TerrAscend Archives - Green Market Report

Debra BorchardtNovember 28, 2022
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Cantor Fitzgerald analyst Pablo Zuanic wrote an upbeat research report on the major cannabis companies despite the somewhat depressing tone in the industry. Zuanic said he hosted 17 company meetings at MJBiz last week and the overall mood was positive. Despite the sunny optimism, the analyst opted to leave ratings, estimates, and price targets unchanged.

Trulieve

Zuanic wrote that for Trulieve (OTC: TCNNF), “Most of the heavy lifting from the Harvest integration has been completed (AZ store rebrand underway), and management thinks it is ahead of peers on tech (SAP; 24 months into the ERP process).” Legalization of adult use in the state would boost the stock and polling is pointing to 70% support and signature collection is running on track. The next main hurdle is the state supreme court review process in early 2024. Trulieve also outlined what it thinks are the positives in the next year. They include:

  • The Florida patient count growth improving (+2,500/week now)
  • The start of adult-use sales in CT and MD
  • It believes the recent election increases the probability of PA going to adult-use
  • WV and GA (although only oils are allowed for now) should begin to ramp. 

Cresco Labs

Zuanic sees the divestiture plan moving ahead and seems to be secure. The Cresco brands enjoy better market share than the Col-Care brands so the company expects to roll out the Cresco brand portfolio across the Columbia Care footprint. “According to management, there is room to improve margins in the combined company, especially in states in either start-up mode or going through a phase of investment,” wrote the analyst.

TerrAscend

  • TRSSF believes in 6-12 months it may be in a position to list in the TSX
  • In MI, given distress in the market, it sees opportunities to expand by acquiring more stores
  • Two NJ stores are “90% of the way to the $40Mn/store annual sales target run rate.

WM Technology

  • The company is removing delinquent accounts
  • Reining in expenses
  • It expects to be cash flow positive by 1H23

Canopy Growth

Zuanic wrote, “With the new structure (US assets more than half of sales), CGC expects to be EBITDA and cash flow positive by late 2023 (capex will be minimal, with investments in BioSteel and negative operating cash flow in the Canadian rec unit, the main drag on cash flow). 

Sundial

The report stated that Sundial was working on various fronts to unlock value (SNDL trades at almost a 50% discount to management’s estimated book value per share of US$4.77). SNDL has C$250Mn of unrestricted cash (no debt), 820K sq ft of indoor cultivation in Canada, and 350 retail doors (liquor and cannabis). 

Aurora Cannabis

Aurora Cannabis is well-positioned in the German market. The report stated, “ACB expects to be EBITDA positive by end of this calendar year; it is in a net cash position (it continues to chip away at the convertible debt) and says it will use its equity facility for strategic purposes only (or reduce the convertible debt) and to fund operations.”

In Closing

The analyst said that most of the MSO management teams he met with felt the probability of SAFE passage in the lame-duck session has increased post the election. Zuanic added, “Most US companies recognized that M&A has taken a wait-and-see attitude ahead of the potential passage of SAFE, but most agreed that consolidation would accelerate without SAFE as several smaller operators will not be able to refinance their debts.”


StaffOctober 12, 2022
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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.


Adam JacksonSeptember 26, 2022
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TerrAscend Corp. (CSE: TER) (OTCQX: TRSSF) will help bring Berner’s Cookies products to Pennsylvania.

TerrAscend said that it has entered into a multi-year agreement with TRP — the cannabis holding and operating company with the exclusive rights Cookies products — to cultivate and manufacture Cookies products in the Keystone State.

Pennsylvania has always shown Cookie’s love and we could not be more excited to expand our reach on the East Coast with our partner TerrAscend,” said Berner, co-founder and CEO of Cookies. “We’re excited to launch a fresh menu of California flavors, in what has become a very strong and important market for cannabis in the US.”

The company said that it will soon launch Cookies products at each of the company’s ‘Apothecarium’ and ‘Keystone Canna Remedies’ dispensary retail chains in Plymouth- MeetingLancasterThorndaleBethlehemAllentown and Stroudsburg.

The trio has already made strides together in the New Jersey market, where the group launched “Cookies Corner” — a portion of the store dedicated to Cookies products — at a TerrAscend ‘Apothecarium’ dispensary.

“TRP is excited to partner with TerrAscend to bring some of the most desirable genetics out there to the patients of the Pennsylvania, and are looking forward to providing patients with the full Cookies experience when we open our flagship stores in the commonwealth” said TRP co-founder and CEO Brandon Johnson.

Strains from Cookies premium genetics will be made available at TerrAscend dispensaries, as well as Cookies stores owned and operated by TRP that are slated to open in the coming months.

“It’s exciting to announce this agreement and continue to collaborate with Berner and his team on sharing these world-class products with patients in Pennsylvania“, said Jason Wild, executive chairman of TerrAscend.


Adam JacksonAugust 11, 2022
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TerrAscend Corp.  (CSE: TER) (OTCQX: TRSSF) ticked up in trading on Thursday despite missing expectations on revenue, which were buoyed by New Jersey sales and an injection of sales from its recent acquisition of Gage.

The multi-state cannabis operator reported its financial results for the first quarter ending June 30, 2022.

For the key metric of revenue, TerrAscend delivered approximately $65 million in total revenue during the period, a gain of 4.8% versus the same period last year — missing the Yahoo Finance Average analyst estimate for revenues of $77.4 million.

Net revenue increased 30% sequentially to $64.8 million as compared to $49.7 million in the previous quarter, according to SEDAR filings. The company attributed the growth to a “partial quarter of adult-use sales in New Jersey along with a full quarter of contribution related to the acquisition of Gage, partially offset by the Company’s decision to discontinue non-branded wholesale sales in Michigan.”

“We grew revenue 31% sequentially for the second quarter as New Jersey adult-use sales got off to a great start,” said executive chairman Jason Wild. “Growth should continue as we remain on track for each of our stores in New Jersey to achieve at least a $40 million run rate in their first full year of adult-use sales.  Adjusted EBITDA and margins grew sequentially, and I expect this to continue into the second half of the year.  The leadership team, which has been significantly bolstered over the past few quarters, remains focused on building the business for success over the long term and we will continue to make decisions with that mindset.”

The company reported a gross margin in the second quarter of 35.5%. Adjusted gross margin was 47.1% versus 38.4% in the previous quarter, an improvement of 870 basis points quarter over quarter.

The sequential margin expansion was driven by “strong improvements across all of the company’s core businesses,” it said.  Adjusted gross margin excludes the one-time impact of reserves and write-downs related to aged inventory in Pennsylvania, it said, dating back to the revamp of its cultivation facility in the second half of last year.

The company also reported a second-quarter net income of $14.2 million versus a net loss of $23 million in the same period last year. The earnings were for a gain of five cents per share, versus earnings per share of $0.14 in the same period last year.

Adjusted EBITDA was $5.8 million in the second quarter of 2022, versus an income of $24.3 million in the same period last year. Adjusted EBITDA margin improved from 6.6% in the first quarter to 8.9% in the second quarter.

TerrAscend said that the improvement was driven by higher sales and improved gross margin, offset by higher General & Administrative expenses (G&A) expenses “with the addition of Gage for a full quarter and costs associated with the launch of adult-use in New Jersey.”

G&A expenses — excluding stock-based compensation — increased by $10 million versus the first quarter of 2022 to $29.5 million, “mainly driven by the full quarter addition of the Gage acquisition.”

“Excluding Michigan, G&A expenses were up $1.1 million quarter over quarter related to additional staffing and other pre-opening expenses in preparation for the start of adult-use sales in New Jersey. As a percentage of revenue, G&A increased to 45.5% in the second quarter from 38.7% in the previous quarter. The increase as a percentage of revenue was impacted by the addition of Gage for a full quarter as well as staffing for all three stores in New Jersey despite the delayed opening of the Lodi store, which opened subsequent to the quarter. ”

The company said it had $49 million worth of cash and cash equivalents in the second quarter, versus $88.4 million in the previous quarter. It said it possesses “ample liquidity and access to capital, mainly through its capacity for additional borrowing related to its unencumbered owned assets and minimal usage of sale-leasebacks.”

The company also said it has the ability to raise equity should the capital markets improve.

TerrAscend said it used $16.1 million worth of cash from operations due to tax payments of $9.2 million and interest payments of $6.4 million. Current income taxes payable at the end of the period was $13 million.

Capital expenditures — including deposits — were $12.3 million in the quarter, it said, primarily related to the ongoing expansion work at the company’s Maryland and Michigan cultivation and processing facilities. The company said that it also made final note payments of $5 million related to its previous acquisitions of HMS in Maryland and KCR in Pennsylvania.

As of August 11, 2022, there were 318 million basic shares outstanding including 253 million common shares, 13 million preferred shares as converted, and 52 million exchangeable shares.

New Jersey and Gage

Last year, the company signed an agreement to supply COOKIES licensed products and bring COOKIES Corners to all three Apothecarium dispensaries in New Jersey, in addition to inking a deal to acquire Gage Growth in March — and the moves have borne fruit since.

TerrAscend said that between the Cookies and Gage brands’ launches in New Jersey, the company has seen a 40% increase in sales for the first full weekend versus the prior weekend “with continued momentum and growth since launch.”

“Between our state lineup and the wide-open map that will allow us to be selective on where we go next, TerrAscend is set up for strong growth for years to come,” president and COO Ziad Ghanem said. “We will achieve that growth while improving margins and driving profitability.”


Debra BorchardtJuly 28, 2022
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Get ready for some cannabis companies to report boosted earnings as revenues got juiced from New Jersey adult-use sales. Cantor Fitzgerald analyst Pablo Zuanic thinks that the addition of this market could drive growth in second-quarter sales for several companies in a report he issued on Thursday. While there hasn’t been any official data from New Jersey on the number of sales, which began April 21, Zuanic thinks it could be as high as $60 million in the second quarter. 

The first month was reported to be $24 million and since that time the store count has grown from 12 to 17. The SKUs at the stores have jumped from  283 to 1,322 as more products get added. Looking at the landscape the companies poised to benefit the most are TerrAscend (OTC: TRSSF) with three dispensaries in NJ selling recreational cannabis as does Ayr Wellness (OTC: AYRWF). Next with two stores under their belts are Verano (OTC: VRNOF), Acreage Holdings (OTC: ACRHF), Columbia Care (OTC: CCHWF), Curaleaf (CURLF), and  Green Thumb Industries (OTC: GTBIF). Ascend Wellness (OTC: AAWH) taps in at one store, but its Montclair dispensary was been approved to start rec sales, however, Montclair won’t allow recreational sales. 

Apothocarium stores are owned by TerrAscend

Brick & Mortar Wins

In order to make his sales estimates, the analyst calculated the number of days during the second quarter that these companies could open their stores for business. Then he looked at the hours the stores were open and the market share that the operators had. He reviewed the online menus to determine SKU counts for the stores and further drilled down to in-store brands.

“If we define market share based on opening hours (prorated for when stores began rec sales), in 2Q22 Green Thumb and Verano would have had 19% share, TerrAscend 18%, Acreage 15%, Curaleaf 11% (its second rec store opened 5/24), Ascend Wellness 8%, Columbia Care 6% (extended rec opening hours from early June), and AYR 5% (its stores opened for rec on 6/14),” wrote the analyst. “If we define it based on SKU count, Green Thumb would have had 24%, Verano 23%, Ascend 17%, TerrAscend 11%, Curaleaf 9%, Columbia Care 3%, and AYR 2%.”

However, the geography and cannabis market in the state splits into three zones – North, Central, and South.  He wrote in his report, “There are more stores in the northeastern part of NJ while the Curaleaf store in Bellmawr initially had minimal competition and benefited from incoming Philly traffic. We should also factor in location (next to a high-traffic road/ highway) and parking availability. Although this report is not a 2Q preview, we would estimate that Green Thumb and Verano had ~18% share in 2Q; Curaleaf, Acreage, and Ascend 15%; TerrAscend (parking is an issue) 10%; and Columbia Care and AYR the rest (9% combined).”

The analyst then got out his calculator and wrote, “On the base of 1Q22 reported sales (all else equal; again, we are not forecasting total 2Q sales here), this would mean +4.4% for Green Thumb (18% x $60Mn, on a 1Q22 sales base of $242.6Mn); Verano +5.3% ($10.8Mn/$202.2Mn); Acreage +15.8% ($9Mn/$56.9Mn); Curaleaf +2.9% ($9Mn/$313.4Mn); Ascend +10.6% ($9Mn/ $85.1Mn); TerrAscend +12.1% ($6Mn on $49.7Mn); AYR +2.4% ($2.7Mn/$111.2Mn), Columbia Care +2.2% ($2.7Mn/$123.1Mn).”

Brand Power

The analyst went a little further and found that the top five brands in the adult use market accounted for 80% of the total SKUs available. Verano was the winner here with 376 SKUs or 28% of the market share. It was followed by Curaleaf with 321 SKUs and a 24% share, then TerrAscend’s Kind Tree brand came in at 215 SKUs and 16% share. Green Thumb’s Rhythm brand had 6%, and Ascend Wellness’s Ozone brand had 5%.

Vapes had the most SKU’s with Verano leading the pack, while flower came in second  and Curaleaf led that category. Curaleaf led the day for pre-rolls, while Verano mopped up with the edible category. 

In Closing

Most cannabis companies have been complaining about how challenging the cannabis industry has become. Mature markets are flattening out in sales and costs are going up, while prices come down. Consumers are being hit with inflation pressures and there are recession worries on the horizon. The addition of a new market and one that is looking to be a strong one is great news for these companies. Welcome to the Garden State.


StaffMay 12, 2022
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TerrAscend Corp.  (CSE: TER) (OTCQX: TRSSF) reported its financial results for the first quarter ending March 31, 2022. Net sales for the first quarter of 2022 totaled $49.7 million, up 1% sequentially and down 7% year over year. TerrAscend attributed the decline to the vape recall on the Pennsylvania business, combined with the continued intentional accumulation of inventory in New Jersey, versus selling wholesale, in preparation for adult-use sales. The company’s Canadian business also experienced a soft quarter both sequentially and year over year. The declines were partially offset by three weeks of revenue from the Gage acquisition, which closed on March 10th.

The net loss for the quarter was $16.0 million, mainly driven by the operating loss, accrued income taxes of $3.7 million, and finance and other expenses of $6.9 million, partially offset by a net gain on fair value of warrant liability of $5.7 million.

“While revenue and margins during the first quarter were impacted by the industry-wide vape recall in Pennsylvania and front-loaded operating costs in New Jersey ahead of adult use, we expect revenue and margin to increase materially in the second quarter and beyond,” said CEO Jason Wild. “The strategic decisions and investments we have made over the last three years position us well for substantial growth in each of our four key markets – New JerseyPennsylvaniaMichigan, and Maryland.”

New Jersey Gets Busy

The company got very busy after the quarter ended with its business in New Jersey. It celebrated the grand opening of adult-use sales on April 21st in Maplewood and Phillipsburg, New Jersey, two of only twelve dispensaries currently opened in the state. TerrAscend was approved for hydrocarbon extraction in New Jersey with the first products recently launched. It signed a lease on a new facility in New Jersey, which will provide expanded capacity up to the 150,000 canopy square foot limit. Plus, the company received a home delivery license for medical patients in New Jersey.

Mr. Wild continued, “New Jersey adult use sales began on April 21st, a significant milestone for TerrAscend and the entire industry. Demand has been strong for our brands and our elevated retail experience. We recently introduced the first concentrates in the state and expect additional ‘first-in-state’ product introductions in the near future. In Pennsylvania, we continue to cultivate the highest quality flower in our history and have introduced new genetics, to which patients have reacted positively. In Michigan, Gage has positioned us as a leader in one of the largest cannabis markets in the U.S. Lastly, subsequent to the quarter end, we announced the acquisition of a medical dispensary in Maryland and 5 dispensaries in Michigan. These acquisitions exemplify our strategy of ‘going deep’ in the markets in which we operate. While remaining focused on organic growth, the dislocation in public and private company valuations should provide attractive M&A opportunities to accelerate growth in a financially disciplined way.”


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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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