Sundial Reports First Quarter 2022 Financial and Operational Results

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CALGARY, AB, May 16, 2022 /CNW/ – Sundial Growers Inc. (NASDAQ: SNDL) (“Sundial” or the “Company”) reported its financial and operational results for the first quarter ended March 31, 2022. All financial information in this press release is reported in millions of Canadian dollars unless otherwise indicated.

Sundial Growers (CNW Group/Sundial Growers Inc.)

Sundial Growers (CNW Group/Sundial Growers Inc.)

The Company will hold a conference call and webcast at 10:30 a.m. EDT (8:30 a.m. MDT) on Tuesday, May 17, 2022. Please see the dial-in details within the release and additional details on Sundial’s website at www.sndlgroup.com.

This press release is intended to be read in conjunction with the Company’s Financial Statements and Notes for the period and the accompanying Management’s Discussion and Analysis (“MD&A”). These reports are available under the Company’s profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar.shtml.

Sundial has also posted a supplemental investor presentation on its website which can be found at https://sndlgroup.com/investors.

FIRST QUARTER 2022 FINANCIAL AND OPERATIONAL HIGHLIGHTS

  • Acquired Alcanna Inc. (“Alcanna“) on March 31, 2022, creating the largest private sector cannabis and liquor retail network in Canada.

  • Net revenue for the first quarter of 2022 of $17.6 million, including one day of revenue on the acquisition of Alcanna, an increase of 78% over the first quarter of 2021.

  • Alcanna’s revenues for the period from January 1, 2022 to March 30, 2022 (prior to the date it was acquired by Sundial were $162.5 million, with gross margin of approximately $36.3 million, which, subject to certain acquisition-related and other adjustments, would have been consolidated with Sundial’s results for this period had the acquisition occurred on January 1, 2022.

  • Gross margin increased to $3.4 million for the first quarter of 2022 compared to a loss of $3.5 million in the first quarter of 2021, a 199% increase.

  • Net loss was improved to $38.0 million for the first quarter of 2022 compared to a $134.4 million net loss in the first quarter of 2021, an improvement of 72%.

  • Adjusted EBITDA loss of $0.7 million for the first quarter of 2022, compared to Adjusted EBITDA of $3.3 million in the first quarter of 2021, largely driven by central bank interest rate changes and fair value adjustments related to the SunStream joint venture.

  • $1.0 billion of cash, marketable securities, and long-term investments and no outstanding debt at March 31, 2022; $361 million of unrestricted cash at May 13, 2022.

“The first quarter of 2022 was both transformational and transitional for Sundial,” said Zach George, Chief Executive Officer. “We are now Canada’s largest private sector distributor of both liquor and cannabis with 354 retail locations and have quickly benefitted from collaboration with our new legacy Alcanna colleagues. Sundial’s regulated products platform provides unique insights into evolving consumer preferences and value propositions. We continue to strengthen and transform our business while benefitting from vertical integration across our segments under a shared services model. In less than two months, we have been able to increase branded product distribution by shipping products to Value Buds stores and have started to realize synergies against an integration plan that will be a focus for the balance of the year. Through cost structure improvements in our cannabis operations, we have created a more balanced and diverse product mix that focuses on higher-margin, higher-quality cannabis. In addition, the current rising interest rate environment has led us to make non-cash accounting adjustments to our largely fixed-rate SunStream portfolio, resulting in muted adjusted EBITDA contribution for the quarter.”

Commenting on the current market environment, Mr. George added “While our shares have outperformed global and Canadian cannabis indices on a year-to-date and a one-year basis through May 13, we are focused on sustainable absolute returns and committed to the relentless pursuit of shareholder value creation. Sundial’s debt-free balance sheet and ample cash reserves place us in an enviable position as we witness a reckoning taking hold in the Canadian cannabis market. Continued aggressive cash consumption by our peers, reduced access to capital, and waning investor risk appetite is likely to accelerate sector rationalization as the industry slowly moves towards the formation of an oligopoly.”

FIRST QUARTER 2022 KEY FINANCIAL METRICS

OPERATING SEGMENTS

———Cannabis———

($000s)

Cultivation and

Production

Retail

Liquor Retail

Investment

Corporate

Total

As at March 31, 2022

Total assets

153,612

254,514

582,808

982,306

23,032

1,996,272

Three months ended March 31, 2022

Net revenue

8,775

7,512

1,310

17,597

Gross margin

(158)

3,293

284

3,419

Interest and fee revenue

3,861

3,861

Loss on marketable securities

(17,710)

(17,710)

Share of profit of equity-accounted investees

4,091

4,091

Depreciation and amortization

68

595

76

739

Earnings (loss) before tax

(9,190)

131

(73)

(9,758)

(19,150)

(38,040)

As at December 31, 2021

Total assets

147,887

153,624

1,093,596

29,155

1,424,262

Three months ended March 31, 2021

Net revenue

9,891

9,891

Gross margin

(3,452)

(3,452)

Interest and fee revenue

2,849

2,849

Gain on marketable securities

12,900

12,900

Share of profit of equity-accounted investees

Depreciation and amortization

954

104

1,058

Earnings (loss) before tax

(9,172)

14,300

(139,573)

(134,445)


FIRST QUARTER 2022 RESULTS

Sundial is comprised of four segments: Cannabis Cultivation and Production, Cannabis Retail, Liquor Retail, and Investments.

CANNABIS CULTIVATION AND PRODUCTION

Sundial remains focused and committed to its cultivation and processing activities, including continuous improvement of its product offerings for customers while focusing on cost optimization and the most competitive and profitable strains and brands.

  • Cost of sales per gram sold for the three months ended March 31, 2022 was $2.69 compared to $2.87 for the three months ended March 31, 2021. The decrease of $0.18 per gram sold reflects reductions in per gram costs across all branded product formats due to operational efficiencies, despite increases in cost of power and wages.

  • Gross margin for the first quarter of 2022 was negative $0.2 million compared to negative $3.5 million for the three months ended March 31, 2021. The gross margin improvement demonstrates Sundial’s progress in implementing supply chain excellence to drive discipline around cost optimization, despite intense price compression and lower revenue.

  • Cultivation consistency continues to improve in 2022 with Sundial’s highest ever average weighted potency results achieved in the first quarter of 2022 at 23.9% THC representing a 1.5% increase from the previous quarter. Further, Sundial’s average weighted yield per square foot broke a new Company record in March 2022, with an average weighted yield of 64 grams per square foot.

  • Through its enhanced portfolio initiative, Sundial remains focused on the premium inhalables segment. The Company has made material improvements in its cultivation and innovation pipeline, which is contributing to an enhanced product portfolio nationally. In the first quarter of 2022, Sundial’s priority SKU distribution increased nationally by 1,389 points as measured by internal Customer Relationship Management reporting. Further, the company continues to partner effectively with provincial boards and secured 159 new inhalable product listings nationally year to date. This innovation success rate represents a 92% strike rate against the Company’s plan despite provinces and retailers scrutinizing and rationalizing SKUs.

  • Sundial has terminated the Service and Sale Agreement between Sundial and Sun 8 Holdings Inc. for a total consideration of approximately $3.1 million in cash and $2.9 million in Sundial shares. As part of this transaction, Sundial has acquired the royalty rights to own the intellectual property of Top Leaf, which eliminates the royalty fee Sundial was paying to Sun 8.

REVENUE FROM CULTIVATION AND PRODUCTION
Gross revenue from branded cannabis products was $9.7 million for the first quarter of 2022, an increase of 8% compared to the first quarter of 2021. The increase in branded sales as part of the company’s product mix reflects the progress and commitment to executing its retail vertical integration strategy across Western Canada and Ontario. Total gross revenue from the cultivation and product of cannabis was $11.3 million for the first quarter of 2022, a decrease of 3% compared to the first quarter of 2021. The decline in gross revenue was driven by a 42% decrease in wholesale sales to other Licensed Producers in the first quarter of 2022 versus the first quarter of 2021.

NET SELLING PRICE
Average net selling price per gram was $2.60 in the first quarter of 2022, an increase of 5%, compared to $2.48 per gram in the first quarter of 2021. The increase was due to higher prices for provincial board sales. Provincial board prices have increased due to the shift of the mix of Sundial offerings from value products to core products as well as lower price discounts and concessions compared to the prior period.

REVENUE BY FORMATS
In the first quarter of 2022 gross revenue from Sundial’s formats was:

Three months ended

March 31

($000s)

2022

2021

Revenue from dried flower

8,853

9,716

Revenue from vapes

531

1,413

Revenue from oil

27

181

Revenue from edibles and concentrates

1,536

438

Revenue from services

358

Gross revenue

11,305

11,748


CANNABIS RETAIL

The Company’s expanded retail network creates an opportunity to own the relationship with cannabis consumers and showcase both Sundial’s branded products and the best offerings from other Canadian licensed producers.

  • Effective March 31, 2022, Sundial appointed Marcie Kiziak as its President, Cannabis Retail.

  • Gross margin for retail operations for the first quarter of 2022, was $3.3 million dollars.

  • As of May 13,…



Read More:Sundial Reports First Quarter 2022 Financial and Operational Results

2022-05-16 21:40:00

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