro, Inc. (Nasdaq: UGRO), an integrated professional services and design-build firm offering solutions to the controlled environment agriculture (CEA) and commercial sectors, today reported second quarter financial results. Read more here.
Field Trip Health & Wellness Ltd.
Field Trip Health & Wellness Ltd. announced that it has filed a listing application in connection with the previously announced intention to list its common shares on the TSX Venture Exchange (TSXV). It is anticipated that the shares will commence trading on the TSXV under the ticker symbol “FTHW” at the opening of the market on August 17, 2021. Read more here.
Small Pharma Inc.
Small Pharma Inc. (TSXV: DMT) (OTCQB: DMTTF), a biotechnology company focused on short-acting psychedelic-assisted therapies for mental health conditions, today announced that it has received approval from the U.K. Medicines and Healthcare products Regulatory Authority (MHRA) and the Regional Ethics Committee to initiate a drug interaction clinical trial in the U.K. The study will assess the interaction between serotonin reuptake inhibitors (SSRIs) and SPL026, the company’s lead N, N-dimethyltryptamine (DMT) candidate, in patients with major depressive disorder. Read more here.
Adam JacksonAugust 15, 2022
SNDL Inc. (NASDAQ: SNDL) posted positive results as the company reaps record revenue from this year’s M&A bets. The Canadian vice operator — formerly known as Sundial Growers Inc. — delivered its second-quarter results ending June 30, 2022.
SNDL reported approximately $223.7 million in total revenue during the period, a 2,344% gain versus the same period last year; well over the Yahoo Finance Average analyst estimate for revenues of $162.6 million.
This comes after the company in March acquired a 63% majority stake in Nova — making SNDL the largest private sector cannabis and liquor retailer in Canada.
The company also reported a second-quarter net loss of $74 million versus a net loss of $52.3 million in the same period last year. The earnings were for a loss of $0.31 cents per share, according to SEDAR filings, versus an earnings loss of $0.23 cents a share during the same time last year.
“The SNDL team’s dedication and perseverance have enabled us to make significant progress on our journey to becoming Canada’s largest private sector distributor of both liquor and cannabis,” said CEO Zach George. “We believe our unique asset base and balance sheet strength represent competitive advantages that we are determined to leverage for the benefit of our stakeholders.”
The increased loss of $21.7 million sequentially was due to investment losses ($37.4 million), the share of loss of equity-accounted investees ($41.7 million), higher general and administrative expenses ($30.2 million), depreciation and amortization ($7.9 million) as well as finance costs ($26.5 million) — partially offset by an increase in gross margin ($45.8 million), lower asset impairment ($58.2 million), lower transaction costs ($8.7 million) and a positive change in fair value of derivative warrant liabilities ($3.8 million).
Adjusted EBITDA across segments was a loss of $25.9 million for the quarter, versus a loss of $200,000 in the same period last year, driven primarily by the Sunstream equity pickup of a $38M loss.
The company also added that the adjusted EBITDA loss was primarily due to its recent reverse stock split — which it needed to continue listing its shares on the Nasdaq — as well as an increase in general and administrative expenses due to the inclusion of Alcanna and Spiritleaf as well as a decrease in realized gain on marketable securities. The decrease was partially offset by an increase in gross margin including Alcanna and Spiritleaf, it said.
Cannabis Segments
For its cannabis retail sector, the company included Nova’s Value Buds sales totaling $63.5 million versus $7.5 million in the first quarter of 2022, a 746% increase. Value Buds sales were the material driver of the increase with $56.3 million of revenue.
Gross revenue from the cannabis cultivation and production segment for the second quarter of 2022 was $15.4 million versus $11.3 million in the previous quarter, a 36% sequential improvement and a 21% year-over-year improvement.
SNDL reported an $8 million net loss for the segment during the second quarter versus a $75.4 million loss in the second quarter last year.
Adjusted EBITDA in the cannabis cultivation and production segment was $3.4 million versus a loss of $11.0 million in the same period last year.
This represents SNDL’s first positive adjusted EBITDA quarter in the cannabis cultivation and production segment, the company said, adding “The significant improvement in Adjusted EBITDA can be attributed to higher sales volumes, improved margin on an adjusted basis, reductions to SMG&A, and greater discipline over inventory management driving a reduction in price discounts for provincial board sales during the first half of 2022.”
“We are seeing market share gains through our retail network and this quarter our cannabis operations generated positive adjusted EBITDA for the first time in the Company’s history,” George said. “We continue to strengthen and transform our business while benefitting from vertical integration across our business segments under a shared services model with integration work expected to impact results over the next two quarters.”
Newly-Acquired Liquor Vertical
Gross revenue from liquor retail sales for the three banners — “Wine and Beyond”, “Liquor Depot” and “Ace Liquor” — combined was $148.6 million for the second quarter.
SNDL said the gross margin in the liquor retail segment was $33.5 million, or 22.6% of sales.
On the liquor side, the company said it stabilized its margin through a pricing and mix strategy in the second quarter — despite fluctuations in sales due to market conditions and retail competition.
While customer count is down by 5% year-to-date, largely due to a return to on-premises consumption in a post COVID-19 environment, the average basket size is up 2%. SNDL said it sees larger basket sizes at their Wine & Beyond locations, where consumers come for the experiential, destination shopping approach to liquor retail.
SNDL’s liquor banners’ market share in Alberta was 17.6% in the second quarter of 2022, with Wine & Beyond representing 2.9% with only 11 stores, “showcasing the continued and increasing popularity of the banner.” SNDL is exploring opportunities to expand the Wine & Beyond store footprint in Alberta, British Columbia, and Saskatchewan.
“Moving forward, the company will seek to optimize profitability and cash flow for the liquor retail segment by focusing on cost discipline, margin accretive products, monetizing intellectual property, and leveraging its retail footprint to develop an e-commerce platform,” it said.
Looking Ahead
Revenue from the investments segment for the second quarter was a loss of $35.1 million, versus $2.4 million in the second quarter last year. The company said the decrease was primarily due to “accounting fair value adjustments reflecting an increase in the assumed risk-free rate and the deterioration in overall cannabis credit market conditions.”
The company also said it possesses an unrestricted cash balance of $363 million and $334.9 million, respectively, and a total of 238 million post-consolidation shares outstanding as of August 11, 2022.
SNDL said it remains focused on “building long-term shareholder value through vertical integration, the accretive deployment of cash resources, the expansion of its retail distribution network, the further streamlining of the company’s operating structure as well as the enhanced offering of high-quality brands.”
“Despite our encouraging results, we know there is still room for improvement, and we remain humbled by the opportunity before us,” George said. “SNDL represents an opportunity for investors to gain exposure to North American regulated products in a manner that does not exist with any other public company today. We will continue to prioritize free cash flow generation with a focus on strengthening our distribution platform and using our credit portfolios to turn industry headwinds into long-term opportunities.”
Adam JacksonAugust 12, 2022
Nova Cannabis Inc. (TSX: NOVC) posted positive results after the market close on Thursday as the company pivots toward more competitive pricing under a new discount banner.
The Canadian cannabis company released its financial report card in the period ending June 30, 2021.
Nova delivered approximately $56.3 million in total revenue during the period, a 90% gain versus the same period last year — beating the Yahoo Finance Average analyst estimate for revenues of $38.66 million.
Nova reported that second-quarter sales rose 90% to $56.3 million over last year and saw a 13% increase over the first quarter of 2022. The company attributed the sales growth to the 29 retail cannabis stores that were opened since March last year, and rising sales from stores that were re-branded to the Value Buds discount banner at various times throughout 2021.
“The performance of our Value Buds stores continues to outpace the growth of the industry as we reported record sales for the second quarter of 2022, underpinned by equally strong sales and gross margin growth that is driving greater operating leverage to the bottom line,” said CEO Marcie Kiziak.
Nova recorded a net loss of $1.4 million, versus a net loss of $7 million in the same period last year. The reduction is primarily a result of the increase in sales and gross margin over the period.
Gross margin for the period was $10.6 million, up $5.4 million or 105.0%, from $5.2 million for the same period in the prior year. The gross margin as a percent of sales was 18.8% for the period.
During the comparative period for 2021, the stores were operated under the Nova Cannabis, YSS and Sweet Tree banners with a different operating, pricing and margin strategy than in the second quarter of 2022 when sales came primarily from the stores converted to the Value Buds discount banner.
Since then, the company revised prices at certain retail locations where the competitive response has waned which has led to increases in gross margin percentage.
Nova has an uncommitted revolving credit facility with Sundial in an aggregate principal amount not to exceed $15 million. Currently, $8.7 million in principal and accrued interest is outstanding on the credit facility.
The company currently has $6.2 million worth of cash.
Last month, Nova launched an at-the-market equity offering program, which will allow the company to issue up to $20 million of common shares from treasury to the public at the discretion of the company and subject to market conditions and regulatory requirements
“Delivering superior value to cannabis consumers will become increasingly important in the current economic environment, and Value Buds is purpose built for this,” said Kiziak. “We will stay the course by being disciplined in how we expand our footprint, remaining customer focused and choosing the best real estate for our strategy, whether through acquiring stores or building our own.”
Adam JacksonAugust 11, 2022
Aleafia Health Inc. (OTCQX: ALEAF) delivered positive results on Thursday as it continues to cut costs and find more profit in the Canadian legal market and overseas.
The Canadian cannabis company reported its financial results for the three months ending June 30, 2021. Aleafia Health releases its financial report card on a 15-month fiscal year with five quarters versus a standard 12-month year with four quarters.
Revenue from the fiscal year’s first quarter rose 41% from last year’s $11.7 million to this year’s $16.5 million. Much of the gains derived from the company’s Ontario brand Divvy climbing the market ladder in both pre-roll and flower products.
“Our pivot to a branded cannabis strategy is the success story driving the three pillars of company revenue: adult-use branded cannabis, a ‘sticky’ recurring medical cannabis revenue stream, and growing higher margin international sales,” said CEO Tricia Symmes. “As a result of revenue increases, the company has achieved the 2nd highest growth rate amongst top 12 Canadian LPs in retail sell-through over the prior quarter while achieving a #12 ranking for market share in our core markets for Q2 CY2022.”
Aleafia Health also reported that its net losses increased from last year’s $5.2 million to this year’s $4.5 million.
Non-GAAP income before interest, taxes, depreciation, amortization, and share-based compensation (Adjusted EBITDA) was a loss of $900,000 in the second quarter of 2022, versus a loss of $3.1 million in the same period last year. The company reaffirmed guidance of achieving run-rate breakeven Adjusted EBITDA in the 2023 fiscal year.
“Due to our successful branded growth strategy, the company continues to target a top 10 standing in our key markets and reaffirms our expectation to reach breakeven Adjusted EBITDA profitability during the second half of FY2023,” said CFO Matt Sale. “Showing continued success in retail sell-through provides us the confidence to reaffirm our guidance to deliver at least $53 million in total net revenue in fiscal year 2023, with a current run-rate of $48 million.”
Revenue Dissection
Aleafia Health saw $12 million in net revenue in the quarter and maintained its forecasted range of $53 million–$63 million.
The company continued its upward sales growth trend, with overall branded cannabis net revenue increasing 31% to a record $10.0 million, versus $7.6 million in the same quarter the previous year.
Adult-use cannabis net revenue rose 107% to $6.7 million versus $3.2 million in the same period last year.
Medical cannabis net revenue increased 4% to $2.8 million, an uptick from the previous quarter’s figure of $2.5 million — representing an $11 million run-rate net revenue base. The company said it attained a milestone 7.5% market share in the overall Canadian medical market, according to Health Canada data.
The company also said it secured new international partnerships representing approximately $4.6 million in sales commitments.
“International revenue is a competitive advantage and a differentiating factor for Aleafia, as we leverage our high quality, diversified flower supply and export it to the higher margin international sales markets,” Symmes said. “Current international agreements have led to more than $0.5 million in sales to Germany and Australia this quarter. We have also secured a new European partner with a $4.6 million sales commitment, representing further channel development. International success leverages both the company’s products and its brands.”
Sale agreed, adding “The newly signed agreement improves revenue and cash flow visibility, locks in attractive margins, and improves our overall cash conversion cycle and net working capital performance.”
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