SNDL reports higher cannabis sales, lower liquor sales

SNDL Inc. (NASDAQ: SNDL) reported its financial results for the third quarter of September 30, 2024, as revenue from cannabis rose and sales at the liquor stores fell. The company also noted that it was cash flow positive and had a comfortable cash position.

SNDL reported total revenue in the third quarter fell 0.3% to C$236.9 million from last year’s C$237.6 million. This decrease was due to market softness in the liquor retail segment, while both cannabis operations segments posted strong growth.  However, the company did beat the Yahoo Finance average analyst estimate for revenue of $166 million or C$230 million. On a positive note, overall revenue grew by 3.8% sequentially.

Net losses were trimmed to C$19.3 million from last year’s C$21.8 million for the same period. The net loss per share was (C$0.07) versus last year’s net loss per share of (C$0.08).

Cash flow was positive by C$80 million in the third quarter of 2024, compared to $16.5 million in the third quarter of 2023. The company attributed the gain to profitability improvements and the repayment of loan investments. SNDL told investors it had C$763.8 million of unrestricted cash, marketable securities and investments and no outstanding debt, with C$263.0 million of unrestricted cash as of September 30, 2024

“We are pleased with the substantial progress reflected in our results for the third quarter of 2024 as we advance towards sustainable profitability. Our team delivered a record gross margin, positive cash flow and free cash flow, and closed the quarter with over a quarter billion dollars in unrestricted cash and zero debt. We are materially improving our operational performance while executing multiple strategic initiatives that we believe will solidify our foundation and drive sustained, profitable growth,” said Zach George, Chief Executive Officer of SNDL.

Acquisitions

SNDL told investors it completed its acquisition of Nova Cannabis on October 21 by buying the remaining 35% for roughly C$40 million. In addition to that, in August SNDL had told the market that it stalking horse bid was chosen in the acquisition of the Indiva Group‘s business and assets. On November 4, 2024, the company announced that it had successfully closed the Indiva Transaction for approximately $22.7 million.

Restructuring

By mid-July the company announced a restructuring program with planned savings of over C$20 million. The program is on track with more than C$2 million in savings delivered in the third quarter (C$10.3 million annualized). As part of the program, SNDL said it is consolidating its cannabis segments into a single unit under the leadership of Tyler Robson. The company expects to achieve most of the anticipated annualized savings by mid-2025 while starting to capture some of the opportunities as early as the third quarter of 2024.

Sunstream

SNDL said it had collected $73 million in early August from SunStream, following the loan repayment to SunStream representing a majority of Ascend’s outstanding balance and the full outstanding balance of Jushi. The company made no mention of Parallel Cannabis or its plans in Florida. There was also no mention of its plans for Skymint in Michigan.

The share of loss of equity-accounted investees for the quarter was C$13.4 million compared to a profit of C$6.6 million for the third quarter in 2023. The decrease of C$20.0 million was due to accounting fair value adjustments to the investments.