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TerrAscend Second Quarter 2022 Revenue Increases 31% Sequentially to $65 Million
TORONTO, Aug. 11, 2022 /CNW/ – TerrAscend Corp. (“TerrAscend” or the “Company”) (CSE: TER) ( OTCQX: TRSSF), a leading North American cannabis operator, today reported its financial results for the second quarter ending June 30, 2022. All amounts are expressed in U.S. dollars unless indicated otherwise and are prepared under U.S. Generally Accepted Accounting principles (GAAP).
Second Quarter 2022 Financial Highlights
- Net Sales increased 31% sequentially to $65 million as compared to $50 million in Q1 2022.
- Gross Profit Margin was 35.5% as compared to 30.4% in Q1 2022.
- Adjusted Gross Profit Margin1 was 47.1% as compared to 38.4% in Q1 2022.
- Adjusted EBITDA1 was $5.8 million as compared to $3.3 million in Q1 2022.
- Adjusted EBITDA Margin1 was 8.9% as compared to 6.6% in Q1 2022.
- GAAP Net Income was $14.2 million as compared to net loss of $16 million in Q1 2022.
- Cash and Cash Equivalents totaled $49 million as of June 30, 2022.
Jason Wild, Executive Chairman of TerrAscend, commented,
We grew revenue 31% sequentially for the second quarter as New Jersey adult-use sales got off to a great start. 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.
Jason Wild Executive Chairman of TerrAscend
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.
Ziad Ghanem, President and Chief Operating Officer, added, “TerrAscend is focused on engaging our team members, listening to our customers, delivering quality products, and achieving operational excellence. Between our state line up 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. We will achieve that growth while improving margins and driving profitability.”
Second Quarter 2022 Business and Operational Highlights
- Held the grand opening of adult-use sales on April 21st at its Apothecarium stores in Maplewood and Phillipsburg, New Jersey, two of only twelve dispensaries at the time to open for adult-use sales in the state.
- Approved for hydrocarbon extraction in New Jersery with initial products launched in the quarter.
- Successfully launched Cookies and Gage brands in New Jersey, resulting in a 40% increase in sales for the first full weekend versus the prior weekend with continued momentum and growth since launch.
- Signed lease on new facility in New Jersey, which will accommodate expanded capacity up to the 150,000 square foot canopy limit over time.
- Received home delivery license for medical patients in New Jersey.
- Partnered with Cookies to open third Cookies-branded dispensary in Michigan, located in Ann Arbor.
- Announced agreement to acquire KISA Enterprises MI, LLC and KISA Holdings, LLC (“Pinnacle”), a dispensary operator in Michigan with 5 operational locations.
- Operationalized extraction lab and packaging facility in Michigan.
- Introduced Khalifa Kush, a premium cannabis brand founded by Grammy Award-nominated recording artist Wiz Khalifa, at Gage Cannabis dispensaries in Michigan.
- Announced agreement to acquire Allegany Medical Marijuana Dispensary (“AMMD”) located in Cumberland, Maryland, which will enable the Company to become vertically integrated in the state.
- Appointed Lynn Gefen as Chief Legal Officer and Corporate Secretary.
- Opened third New Jersey Apothecarium Dispensary in Lodi.
- Opened first “Cookies Corner” at The Apothecarium location in Maplewood, New Jersey.
- Exclusively launched Chris Webber’s “Players Only” premium cannabis brand in Gage and Cookies dispensaries in Michigan.
Second Quarter 2022 Financial Results
Net sales for the second quarter of 2022 totaled $64.8 million, an increase of 30.5% sequentially and 10.4% year over year, mainly related 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.
Gross margin for the second quarter of 2022 was 35.5%. Adjusted gross margin was 47.1% as compared to 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. Adjusted gross margin excludes the one-time impact of reserves and write-downs related to aged inventory in Pennsylvania, dating back to the revamp of its cultivation facility in the second half of 2021.
General & Administrative expenses (G&A), excluding stock-based compensation, increased $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.
Adjusted EBITDA for the quarter was $5.8 million versus $3.3 million in the first quarter of 2022. Adjusted EBITDA margin improved from 6.6% in the first quarter to 8.9% in the second quarter. The improvement was driven by higher sales and improved gross margin, offset by higher G&A expenses with the addition of Gage for a full quarter and costs associated with the launch of adult-use in New Jersey.
GAAP Net income for the quarter was $14.2 million, compared to a Net loss of $16.0 million in first quarter of 2022.
Balance Sheet and Cash Flow
Cash and cash equivalents were $49 million as of June 30, 2022, compared to $88 million as of March 31, 2022. The Company has 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 has the ability to raise equity should the capital markets improve.
Cash used from operations was $16.1 million for the three months ended June 30, 2022, mainly driven by 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, primarily related to the on-going expansion work at the Company’s Maryland and Michigan cultivation and processing facilities. The Company 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.
TerrAscend will host a conference call today, August 11, 2022, to discuss these results. Jason Wild, Executive Chairman, Ziad Ghanem, President and Chief Operating Officer, and Keith Stauffer, Chief Financial Officer, will host the call starting at 5:00 p.m. Eastern time. A question-and-answer session will follow management’s presentation.
The Canadian Securities Exchange (“CSE”) has neither approved nor disapproved the contents of this news release. Neither the CSE nor its Market Regulator (as that term is defined in the policies of the CSE) accepts responsibility for the adequacy or accuracy of this release.
Definition and Reconciliation of Non-GAAP Measures
In addition to reporting the financial results in accordance with GAAP, the Company reports certain financial results that differ from what is reported under GAAP. Non-GAAP measures used by management do not have any standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies. The Company believes that certain investors and analysts use these measures to measure a company’s ability to meet other payment obligations or as a common measurement to value companies in the cannabis industry, and the Company calculates Adjusted Gross Profit as Gross Profit adjusted for certain material non-cash items and Adjusted EBITDA as EBITDA adjusted for certain material non-cash items and certain other adjustments management believes are not reflective of the ongoing operations and performance. Such information is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The Company believes this definition is a useful measure to assess the performance of the Company as it provides more meaningful operating results by excluding the effects of expenses that are not reflective of the Company’s underlying business performance and other one-time or non-recurring expenses.
The table below reconciles Gross Profit and Adjusted Gross Profit for the quarters ended June 30, 2022, March 31, 2022, and June 30, 2021
The table below reconciles net loss to EBITDA and Adjusted EBITDA for the quarters ended June 30, 2022, March 31, 2022, and June 30, 2021
TerrAscend is a leading North American cannabis operator with vertically integrated operations in Pennsylvania, New Jersey, Michigan and California, licensed cultivation and processing operations in Maryland and licensed production in Canada. TerrAscend operates The Apothecarium and Gage dispensary retail locations as well as scaled cultivation, processing, and manufacturing facilities in its core markets. TerrAscend’s cultivation and manufacturing practices yield consistent, high-quality cannabis, providing industry-leading product selection to both the medical and legal adult-use markets. The Company owns several synergistic businesses and brands, including Gage Cannabis, The Apothecarium, Ilera Healthcare, Kind Tree, Prism, State Flower, Valhalla Confections, and Arise Bioscience Inc. For more information, visit www.terrascend.com.
Unaudited Interim Condensed Consolidated Balance Sheets
(Amounts expressed in thousands of United States dollars, except for per share amounts)
Original Press Release
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