- Net sales increased 34% quarter-over-quarter and 139% year-over-year
- Adjusted EBITDA of $4.9 million
- U.S. operations generated 25% adjusted EBITDA margin
- Anticipates Q2 2020 net sales of approximately $45 million, representing 30% quarter-over-quarter growth, with continued gross margin and adjusted EBITDA margin expansion
TerrAscend Corp. (CSE: TER, OTCQX: TRSSF), a leading North American cannabis operator, today reported financial results for its first quarter ending March 31, 2020.
First Quarter 2020 Financial Highlights
(Unless otherwise stated, comparisons are made between Fiscal Q1 2020 and Q1 2019 results and are in Canadian dollars)
- Net sales: Net sales increased 139% to $34.8 million from $14.6 million.
- Gross margin: Gross margin increased to 45%, compared to 10% (before gain on fair value of biological assets).
- Adjusted EBITDA1: Adjusted EBITDA1 was $4.9 million, compared with $(5.5) million.
- U.S. Operations: The Company’s U.S. operations generated 57% Gross Margin and 25% Adjusted EBITDA margin.
- Balance Sheet: Cash & equivalents (including restricted cash) of $31.4 million, compared to $8.6 million.
- Capital Markets & Financing: The Company closed the final tranches of its previously announced private placement in January resulting in proceeds of $12.7 million and completed a loan financing agreement with Canopy Growth in March, providing $80.5 million in capital that was partially used to fully retire an existing credit facility held with JW Asset Management.
“Getting to adjusted EBITDA profitability is a transformational milestone for our Company, and I’d like to thank the team for their tireless efforts towards that goal,” said Jason Ackerman, Executive Chairman and CEO of TerrAscend. “These results were driven by the strong performance of our U.S. operations, which continue to perform ahead of plan. With our Pennsylvania expansion complete and construction of our New Jersey facilities well underway, we’re confident in the ongoing growth targets that we have set. We remain focused on prudently investing our capital in the markets where we see the greatest and most profitable opportunities.”
Jason Wild, Chairman added, “We’ve assembled a high-caliber team that is executing on the opportunities ahead. I’m extremely proud of the results reported today and pleased to see the commitment to driving strong revenue growth coupled with profitability.”
First Quarter 2020 Operational Highlights
- Tripled Ilera Healthcare’s cultivation output and completed the phase II expansion, with total footprint of 150,000 square feet
- Announced the opening of two Apothecarium retail dispensary locations in Pennsylvania to serve medical marijuana patients.
- Issued a permit to cultivate medical marijuana by the New Jersey Department of Health.
- TerrAscend Canada Inc., a wholly owned subsidiary, entered into a loan financing agreement with Canopy Growth in the amount of $80.5 million pursuant to a secured debenture. A portion of the proceeds received from Canopy Growth was used to retire the outstanding principal and interest amounts under the credit facility with JW Asset Management
- Appointed Jason Ackerman as permanent Chief Executive Officer.
- Named Keith Stauffer as Chief Financial Officer.
- Announced a US$30 million non-brokered private placement
- Closed the initial tranche of the non-brokered private placement, resulting in gross proceeds of US$27.3 million
Outlook and Preliminary Q2 2020 Revenue Guidance
Based on the success of the Company’s operations to-date, TerrAscend anticipates Q2 2020 net sales of approximately $45 million, representing 30% quarter-over-quarter growth. The Company also anticipates ongoing expansion of gross margin and adjusted EBITDA margin beyond Q1 2020 levels.
TerrAscend remains focused on the execution of its U.S. expansion strategy. To date, the Company has grown its U.S. presence, both organically and through targeted strategic acquisitions, which include Arise Bioscience, The Apothecarium, Ilera Healthcare, and State Flower. This has enabled TerrAscend to enter new markets and establish a strong foothold. The Company’s U.S expansion strategy is rooted in a commitment to achieving scale and profitability in the select markets where it operates. To that end, TerrAscend is focused on fully leveraging the expansion completed at the Company’s cultivation and manufacturing facility in Pennsylvania, completing the construction of its cultivation facility in New Jersey, and continuing to add depth to the Company’s portfolio of retail locations in California, Pennsylvania, and New Jersey. The Company continues to evaluate additional markets for potential entry through organic license applications and strategic acquisitions.
Ensuring the health, safety and well-being of its employees, patients, customers, and the communities in which it operates remains TerrAscend’s highest priority. In response to the ongoing COVID-19 pandemic, TerrAscend continues to adhere to stringent, company-wide measures which include taking employee temperatures at the beginning of each shift; thoroughly cleaning equipment and high-traffic areas; using hand-sanitizer between transactions; requiring non-essential employees to work from home; and practicing social distancing from fellow employees, customers and patients. In addition, TerrAscend has implemented convenient drive through services and curb side pick up options at its retail dispensaries, where permitted. TerrAscend’s management team continues to monitor this situation and will proactively implement new measures as required.
Q1 2020 Financial Summary
|(In ooo’s of Canadian Dollars, Except Per Share Amounts)||Q1 2020||Q4 2019||Q1 2019|
|Gross profit (loss) before gain on fair value of biological assets||15,546||(4,243)||1,507|
|% of Net Sales||45%||-16%||10%|
|Net impact, fair value of biological assets||8,645||1,483||427|
|Gross profit (loss)||24,191||(2,760)||1,934|
|% of Net Sales||70%||-11%||13%|
|General & Administrative Expense||14,600||12,273||8,821|
|Total operating expenses||19,261||12,693||11,604|
|Income (loss) from operations||4,930||(15,453)||(9,670)|
|Net loss after income tax||(13,864)||(171,805)||(10,690)|
|Total adjusted EBITDA1||4,941||(5,737)||(5,543)|
|Canada adjusted EBITDA1||(3,260)||(4,302)||(4,150)|
|U.S. adjusted EBITDA1||8,201||(1,435)||(1,393)|
|1. EBITDA and Adjusted EBITDA are Non-IFRS measures. Please see discussion and reconciliation of Non-IFRS measures below.|
Net sales increased 139% to $34.8 million in the first quarter of 2020 (“Q1 2020”), as compared to $14.6 million in the first quarter of 2019 (“Q1 2019”). Net sales in the U.S were $30.9 million in Q1 2020, contributing 89% of total consolidated net sales, reflecting TerrAscend’s continued focus on this important market. This increase was driven by the operational scale-up of TerrAscend’s U.S footprint, which the Company has strategically expanded through investments in production capacity as well as wholesale and retail sales presence.
Gross margin, before gain on fair value of biological assets, was 45% in Q1 2020, compared to 10% in Q1 2019. The increase in gross margin is the result of the Company’s shift to higher margin opportunities in the U.S., as well as ongoing initiatives to rationalize its Canadian operations to the current market opportunity.
Q1 2020 G&A expense was $14.6 million, an increase of 66% compared to Q1 2019. The change was primarily driven by the Company’s strategic focus on entering the U.S. market which drove 139% total net sales growth compared to the prior period. TerrAscend expects to continue to strategically invest in acquiring the talent and developing the appropriate infrastructure to ensure continued expansion in the high-growth U.S market while driving operating leverage as the Company’s operations continue to scale.
Adjusted EBITDA was $4.9 million in Q1 2020, compared to $(5.5) million in Q1 2019. On a geographic basis, adjusted EBITDA from the Company’s U.S. and Canadian operations in Q1 2020 was $8.2 million and $(3.3) million, respectively. Adjusted EBITDA margin generated from the Company’s U.S operations was 25%.
Cash and cash equivalents, including restricted cash, were $31.4 million as of March 31, 2020, compared to $8.6 million as of March 31, 2019, resulting from the net proceeds from the $80.5 million Canopy Growth financing arrangement. $64.8 million of those proceeds were used to retire an existing credit facility with JW Asset Management.
TerrAscend will host a conference call tomorrow, May 29, 2020, to discuss these results. Jason Ackerman, Executive Chairman and Chief Executive Officer, Keith Stauffer, Chief Financial Officer, and Jason Wild, Chairman, will host the call starting at 8:30 a.m. Eastern time. A question and answer session will follow management’s presentation.
|DATE:||Friday, May 29th, 2020|
|TIME:||8:30 a.m. Eastern Time|
|WEBCAST:||Click to Access|
|DIAL-IN NUMBER:||1 (888) 664-6392|
|REPLAY:||(416) 764-8677 or (888) 390-0541|
Available until 12:00 midnight Eastern Time Friday, June 12th, 2020
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.
TerrAscend provides quality products, brands, and services to the global cannabinoid market. As the first North American Operator (NAO), with scale operations in both Canada and the US, TerrAscend participates in the medical and legal adult use markets across these jurisdictions. TerrAscend operates a number of synergistic businesses, including Ilera Healthcare, Pennsylvania’s premier medical marijuana cultivator, processor and dispenser; The Apothecarium, an award-winning cannabis dispensary with several retail locations in California; Valhalla Confections, a manufacturer of premium cannabis-infused edibles; and Arise Bioscience Inc., a manufacturer and distributor of hemp-derived products. TerrAscend holds a cultivation permit in the State of New Jersey and is pending approval for a vertically integrated medical cannabis operation with the ability to operate up to 3 Alternative Treatment Centers. Additionally, TerrAscend holds a Medical Cannabis Processor License in the State of Utah. For more information, visit www.terrascend.com.
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