SNDL Archives - Green Market Report

StaffNovember 1, 2022
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7min9700

The Daily Hit is a recap of cannabis business news for Nov. 1, 2022.

ON THE SITE

New York Regulators Roll Back Cannabis Testing Standards

New York cannabis regulators on Tuesday took a major step in easing testing lab safety standards for the upcoming recreational marijuana market, apparently in response to industry pressure regarding contamination thresholds. The Office of Cannabis Management notified licensed growers via email on Tuesday that “the Office has updated its Laboratory Testing Limits to remove the pass/fail limits” for bacteria, mold, and yeast. Read more here.

Nevada Receives 100 Cannabis Lounge Applications, Predicts Opening Early 2023

Nevada has taken another step toward becoming the first state with a solidly functioning cannabis consumption lounge industry that allows businesses both sell cannabis and have visitors smoke on-site. The state Cannabis Compliance Board announced Monday on Twitter that it had received a total of 100 consumption lounge applications before the submission window closed on Oct. 27. Read more here.

Hexo Reports $1 Billion Loss for Fiscal Year 2022

Hexo (Nasdaq: HEXO) reported net revenue for fiscal year 2022 of $191.1 million, up from $123.8 million from the fiscal year that ended July 31, 2021. Total revenue was $265 million, up 53% from the prior fiscal year. The net loss for the full year was an eye-popping $1 billion versus last year’s net loss of $115 million. Read more here.

Sol Global Continues Slow Exit from Cannabis

SOL Global Investments Corp. (CSE: SOL) (OTCPK: SOLCF) did not release any third-quarter revenue figures but instead noted its net losses. For the third quarter, the total loss from investments was $11.2 million versus a gain of $12.5 million for the same period in 2021. The company also reduced its stake in cannabis from 18% to 14% and is instead gravitating to companies like electric motorcycle company Damon Motors and robotic delivery company Kiwi Campus. Read more here.

Avant Brands Bids to Buy Flowr Corp. Subsidiary out of Bankruptcy

1000343100 Ontario Inc., of which Canadian cannabis producer Avant Brands Inc. (TSX:AVNT) (OTCQX:AVTBF) owns 50% of the issued and outstanding shares, has entered into a stalking horse purchase agreement to acquire all of the issued and outstanding shares in the capital of The Flowr Group Inc., a subsidiary of The Flowr Corp. A stalking-horse bid is the initial bid on the assets of a bankrupt company. Other buyers can submit competing offers following a low-end stalking horse bid. Read more here.

Cannabis Activists Push for Psychedelics Renaissance

As the psychedelics industry’s disagreements with the federal government on a variety of issues continue to rage, the fight to make things right between the citizens of this country and their duly-elected officials over a federally illegal plant has been taken up by some of the same activists who led the charge for cannabis. Read more here.

IN OTHER NEWS

SNDL Acquires Zenabis Business

SNDL Inc. (Nasdaq: SNDL) announced today that, in the context of proceedings pursuant to the Zenabis Group’s filing under the Companies’ Creditors Arrangement Act (Canada), it has successfully closed its acquisition of the Zenabis Business, pursuant to an approval order of the Québec Superior Court. Read more here.

Virginia

Marijuana remains in a legal gray area in Virginia 16 months after the state legalized the possession and use of marijuana for recreational purposes. But the state has not established a legal means of acquiring the product for nonmedicinal uses. Read more here.

Massachusetts

When Massachusetts lawmakers passed a package of reforms to the state’s marijuana business laws over the summer, their intent seemed clear: To crack down on municipalities charging cannabis operators unjustified “impact” fees, which are ostensibly meant to offset the negative effects of a marijuana business. But now, with the law scheduled to take effect next week, there is widespread disagreement over its implementation — and a likelihood that many cities and towns will for the time being continue to collect impact fees that exceed the new legal limits. Read more here.


Adam JacksonOctober 13, 2022
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4min5941

Shares for The Valens Company Inc. (TSX: VLNS) (Nasdaq: VLNS) ticked up this morning as the company has managed to cut its losses, which had been far outpacing revenue over the past year.

The company, which announced an acquisition deal with SNDL, Inc. (Nasdaq: SNDL) in August, released its third quarter financial report card for the period ending August 31.

Net revenue slumped further to $20.3 million in the third quarter, down 15.4% versus revenues of $24.0 million in the second quarter — as double-digit growth in provincial sales was more than offset by declines in Green Roads and B2B bulk sales, the company said.

Net loss for the third quarter was $27.5 million, a 83% improvement versus the massive $160.8 million loss in the previous quarter, according to company filings. The company reported a loss of 34 cents per share.

“Our third quarter results clearly show that we are executing on the most important initiative in this environment which is cash flow,” said Tyler Robson, Chief Executive Officer of The Valens Company.

Filings show that $(7.6) million cash flow from operations for the third quarter improved by $12.2 million or 61.7% quarter-over-quarter, beating previous guidance of $(9) million to $(12.5) million.

Robson added that the company could have performed even better, “but our momentum was muted by the cybersecurity attacks on the Ontario Cannabis Store and the labour strike impacting the British Columbia market.”

Adjusted gross profit increased by $900,000 in the third quarter to $5.1 million versus $4.1 million in the second quarter.

The company saw $32.2 million worth of cash, restricted cash, and marketable securities at the close of the third quarter.

Valens withdrew all previously given financial guidance due to the proposed acquisition of the company by Sundial.

“During the quarter Valens entered into an arrangement agreement to be acquired by SNDL to create a leading vertically integrated cannabis platform in Canada,” said Robson. “With the current market economic headwinds, we believe the pro forma company will be well positioned to capture market share while also providing our investors with exposure to one of the strongest balance sheets in the industry.

“Moreover, the pro forma entity will be the largest revenue generating cannabis company in Canada with a near term opportunity to become one of the most profitable cannabis companies in Canada.”


StaffOctober 12, 2022
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4min5890

The Daily Hit is a recap of cannabis business news for Oct. 12, 2022.

ON THE SITE

SNDL Agrees to $7 Million IPO Settlement

A settlement has been reached in the case of cannabis company Sundial Growers, which now calls itself SNDL (OTC: SNDL). The $7 million settlement is the result of a class action suit that was led by David Draiman, singer for the heavy metal band Disturbed, which accused SNDL of not disclosing a product mold issue ahead of its $143 million initial public offering. Read more here.

Cannabis Rescheduling Discussion Moves Behind Closed Doors

President Joe Biden’s surprise order last week that two of his biggest federal agencies “expeditiously” undertake a review of marijuana’s illegality as a Schedule 1 controlled substance provided more questions than answers for many in the cannabis trade. Green Market Report spoke with the Brookings Institution’s John Hudak to learn more about what Biden’s legal options are for rescheduling – or descheduling – cannabis. Read more here.

TerrAscend Closes $45.5 Million in Debt Financing

TerrAscend Corp. (CSE: TER) (OTCQX: TRSSF), along with its subsidiaries in New Jersey and Maryland, closed a $45.5 million debt financing agreement with commercial real estate lender Pelorus Equity Group. Proceeds from the loan will support TerrAscend’s ongoing growth initiatives. Read more here.

IN OTHER NEWS

Ayr Wellness

Ayr Wellness (CSE: AYR.A) (OTC: AYRWF), a vertically integrated U.S. multistate cannabis operator, has named consumer packaged goods and retail industry veteran David Goubert to serve as president to oversee the company’s operational and commercial functions, including production, supply chain, retail, wholesale, and marketing. Read more here.

California crackdown on illicit cannabis farms

California eradicated nearly one million illegally cultivated cannabis plants and the seizure of more than 200,000 pounds of illegally processed cannabis as part of the California Department of Justice’s annual Campaign Against Marijuana Planting program. Read more here.


Debra BorchardtAugust 22, 2022
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5min2770

SNDL Inc. formerly known as Sundial (Nasdaq: SNDL) is buying The Valens Company Inc. (TSX: VLNS) (Nasdaq: VLNS) in a deal valued at C$138 million. That’s an implied value of $1.26 per Valens share, which is currently selling at 83 cents per share.. SNDL has secured a non-revolving term loan that has been refinanced and upsized with an additional C$14.3 million of incremental capital, increasing the term loan to C$60 million. There is an $8 million termination fee attached to the transaction and Valens shareholders will own approximately 9.5% of the combined company.

The acquisition will make SNDL one of the largest adult-use cannabis manufacturers and retailers. The combined company will have 555,500 square feet of cultivation and manufacturing space and 185 cannabis stores under the Spiritleaf and Value Buds banners. The new SNDL will offer a complete portfolio of branded products to consumers in Canada through its own supply and distribution channels. 

“This powerful combination will result in the creation of a dominant vertically integrated company, exceptionally well-suited to weather the current cannabis environment and become a leader in the Canadian regulated products sector,” said Zach George, Chief Executive Officer of SNDL. “SNDL’s existing consumer packaged cannabis business will be transformed by Valens’ high-quality extraction, processing, and manufacturing capabilities and aligns well with our strategic vision to delight consumers with a full range of quality cannabis products and experiences. Our companies have been commercial partners since Canadian legalization. I am excited by the strong cultural fit between our teams and humbled by the opportunity to work with Valens’ passionate and innovative leadership.”

 In July, Valens reported its second quarter fiscal year 2022 financial results for the period ending May 31, 2022. The company reported that its net revenue increased 3.5% sequentially to $24.0 million in the second quarter versus $23.2 million in the first. The company said the increase was driven by double-digit growth in both Green Roads and B2B, which was partially offset by a decline in provincial sales. However, Valens also delivered an eye-popping net loss of $160 million for the second quarter versus a net loss of $25 million in the first quarter. Valens said that it recognized an impairment loss on goodwill and intangible assets of $52.9 million and $67.9 million, respectively, for the quarter. Valens also provided revenue & EBITDA estimates for 2023 for a minimum revenue of C$225 million and Adjusted EBITDA margins greater than 10%.

“We are thrilled to bring together two best-in-class cannabis companies that have extremely complementary assets to create a true market leader. Valens is one of the fastest growing branded cannabis companies in Canada with a focus on innovation and investing in low-cost automated manufacturing assets,” said Tyler Robson, Chief Executive Officer of The Valens Company. “With SNDL’s exceptional balance sheet and largest cannabis retail network in Canada we look forward to taking Valens’ brands to new heights and unlocking 2.0 products for the SNDL platform. We believe the pro forma company provides investors with attractive exposure not only to the highest revenue generating cannabis company in Canada trading well under its tangible book value but also a dominant platform that can become a global leader in cannabis.”


Adam JacksonAugust 15, 2022
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9min1220

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.”


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The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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