THIRD QUARTER 2023 FINANCIAL AND OPERATIONAL HIGHLIGHTS
- Net cash provided by operating activities of
$27.5 million in the third quarter of 2023, compared to$8.6 million in the third quarter of 2022. - Positive free cash flow1 of
$16.5 million in the third quarter of 2023, compared to negative$67.1 million in the third quarter of 2022. - As of
September 30, 2023 , SNDL's unrestricted cash stood at$202.0 million , up from$185.5 million onJune 30, 2023 . This 8.9% sequential increase can be attributed to effective cash-generating initiatives and operational efficiencies implemented throughout the quarter, particularly in working capital. - Net revenue for the third quarter of 2023 of
$237.6 million , compared to$230.5 million in the third quarter of 2022, an increase of 3.1%.- Liquor Retail: Net revenue of
$151.8 million for the third quarter of 2023, showing stable revenue compared to the same quarter in the prior year. - Cannabis Retail: Net revenue of
$75.5 million for the third quarter of 2023, an increase of 14.1% compared to the same quarter of the prior year. - Cannabis Operations: Net revenue of
$21.0 million for the third quarter of 2023, an increase of 77.4% compared to the same quarter of the prior year.
- Liquor Retail: Net revenue of
- Gross margin of
$48.6 million in the third quarter of 2023, compared to$50.3 million in the third quarter of 2022, a 3.4% decrease driven by non-cash inventory impairments. - Net loss of
$21.8 million for the third quarter of 2023, compared to a loss of$98.8 million in the third quarter of 2022, an improvement of 77.9% mainly driven by asset impairments recorded in 2022. - Adjusted EBITDA of
$16.1 million for the third quarter of 2023, compared to$18.3 million from the third quarter of 2022. SNDL currently has five credit investments in the SunStream portfolio following the monetization of one credit exposure in the third quarter of 2023.
_____________________________ | |
1 See Specified Financial Measures – Free Cash Flow |
"
THIRD QUARTER 2023 KEY FINANCIAL METRICS
OPERATING SEGMENTS | ||||||||||||||||||
($000s) | Liquor Retail | Cannabis Retail | Cannabis Operations | Investments | Corporate | Total | ||||||||||||
Three months ended September 30, 2023 | ||||||||||||||||||
Net revenue | 151,801 | 75,539 | 20,954 | — | (10,699) | 237,595 | ||||||||||||
Gross margin | 37,263 | 20,046 | (8,704) | — | — | 48,605 | ||||||||||||
Income (loss) from operations | 8,257 | 3,481 | (13,971) | 9,886 | (24,023) | (16,370) | ||||||||||||
Three months ended September 30, 2022 | ||||||||||||||||||
Net revenue | 152,488 | 66,202 | 11,810 | — | — | 230,500 | ||||||||||||
Gross margin | 35,568 | 14,494 | 247 | — | — | 50,309 | ||||||||||||
Income (loss) from operations | 13,302 | (83,708) | (5,673) | 7,936 | (20,399) | (88,542) |
THIRD QUARTER 2023 RESULTS
Liquor Retail
- Net revenue for Liquor Retail sales for the three banners combined was
$151.8 million for the third quarter of 2023, showcasing stable revenue compared to$152.5 million in the same quarter in the prior year. - For locations operational throughout the third quarter of 2023 and 2022, same-store sales remained stable year-over-year across all liquor banners.
- Gross margin in the Liquor Retail segment was
$37.3 million , or 24.5% of sales in the third quarter of 2023, compared to$35.6 million , or 23.3% of sales, in the third quarter of 2022. Gross margin growth added$1.7 million to cash flow, mainly driven by procurement productivity and product mix management initiatives. SNDL launched an e-commerce platform for its Liquor Retail banner Wine and Beyond to drive accretive revenues and meaningful basket growth opportunities. Early observations suggest an average increase in total basket spend for online purchases compared to in-store purchases in the first four weeks post-launch.SNDL has constructed and shared the Liquor Retail proprietary data licensing program framework with its partners. It anticipates revenue generation starting in the first quarter of 2024, helping to further enhance the segment's profit margins.- Private label sales, a substantial driver of gross margin growth, increased by 33% compared to the third quarter of 2022 and 7% compared to the second quarter of 2023. This increase is driven by further additions to the private label offerings, particularly within the value segment.
- The Company expects to launch its first wine private label in the first half of 2024, enhancing its successful private label lineup. This new offering will feature an array of wine varietals sourced from distinguished regions and notable winemakers, all priced attractively, which is expected to contribute to
SNDL's margin growth while further distinguishing its liquor retail banners. - The Company plans to open a new Wine and Beyond location in
Airdrie, Alberta , in the first quarter of 2024 to further drive revenue growth under the banner. - As of
November 13, 2023 , the Ace Liquor store count is 138, the Liquor Depot store count is 20, and the Wine and Beyond store count is 12.
Cannabis Retail
With its ownership interest in Nova Cannabis Inc. ("Nova"),
- Net revenue from the Cannabis Retail segment for the third quarter of 2023 was
$75.5 million , compared to$66.2 million in the third quarter of 2022, a 14.1% increase year-over-year and a record for the segment sinceSNDL diversified into Cannabis Retail in 2021. - For locations operational throughout the third quarter of 2023 and 2022, same-store sales increased 3.9% year-over-year across all Cannabis Retail banners.
- Gross margin of
$20.0 million , or 26.5% of sales, up from 21.9% of sales in the third quarter of 2022, and a 12.4% increase sequentially showcasing the Company's efforts in continued margin expansion initiatives and data program enhancements. - Nova's proprietary data licensing program resulted in revenue for the third quarter of 2023 of
$4.0 million , compared to$1.4 million in the third quarter of 2022, representing a 53.8% growth compared to the second quarter of 2023. - The Company expanded its collaboration with Nova for Value Buds' private label products. This past quarter, Nova introduced a new 1.2-gram vape to its existing large format flower offerings. From the launch of this product on
September 8, 2023 , toSeptember 30, 2023 , 'Hello My Name is Strawberry' was the bestselling 1.2-gram vape cartridge in Alberta Value Buds stores. The Company anticipates expanding to a full suite of products, with a keen focus on launching pre-rolls in the near future. - As of
November 13, 2023 , the Spiritleaf store count is 87 (22 corporate stores and 65 franchise stores), the Value Buds store count is 92 corporate stores, the Superette store count is five corporate stores, and the Firesale store count is two corporate stores.
Cannabis Operations
- Net revenue from the Cannabis Operations segment for the third quarter of 2023 was
$21.0 million , a 77.4% increase compared to the third quarter of 2022. - Gross margin of negative
$8.7 million in the third quarter of 2023, compared to$0.2 million in the third quarter of 2022, mainly due to inventory impairment. SNDL recently announced an additional step towards optimizing its facility footprint to bolster competitiveness and profitability in its Cannabis Operations segment. The Company will consolidate cultivation activities at itsAtholville, New Brunswick facility while centralizing manufacturing, processing, and production operations inKelowna, British Columbia .- The Company has implemented innovative strategies in its
Atholville, New Brunswick facility to improve cultivation, resulting in an average annual yield of 105 grams per square foot and an average THC potency result of 25%. - In the third quarter of 2023,
SNDL optimized its brand portfolio rationalizing by close to 50% its total offerings across all brands to focus on high-performing SKUs, key consumer categories and new innovations. This rationalization initiative prioritizes revenue generation and key volume SKUs to deliver increased margins within the Cannabis Operations segment and owned retail locations through 2024. - The Company launched 41 SKUs in the third quarter of 2023, primarily focusing on large format flower, vapes, and pre-rolls under its value-driven brands,
Palmetto and Versus, aligning with its consumer-driven innovation strategy and retail trends. SNDL worked cross-functionally to roll out theOntario Cannabis Store flow-through fulfillment process and has since ranked as the #4 licensed producer in dollar sales since the process was implemented.
Investments
- As of the end of the third quarter of 2023, the Company had deployed capital into cannabis-related credit investments with a carrying value of
$583.2 million , including$550.5 million through theSunStream Bancorp Inc. joint venture ("SunStream"). - SunStream is a joint venture sponsored by
SNDL . SunStream directed the formation of theSunStream USA group of companies ("SunStream USA "), in connection with the restructuring of certain loans controlled by SunStream.SunStream USA is anticipated to be aU.S. platform with one or more independent third-party investors, which will be independently managed and governed.The SunStream USA structure is anticipated to be reviewed by the Nasdaq, as the relevant listing authority forSNDL . - For the third quarter of 2023, the investment portfolio generated revenue of
$10.0 million , mainly driven by interest and fee revenue of$3.3 million and an increase in the estimated fair value of the Company'sU.S. credit investments of$6.6 million . - At the end of the third quarter of 2023, the credit portfolio controlled by SunStream comprised five investments: Jushi Holdings Inc., SKYMINT Brands ("Skymint"), Ascend Wellness Holdings,
Surterra Holdings, Inc. d/b/a Parallel ("Parallel"), and Columbia Care Inc. - On
September 22, 2023 , an affiliate of SunStream entered into restructuring arrangements relating to investments in Parallel, which contemplate the foreclosure, to aSunStream USA entity, of certain Parallel cannabis operations inFlorida ,Massachusetts ,Texas , andNevada (the "Parallel Transaction"). - On
October 23, 2023 , an affiliate of SunStream announced a receivership court order granting the sale of certain assets of Skymint to aSunStream USA entity (the "Skymint Transaction"). - The Parallel Transaction and Skymint Transaction are anticipated to close by the end of the first quarter of 2024 and are subject to certain conditions and regulatory approvals.
Three months ended September 30 | Nine months ended September 30 | |||||||||||
($000s) | 2023 | 2022 | 2023 | 2022 | ||||||||
Interest and fee revenue | ||||||||||||
Interest revenue from investments at amortized cost | 891 | 924 | 2,819 | 2,737 | ||||||||
Interest and fee revenue from investments at Fair Value | 250 | 1,095 | 1,124 | 3,754 | ||||||||
Interest revenue from cash | 2,185 | 2,293 | 6,780 | 4,259 | ||||||||
3,326 | 4,312 | 10,723 | 10,750 | |||||||||
Investment revenue (loss) | ||||||||||||
Realized (losses) gains | (46,082) | — | (138,874) | 389 | ||||||||
Unrealized gains (losses) | 46,167 | (5,513) | 130,267 | (58,685) | ||||||||
85 | (5,513) | (8,607) | (58,296) | |||||||||
Revenue from direct investments | 3,411 | (1,201) | 2,116 | (47,546) | ||||||||
Share of profit (loss) of equity-accounted investees | 6,581 | 9,176 | 15,161 | (24,711) | ||||||||
Total investment activities | 9,992 | 7,975 | 17,277 | (72,257) |
Equity Position
$785 million of unrestricted cash, marketable securities and investments, including investments in equity-accounted investees and no outstanding debt atSeptember 30, 2023 , resulting in a net book value of$1.3 billion .- The Company's share repurchase program continues to be available to lower the outstanding share float.
SNDL will continue to assess opportunities to utilize the program to the extent that management believes it is in the best interest ofSNDL's shareholders. For the three months endedSeptember 30, 2023 , the Company did not purchase common shares for cancellation. The share repurchase program was set to expire onNovember 20, 2023 , but onNovember 10, 2023 ,SNDL's board of directors approved an extension toNovember 20, 2024 .
STRATEGIC AND ORGANIZATIONAL UPDATE
Integration Initiatives
Since the acquisition of The Valens Company Inc. in
As part of
The Company's integration initiatives are critical to
This press release is intended to be read in conjunction with the Company's condensed consolidated interim Financial Statements and Notes for the three and nine month ended
CONFERENCE CALL
The Company will hold a conference call and webcast at
WEBCAST ACCESS
To access the live webcast of the call, please visit the following link:
https://services.choruscall.ca/links/sndl2023q3.html
REPLAY
A telephone replay will be available for one month. To access the replay, dial:
When prompted, enter Replay Access Code: 0541#
The webcast archive will be available for three months via the link provided above.
ABOUT SNDL INC.
Forward-Looking Information Cautionary Statement
This news release includes statements containing certain "forward-looking information" within the meaning of applicable securities law ("forward-looking statements"), including, but not limited to, statements regarding the Company's operational goals, the Company's ability to achieve improved profitability, growth and efficiencies across all segments, or its goal of sustainable, positive gross margin and positive free cash flow, revenue generation from the Liquor Retail proprietary data licensing program, expansion of product offerings (including the expected launch of the Company's wine private label), the impact of rationalization initiatives on revenue and margins within the Cannabis Operations segment and owned retail locations, the expansion and additional cost savings at the
Condensed Consolidated Interim Statement of Loss and Comprehensive Loss
(Unaudited - expressed in thousands of Canadian dollars, except per share amounts)
Three months ended | Nine months ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Gross revenue | 249,796 | 235,144 | 696,118 | 482,828 | ||||||||||||
Excise taxes | 12,201 | 4,644 | 35,562 | 11,036 | ||||||||||||
Net revenue | 237,595 | 230,500 | 660,556 | 471,792 | ||||||||||||
Cost of sales | 180,375 | 179,093 | 503,444 | 367,710 | ||||||||||||
Inventory impairment and obsolescence | 9,126 | (2,307) | 22,594 | 3,545 | ||||||||||||
Gross margin before fair value adjustments | 48,094 | 53,714 | 134,518 | 100,537 | ||||||||||||
Change in fair value of biological assets | (1,819) | (1,899) | (6,767) | 1,403 | ||||||||||||
Change in fair value realized through inventory | 2,330 | (1,506) | 5,328 | (5,133) | ||||||||||||
Gross margin | 48,605 | 50,309 | 133,079 | 96,807 | ||||||||||||
Interest and fee revenue | 3,445 | 4,312 | 11,077 | 10,750 | ||||||||||||
Investment loss | (29) | (5,513) | (9,218) | (58,296) | ||||||||||||
Share of profit (loss) of equity-accounted investees | 6,581 | 9,176 | 15,161 | (24,711) | ||||||||||||
General and administrative | 48,235 | 45,014 | 149,535 | 95,989 | ||||||||||||
Sales and marketing | 3,271 | 1,935 | 10,761 | 6,178 | ||||||||||||
Research and development | 57 | 1,503 | 217 | 1,988 | ||||||||||||
Depreciation and amortization | 15,545 | 9,783 | 45,456 | 19,322 | ||||||||||||
Share-based compensation | 5,373 | 2,069 | 11,475 | 6,711 | ||||||||||||
Restructuring costs | 708 | — | 6,286 | (882) | ||||||||||||
Asset impairment | 1,783 | 86,522 | 4,248 | 88,372 | ||||||||||||
Loss from operations | (16,370) | (88,542) | (77,879) | (193,128) | ||||||||||||
Transaction costs | (226) | (417) | (2,439) | 1,040 | ||||||||||||
Finance costs, net | (2,142) | (8,409) | (9,773) | (34,853) | ||||||||||||
Change in estimate of fair value of derivative warrants | (2,840) | (8,500) | 4,202 | 6,856 | ||||||||||||
Foreign exchange gain (loss) | (235) | 91 | (429) | 102 | ||||||||||||
Gain (loss) on disposition of assets | (14) | 6 | (275) | 408 | ||||||||||||
Loss before income tax | (21,827) | (105,771) | (86,593) | (219,575) | ||||||||||||
Income tax recovery | — | 6,927 | — | 8,718 | ||||||||||||
Net loss from continuing operations | (21,827) | (98,844) | (86,593) | (210,857) | ||||||||||||
Net loss from discontinued operations | — | — | (4,535) | — | ||||||||||||
Net loss | (21,827) | (98,844) | (91,128) | (210,857) | ||||||||||||
Equity-accounted investees - share of other comprehensive | 11,124 | 23,194 | (882) | 29,188 | ||||||||||||
Comprehensive loss | (10,703) | (75,650) | (92,010) | (181,669) | ||||||||||||
Net loss from continuing operations attributable to: | ||||||||||||||||
Owners of the Company | (21,784) | (98,108) | (85,337) | (209,313) | ||||||||||||
Non-controlling interest | (43) | (736) | (1,256) | (1,544) | ||||||||||||
(21,827) | (98,844) | (86,593) | (210,857) | |||||||||||||
Net loss attributable to: | ||||||||||||||||
Owners of the Company | (21,784) | (98,108) | (89,872) | (209,313) | ||||||||||||
Non-controlling interest | (43) | (736) | (1,256) | (1,544) | ||||||||||||
(21,827) | (98,844) | (91,128) | (210,857) | |||||||||||||
Comprehensive loss attributable to: | ||||||||||||||||
Owners of the Company | (10,660) | (74,914) | (90,754) | (180,125) | ||||||||||||
Non-controlling interest | (43) | (736) | (1,256) | (1,544) |
Condensed Consolidated Interim Statement of Financial Position
(Unaudited - expressed in thousands of Canadian dollars)
As at | ||||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | 201,983 | 279,586 | ||||
Restricted cash | 19,661 | 19,338 | ||||
Marketable securities | 265 | 21,926 | ||||
Accounts receivable | 25,505 | 22,636 | ||||
Biological assets | 562 | 3,477 | ||||
Inventory | 142,550 | 127,782 | ||||
Prepaid expenses and deposits | 17,814 | 10,110 | ||||
Investments | 3,400 | 6,552 | ||||
Assets held for sale | 8,391 | 6,375 | ||||
Net investment in subleases | 3,603 | 3,701 | ||||
423,734 | 501,483 | |||||
Non-current assets | ||||||
Long-term deposits | 9,720 | 8,584 | ||||
Right of use assets | 133,792 | 134,154 | ||||
Property, plant and equipment | 176,144 | 143,409 | ||||
Net investment in subleases | 18,262 | 19,618 | ||||
Intangible assets | 73,776 | 74,885 | ||||
Investments | 29,058 | 90,702 | ||||
Equity-accounted investees | 550,523 | 519,255 | ||||
148,282 | 67,260 | |||||
Total assets | 1,563,291 | 1,559,350 | ||||
Liabilities | ||||||
Current liabilities | ||||||
Accounts payable and accrued liabilities | 57,230 | 48,153 | ||||
Lease liabilities | 33,809 | 30,206 | ||||
Derivative warrants | 6,800 | 11,002 | ||||
97,839 | 89,361 | |||||
Non-current liabilities | ||||||
Lease liabilities | 137,201 | 139,625 | ||||
Other liabilities | 6,860 | 2,709 | ||||
Total liabilities | 241,900 | 231,695 | ||||
Shareholders' equity | ||||||
Share capital | 2,366,775 | 2,292,810 | ||||
Warrants | 2,260 | 2,260 | ||||
Contributed surplus | 76,912 | 68,961 | ||||
Contingent consideration | 2,279 | 2,279 | ||||
Accumulated deficit | (1,178,063) | (1,091,999) | ||||
Accumulated other comprehensive income | 31,306 | 32,188 | ||||
Total shareholders' equity | 1,301,469 | 1,306,499 | ||||
Non-controlling interest | 19,922 | 21,156 | ||||
Total liabilities and shareholders' equity | 1,563,291 | 1,559,350 |
Condensed Consolidated Interim Statement of Cash Flows
(Unaudited - expressed in thousands of Canadian dollars)
Three months ended | Nine months ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Cash provided by (used in): | ||||||||||||||||
Operating activities | ||||||||||||||||
Net loss for the period | (21,827) | (98,844) | (91,128) | (210,857) | ||||||||||||
Adjustments for: | ||||||||||||||||
Income tax recovery | — | (6,927) | — | (8,718) | ||||||||||||
Interest and fee revenue | (3,445) | (4,312) | (11,077) | (10,750) | ||||||||||||
Change in fair value of biological assets | 1,819 | 1,899 | 6,767 | (1,403) | ||||||||||||
Share-based compensation | 5,373 | 2,069 | 11,475 | 6,711 | ||||||||||||
Depreciation and amortization | 16,602 | 11,294 | 49,535 | 24,271 | ||||||||||||
Loss (gain) on disposition of assets | 14 | (6) | 275 | (408) | ||||||||||||
Inventory obsolescence | 9,126 | (2,307) | 22,594 | 3,545 | ||||||||||||
Finance costs | 2,142 | 8,409 | 9,773 | 34,853 | ||||||||||||
Change in estimate of fair value of derivative warrants | 2,840 | 8,500 | (4,202) | (6,856) | ||||||||||||
Unrealized foreign exchange loss (gain) | 68 | (75) | 44 | (40) | ||||||||||||
Asset impairment | 1,783 | 86,522 | 4,248 | 88,372 | ||||||||||||
Share of (profit) loss of equity-accounted investees | (6,581) | (9,176) | (15,161) | 24,711 | ||||||||||||
Realized loss on settlement of marketable securities | 46,082 | — | 138,874 | — | ||||||||||||
Unrealized loss on marketable securities | (46,053) | 5,513 | (129,656) | 58,685 | ||||||||||||
Additions to marketable securities | — | — | — | (3,500) | ||||||||||||
Proceeds from settlement of marketable securities | 3,241 | — | 6,704 | — | ||||||||||||
Income distributions from equity-accounted investees | — | 976 | — | 1,661 | ||||||||||||
Interest received | 3,325 | 3,874 | 10,245 | 9,673 | ||||||||||||
Change in non-cash working capital | 13,033 | 1,163 | (43,722) | (45,271) | ||||||||||||
Net cash provided by (used in) operating activities from continuing | 27,542 | 8,572 | (34,412) | (35,321) | ||||||||||||
Net cash provided by operating activities from discontinued | — | — | 4,314 | — | ||||||||||||
Net cash provided by (used in) operating activities | 27,542 | 8,572 | (30,098) | (35,321) | ||||||||||||
Investing activities | ||||||||||||||||
Additions to property, plant and equipment | (3,042) | (2,119) | (5,683) | (6,654) | ||||||||||||
Additions to intangible assets | (32) | — | (88) | (55) | ||||||||||||
Additions to investments | 195 | (60,676) | (507) | (74,770) | ||||||||||||
Additions to equity-accounted investees | — | (8,072) | (16,989) | (102,272) | ||||||||||||
Proceeds from disposal of property, plant and equipment | 1,150 | 3 | 1,287 | 4,003 | ||||||||||||
Acquisitions, net of cash acquired | — | — | 3,695 | (31,149) | ||||||||||||
Change in non-cash working capital | 730 | (754) | 1,857 | (495) | ||||||||||||
Net cash used in investing activities from continuing operations | (999) | (71,618) | (16,428) | (211,392) | ||||||||||||
Net cash used in investing activities from discontinued operations | — | — | — | — | ||||||||||||
Net cash used in investing activities | (999) | (71,618) | (16,428) | (211,392) | ||||||||||||
Financing activities | ||||||||||||||||
Change in restricted cash | (205) | 70 | (323) | 7,677 | ||||||||||||
Payments on lease liabilities, net | (9,793) | (9,127) | (29,400) | (18,751) | ||||||||||||
Repurchase of common shares, net of costs | — | (4,096) | (1,536) | (6,149) | ||||||||||||
Repayment of long-term debt | — | — | — | (10,000) | ||||||||||||
Change in non-cash working capital | (17) | 4,996 | 182 | 7,112 | ||||||||||||
Net cash used in financing activities from continuing operations | (10,015) | (8,157) | (31,077) | (20,111) | ||||||||||||
Net cash used in financing activities from discontinued operations | — | — | — | — | ||||||||||||
Net cash used in financing activities | (10,015) | (8,157) | (31,077) | (20,111) | ||||||||||||
Change in cash and cash equivalents | 16,528 | (71,203) | (77,603) | (266,824) | ||||||||||||
Cash and cash equivalents, beginning of period | 185,455 | 362,630 | 279,586 | 558,251 | ||||||||||||
Cash and cash equivalents, end of period | 201,983 | 291,427 | 201,983 | 291,427 |
SPECIFIED FINANCIAL MEASURES
Certain specified financial measures in this news release are non-IFRS measures. These terms are not defined by IFRS and, therefore, may not be comparable to similar measures provided by other companies. These non-IFRS financial measures should not be considered in isolation or as an alternative for or superior to measures of performance prepared in accordance with IFRS. These measures are presented and described in order to provide shareholders and potential investors with additional measures in understanding the Company's operating results in the same manner as the management team.
ADJUSTED EBITDA
Adjusted EBITDA is a non-IFRS measure which the Company uses to evaluate its operating performance. Adjusted EBITDA provides information to investors, analysts, and others to aid in understanding and evaluating the Company's operating results in a manner similar to its management team. Adjusted EBITDA is defined as net income (loss) from continuing operations before finance costs, change in estimate of fair value of derivative warrants, depreciation and amortization, income tax recovery and excluding change in fair value of biological assets, change in fair value realized through inventory, unrealized foreign exchange gains or losses, unrealized gains or losses on marketable securities, realized gains or losses on marketable securities, share-based compensation expense, asset impairment, gain or loss on disposal of property, plant and equipment, cost of sales non-cash component, inventory impairment (recovery) and obsolescence, restructuring costs and transaction costs.. The Company presents both consolidated or total Adjusted EBITDA and Adjusted EBITDA by operating segment.
OPERATING SEGMENTS | ||||||||||||||||||
($000s) | Liquor Retail | Cannabis Retail | Cannabis Operations | Investments | Corporate | Total | ||||||||||||
Three months ended September 30, 2023 | ||||||||||||||||||
Net earnings (loss) | 6,449 | 2,753 | (13,774) | 9,834 | (27,089) | (21,827) | ||||||||||||
Adjustments | ||||||||||||||||||
Finance costs | 1,652 | 679 | (241) | 52 | — | 2,142 | ||||||||||||
Change in estimate of fair value of derivative | — | — | — | — | 2,840 | 2,840 | ||||||||||||
Depreciation and amortization | 9,436 | 4,340 | 954 | — | 815 | 15,545 | ||||||||||||
Change in fair value of biological assets | — | — | 1,819 | — | — | 1,819 | ||||||||||||
Change in fair value realized through inventory | — | — | (2,330) | — | — | (2,330) | ||||||||||||
Unrealized foreign exchange (gain) loss | — | — | 68 | — | — | 68 | ||||||||||||
Unrealized (gain) loss on marketable securities | — | — | 114 | (46,167) | — | (46,053) | ||||||||||||
Realized loss on marketable securities | — | — | — | 46,082 | — | 46,082 | ||||||||||||
Share-based compensation | — | 2 | — | — | 5,371 | 5,373 | ||||||||||||
Asset impairment | 1,640 | 108 | 35 | — | — | 1,783 | ||||||||||||
Loss (gain) on disposition of PP&E | (21) | 49 | (14) | — | — | 14 | ||||||||||||
Cost of sales non-cash component (1) | — | — | 601 | — | — | 601 | ||||||||||||
Inventory impairment (recovery) and | — | — | 9,126 | — | — | 9,126 | ||||||||||||
Restructuring costs | — | — | (323) | — | 1,031 | 708 | ||||||||||||
Transaction costs | — | — | — | — | 226 | 226 | ||||||||||||
Adjusted EBITDA | 19,156 | 7,931 | (3,965) | 9,801 | (16,806) | 16,117 | ||||||||||||
(1) Cost of sales non-cash component is comprised of depreciation expense | ||||||||||||||||||
OPERATING SEGMENTS | ||||||||||||||||||
($000s) | Liquor Retail | Cannabis Retail | Cannabis Operations | Investments | Corporate | Total | ||||||||||||
Three months ended | ||||||||||||||||||
Net earnings (loss) | 10,736 | (84,848) | (5,686) | 10,179 | (29,225) | (98,844) | ||||||||||||
Adjustments | ||||||||||||||||||
Finance costs | 2,570 | 1,142 | 13 | 4,684 | — | 8,409 | ||||||||||||
Change in estimate of fair value of derivative | — | — | — | — | 8,500 | 8,500 | ||||||||||||
Depreciation and amortization | 407 | 2,076 | — | — | 7,300 | 9,783 | ||||||||||||
Income tax recovery | — | — | — | (6,927) | — | (6,927) | ||||||||||||
Change in fair value of biological assets | — | — | 1,899 | — | — | 1,899 | ||||||||||||
Change in fair value realized through inventory | — | — | 1,506 | — | — | 1,506 | ||||||||||||
Unrealized foreign exchange (gain) loss | (2) | — | (73) | — | — | (75) | ||||||||||||
Unrealized (gain) loss on marketable securities | — | — | — | 5,513 | — | 5,513 | ||||||||||||
Share-based compensation | — | 105 | — | — | 1,964 | 2,069 | ||||||||||||
Asset impairment | — | 84,366 | 2,156 | — | — | 86,522 | ||||||||||||
Loss (gain) on disposition of PP&E | (4) | (2) | — | — | — | (6) | ||||||||||||
Cost of sales non-cash component (1) | — | — | 1,861 | — | — | 1,861 | ||||||||||||
Inventory impairment (recovery) and | — | — | (2,307) | — | — | (2,307) | ||||||||||||
Restructuring costs | — | — | — | — | — | — | ||||||||||||
Transaction costs | — | — | — | — | 417 | 417 | ||||||||||||
Adjusted EBITDA | 13,707 | 2,839 | (631) | 13,449 | (11,044) | 18,320 | ||||||||||||
(1) Cost of sales non-cash component is comprised of depreciation expense |
FREE CASH FLOW
Free cash flow is a non-IFRS financial measure which the Company uses to evaluate its financial performance. Free cash flow provides information which management believes to be useful to investors, analysts and others in understanding and evaluating the Company's ability to generate positive cash flows as it removes cash used for non-operational items. Free cash flow is defined as the total change in cash and cash equivalents less cash used for common share repurchases, dividends (if any), net cash used for acquisitions plus cash provided by dispositions (if any).
Three months ended September 30 | ||||||||
($000s) | 2023 | 2022 | ||||||
Change in cash and cash equivalents | 16,528 | (71,203) | ||||||
Adjustments | ||||||||
Repurchase of common shares | — | 4,096 | ||||||
Free cash flow | 16,528 | (67,107) |
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