U.S. Markets open in 1 hr 25 mins
  • S&P Futures

    4,704.00
    +2.50 (+0.05%)
     
  • Dow Futures

    35,830.00
    +19.00 (+0.05%)
     
  • Nasdaq Futures

    16,494.75
    +13.50 (+0.08%)
     
  • Russell 2000 Futures

    2,365.40
    +1.20 (+0.05%)
     
  • Gold

    1,861.20
    -0.20 (-0.01%)
     
  • Silver

    24.88
    -0.02 (-0.08%)
     
  • EUR/USD

    1.1369
    -0.0006 (-0.0568%)
     
  • 10-Yr Bond

    1.5890
    -0.0150 (-0.94%)
     
  • Vix

    17.59
    +0.48 (+2.81%)
     
  • GBP/USD

    1.3497
    -0.0003 (-0.0216%)
     
  • USD/JPY

    114.3040
    +0.0520 (+0.0455%)
     
  • BTC-USD

    56,996.25
    +2,571.05 (+4.72%)
     
  • CMC Crypto 200

    1,402.14
    -65.80 (-4.48%)
     
  • FTSE 100

    7,255.96
    -35.24 (-0.48%)
     
  • Nikkei 225

    29,683.09
    +84.43 (+0.29%)
     

TerrAscend Reports Third Quarter Net Sales of $49.1 Million and Adjusted EBITDA(1) of $10.5 Million

  • Oops!
    Something went wrong.
    Please try again later.
·19 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

NEW YORK and TORONTO, Nov. 16, 2021 /CNW/ - TerrAscend Corp. ("TerrAscend" or the "Company") (CSE: TER) (OTCQX: TRSSF), a leading North American cannabis operator, today reported its financial results for the third quarter and nine-month periods ending September 30, 2021. All amounts are expressed in U.S. dollars unless indicated otherwise and are prepared under International Financial Reporting Standards ("IFRS").

TerrAscend Corp. (CNW Group/TerrAscend)
TerrAscend Corp. (CNW Group/TerrAscend)

Third Quarter 2021 Financial Highlights
(Unless otherwise stated, all results are in U.S. dollars)

  • Net Sales increased 29% year-over-year to $49.1 million and declined 16% sequentially.

  • Adjusted Gross Profit Margin1 of 46% compared to 59% in Q3 2020 and 61% in Q2 2021.

  • Adjusted EBITDA1 of $10.5 million compared to $13.2 million in Q3 2020 and $24.3 million in Q2 2021.

  • Adjusted EBITDA Margin1 of 21% compared to 35% in Q3 2020 and 41% in Q2 2021.

  • Cash balance of $103 million at quarter end to support growth initiatives.

Jason Wild, Executive Chairman of TerrAscend, commented, "I am pleased with the improvements made in Pennsylvania since we withdrew full year 2021 guidance in August. The ratio of quality flower to trim from recent harvests has increased dramatically. Additionally, THC and Terpene potency has been testing at all-time highs. In New Jersey, we are well prepared for adult use once the state gives us the go ahead. Our New Jersey Apothecarium dispensaries will have some of the best selection and depth of product available in the state at launch. We are building this business for success over the long term and will continue to make decisions with that mindset. For the 4th quarter, we expect to show sequential revenue and adjusted EBITDA growth with these positive trends accelerating into 2022."

Third Quarter 2021 Operational Highlights

  • Previously disclosed yield issues in Pennsylvania have been rectified, with the highest quality flower the facility has ever grown hitting the market in recent weeks.

  • Announced the acquisition of Gage Growth Corp. ("Gage") and expect the transaction to close in early 2022, ahead of previous expectations.

  • Signed exclusive agreement to cultivate, manufacture and distribute COOKIES licensed product and bring COOKIES Corners to all three Apothecarium dispensaries in New Jersey, subject to regulatory approval.

  • Purchased an additional 12.5% of the equity of TerrAscend New Jersey, bringing total ownership to 87.5%.

  • Successfully launched premium California edibles brand, Valhalla Confections, in New Jersey.

Subsequent Events

  • Shareholders overwhelmingly approved the acquisition of Gage at the special shareholder meeting held on November 11, 2021.

  • Closed on the purchase of a 156,000 square foot facility in Hagerstown, MD intended for expansion of cultivation and processing in the state, with plans to be operational in Q1 2022, in preparation for potential adult use legislation.

  • Filed Form 10 registration statement with the SEC to convert from a foreign private issuer and IFRS reporting to U.S. GAAP effective January 1, 2022. The Company is now prepared to list on a US Exchange once permissible.

  • Entered into amendment to membership interest purchase agreement to acquire Gage's licensed operators to potentially expedite the timeframe to complete conditions to close.

Financial Summary of Q3 2021 and Comparative Periods

(In millions of U.S. Dollars)

Q3 2020

Q2 2021

Q3 2021


YTD 20

YTD 21

Net Sales

38.1

58.7

49.1


98.2

161.2

QoQ increase

11%

10%

-16%




YoY increase

88%

72%

29%


121%

64%

Gross profit before gain on fair value of biological assets

22.5

34.7

22.6


53.2

92.3

Adjusted Gross profit1

22.5

35.7

22.6


54.4

93.3

% of Net Sales

59%

61%

46%


55%

58%

General & Administrative Expense

10.3

14.8

15.0


32.5

45.5

% of Net Sales

27%

25%

30%


33%

28%

Adjusted EBITDA1

13.2

24.3

10.5


25.3

57.3

Adjusted EBITDA % of Net Sales

35%

41%

21%


26%

36%

Net income / (loss)

(14.6)

(23.1)

62.3


(34.7)

26.5

Cash Flow from Operations

(1.2)

3.4

(16.9)


5.2

(0.2)

1. Adjusted EBITDA and the respective margin and Adjusted Gross Profit and the respective margin are Non-IFRS measures. Please see discussion and reconciliation of Non-IFRS measures below.

Net Sales increased 29% to $49.1 million in the third quarter of 2021, as compared to $38.1 million in the third quarter of 2020. This year over year growth was driven by the acquisitions of KCR and HMS, cultivation capacity expansions in Pennsylvania, New Jersey, and California as well as an increase in the number of dispensaries from seven to thirteen. Net Sales declined 16% quarter over quarter primarily driven by temporary yield declines in Pennsylvania related to ongoing construction and expansion efforts.

Adjusted gross margin, before gain on fair value of biological assets, was 46% in the third quarter of 2021 compared to 59% in the third quarter of 2020 and 61% in the second quarter of 2021. The compression year over year and quarter over quarter in adjusted gross margin was due to yield declines in Pennsylvania leading to under absorption of fixed costs and a higher mix of retail versus wholesale sales.

SG&A expense, excluding stock-based compensation, was $15.0 million compared to $10.3 million in the third quarter 2020. The year over year increase was primarily due to the increase in dispensary count from seven to thirteen and a non-recurring increase in professional fees related to US filing and IFRS to US GAAP conversion. SG&A as a percent of net sales was 30% in the third quarter of 2021, including these non-recurring professional fees, compared to 27% in the third quarter of 2020 and 25% in the second quarter of 2021. The Company continues to invest in building infrastructure to support growth while realizing improved operating leverage over time.

Adjusted EBITDA1 was $10.5 million in the third quarter of 2021 compared to $13.2 million in the third quarter of 2020 and $24.3 million in second quarter 2021. The decline in Adjusted EBITDA1 was primarily due to the yield declines in Pennsylvania.

Net income for the third quarter of 2021 was $62 million, largely impacted by a non-cash gain on fair value of warrants of $69 million.

Balance Sheet and Cash Flow

Cash and cash equivalents were $103 million as of September 30, 2021, compared to $154 million as of June 30, 2021, providing ample capacity to fund planned organic and inorganic growth initiatives.

Cash used in operations was $17 million, including a $21 million tax payment in the quarter. During the quarter a payment of $25 million was also made related to the partial buyout of our New Jersey partnership, taking total ownership up to 87.5%, from 75%. Capex spending was $16 million focused primarily on the continued expansion work at the Pennsylvania cultivation facility and the construction of the third New Jersey dispensary in Lodi expected to open in the fourth quarter.

As of November 16, 2021, there were 313 million shares outstanding on a fully diluted basis. Fully diluted shares outstanding include approximately 185 million common shares, 14 million common share equivalent preferred shares, 39 million exchangeable non-voting shares, and 75 million warrants and options. Basic shares outstanding on an as converted basis were approximately 238 million. The warrants and options had a weighted average strike price of C$5.20 on September 30, 2021, with potential USD cash proceeds of approximately $300 million if exercised.

US Filing Update

On November 2, 2021, the Company filed a Form-10 registration statement with the SEC and will therefore become a U.S. filer under U.S. Generally Accepted Accounting Principles (US GAAP) with the United States Securities and Exchange Commission (SEC) effective on 1/1/22. The Company is now prepared to list on a US stock Exchange once permissible.

Conference Call
TerrAscend will host a conference call today, November 16, 2021, to discuss these results. Jason Wild, Executive Chairman, and Keith Stauffer, Chief Financial Officer will host the call starting at 8:30 a.m. Eastern time. A question-and-answer session will follow management's presentation.

CONFERENCE CALL DETAILS



DATE:

Tuesday, November 16, 2021

TIME:

8:30 a.m. Eastern Time

WEBCAST:

Click Here

DIAL-IN NUMBER:

1-888-664-6392

CONFERENCE ID:

35677280

REPLAY:

(416) 764-8677 or (888) 390-0541
Available until 12:00 midnight Eastern Time Tuesday, November 30, 2021

Replay Code: 677280

Financial results and analyses are available on the Company's website (www.terrascend.com) and SEDAR (www.sedar.com).

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.

About TerrAscend
TerrAscend is a leading North American cannabis operator with vertically integrated operations in Pennsylvania, New Jersey, and California, licensed cultivation and processing operations in Maryland and licensed production in Canada. TerrAscend operates an award-winning chain of The Apothecarium dispensary retail locations as well as scaled cultivation, processing, and manufacturing facilities on both the East and West coasts. TerrAscend's best-in-class cultivation and manufacturing practices yield consistent, high-quality cannabis, providing industry-leading product selection to both the medical and legal adult-use market. The Company owns several synergistic businesses and brands, including The Apothecarium, Ilera Healthcare, Kind Tree, Prism, State Flower, Valhalla Confections, and Arise Bioscience Inc. For more information, visit www.terrascend.com.

Non-IFRS Measures, Reconciliation and Discussion
Certain financial measures in this news release are non-IFRS measures, including, Adjusted Gross Profit and Adjusted EBITDA. These terms are not defined by IFRS and, therefore, may not be comparable to similar measures provided by other companies. These metrics have no direct comparable IFRS financial measure. 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 IFRS. For more information, please see "Non-IFRS Financial Measures" in the Company's Interim MD&A available on www.sedar.com.

Adjusted Gross Profit and the associated margin are non-IFRS measures which management uses to evaluate the performance of the Company's business as it reflects its ongoing profitability. The Company believes that certain investors and analysts use this measure to evaluate a company's ability to service debt and to meet other payment obligations or as a common measurement to value companies in certain industries. The Company measures Adjusted Gross Profit as Gross Profit / (loss) less the cost of a one-time inventory impairments. The associated margin is Adjusted Gross Profit as a percentage of Net Sales.

Adjusted EBITDA and the associated margin are non-IFRS measures which management uses to evaluate the performance of the Company's business as it reflects its ongoing profitability. The Company believes that certain investors and analysts use this measure to evaluate a company's ability to service debt and to meet other payment obligations or as a common measurement to value companies in certain industries. The Company measures Adjusted EBITDA as EBITDA less unrealized gain on changes in fair value of biological assets and other income plus fair value changes in biological assets included in inventory sold, impairments, restructuring costs, purchase accounting adjustments, transaction costs, share based compensation, revaluation of warrants and derivatives liabilities, unrealized loss on investments or foreign exchange, settlement costs related to contractual disputes, and other one-time non-recurring items. The associated margin is Adjusted EBITDA as a percentage of Net Sales.

Caution Regarding Cannabis Operations in the United States
Investors should note that there are significant legal restrictions and regulations that govern the cannabis industry in the United States. Cannabis remains a Schedule I drug under the US Controlled Substances Act, making it illegal under federal law in the United States to, among other things, cultivate, distribute, or possess cannabis in the United States. Financial transactions involving proceeds generated by, or intended to promote, cannabis-related business activities in the United States may form the basis for prosecution under applicable US federal money laundering legislation.

While the approach to enforcement of such laws by the federal government in the United States has trended toward non-enforcement against individuals and businesses that comply with medical or adult-use cannabis programs in states where such programs are legal, strict compliance with state laws with respect to cannabis will neither absolve TerrAscend of liability under U.S. federal law, nor will it provide a defense to any federal proceeding which may be brought against TerrAscend. The enforcement of federal laws in the United States is a significant risk to the business of TerrAscend and any proceedings brought against TerrAscend thereunder may adversely affect TerrAscend's operations and financial performance.

Forward Looking Information
This news release contains "forward-looking information" within the meaning of applicable securities laws. Forward-looking information contained in this press release may be identified by the use of words such as, "may", "would", "could", "will", "likely", "expect", "anticipate", "believe, "intend", "plan", "forecast", "project", "estimate", "outlook" and other similar expressions, and include statements with respect to future revenue and profits. Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management's experience and perception of trends, current conditions and expected developments, as well as other factors relevant in the circumstances, including assumptions in respect of current and future market conditions, the current and future regulatory environment, and the availability of licenses, approvals and permits.

Although the Company believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because the Company can give no assurance that they will prove to be correct. Actual results and developments may differ materially from those contemplated by these statements. Forward-looking information is subject to a variety of risks and uncertainties that could cause actual events or results to differ materially from those projected in the forward-looking information. Such risks and uncertainties include, but are not limited to, current and future market conditions; risks related to federal, state, provincial, territorial, local and foreign government laws, rules and regulations, including federal and state laws in the United States relating to cannabis operations in the United States; and the risk factors set out in the Company's most recently filed MD&A, filed with the Canadian securities regulators and available under the Company's profile on SEDAR at www.sedar.com.

The statements in this press release are made as of the date of this release. The Company disclaims any intent or obligation to update any forward-looking information, whether, as a result of new information, future events, or results or otherwise, other than as required by applicable securities laws.

Unaudited Condensed Interim Consolidated Statements of Financial Position
(Amounts expressed in thousands of United States dollars, except for per share amounts)



At



At



At



September 30, 2021



December 31, 2020



January 1, 2020

Assets









Current Assets









Cash and cash equivalents

$

102,638


$

59,226


$

9,162

Receivables, net of sales returns and allowances


10,831



10,876



5,869

Share subscriptions receivable






24,463

Note receivable






4,609

Investments






358

Biological assets


12,578



17,816



4,222

Inventory


71,158



34,696



15,723

Prepaid expenses and other assets


5,745



5,165



4,757



202,950



127,779



69,163

Non-Current Assets









Investment in associate




1,379



1,000

Property, plant and equipment


161,626



129,735



86,734

Intangible assets and goodwill


296,429



199,985



185,670

Indemnification asset


4,581



11,500



11,500

Prepaid expenses and other assets


5,776



3,923



695



468,412



346,522



285,599

Total Assets

$

671,362


$

474,301


$

354,762










Liabilities and Shareholders' Equity









Current Liabilities









Accounts payable and accrued liabilities

$

48,992


$

27,176


$

19,256

Deferred revenue


925



638



908

Loans payable


10,669



5,734



48,559

Contingent consideration payable


10,488



30,966



24,008

Lease liability


2,601



1,710



891

Corporate income tax payable


10,924



27,739



16,381



84,599



93,963



110,003

Non-Current Liabilities









Loans payable


182,208



178,804



4,849

Contingent consideration payable


1,115



6,590



135,393

Lease liability


28,626



22,609



15,070

Warrant liability


69,432



132,257



Convertible debentures




4,083



10,682

Deferred income tax liability


54,304



27,263



20,774

Other non-current liabilities


3,750







339,435



371,606



186,768

Total Liabilities

$

424,034


$

465,569


$

296,771










Shareholders' Equity









Share capital


492,656



242,336



196,978

Contributed surplus


31,264



69,205



41,874

Cumulative translation adjustment


(105)



(3,819)



(826)

Deficit


(285,458)



(306,423)



(186,496)

Non-controlling interest


8,971



7,433



6,461

Total Shareholders' Equity


247,328



8,732



57,991










Total Liabilities and Shareholders' Equity

$

671,362


$

474,301


$

354,762

Total Number of Common and Proportionate Voting Shares Outstanding


184,540,757



155,834,272



141,980,314

Unaudited Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(Amounts expressed in thousands of United States dollars, except for per share amounts)


For the three months ended


For the nine months ended


September 30, 2021


September 30, 2020


September 30, 2021


September 30, 2020

Sales, gross

$

50,537


$

40,416


$

169,010


$

104,926

Excise and cultivation taxes


-1,398



-2,288



(7,794)



(6,709)

Sales, net


49,139



38,128



161,216



98,217













Cost of sales


26,541



15,659



68,966



44,973

Gross profit before gain on fair value of biological assets


22,598



22,469



92,250



53,244













Unrealized gain on changes in fair value of biological assets


24,581



18,885



75,789



46,678

Realized fair value amounts included in inventory sold


-23,726



-15,505



(60,785)



(33,896)













Gross profit


23,453



25,849



107,254



66,026













Operating expenses:












General and administrative


14,966



10,324



45,546



32,525

Share-based payments


1,496



3,129



11,910



7,710

Amortization and depreciation


2,310



1,912



6,969



5,429

Research and development


-



17





292

Total operating expenses


18,772



15,382



64,425



45,956













Income from operations


4,681



10,467



42,829



20,070













Impairment of property, plant, and equipment








Revaluation of contingent consideration


-338



6,047



2,652



14,667

Finance and other expenses


7,822



2,476



25,055



7,199

Transaction and restructuring costs


1,034



195



1,466



1,889

Unrealized gain on note receivable




0





Unrealized (gain) loss on investments


-



-304



(6,192)



(60)

Impairment of goodwill


-



-



5,007



Impairment of intangible assets


-



-



3,633



734

Realized gain on investments




0





(Gain) loss on fair value of warrants


-69,016



17,833



(43,715)



17,833

Unrealized foreign exchange (gain) loss


(1,256)



34



4,582



111













Income (loss) before income taxes


66,435



(15,814)



50,341



(22,303)

Current income tax expense


5,966



2,122



22,054



13,596

Deferred income tax (benefit) expense


-1,880



-3,336



1,811



(1,163)

Net income (loss)

$

62,349


$

(14,600)


$

26,476


$

(34,736)

Items that will be subsequently reclassified to profit or loss:












Currency translation adjustment


1,267



90



(3,714)



2,099

Comprehensive income (loss)

$

61,082


$

(14,690)


$

30,190


$

(36,835)













Net income (loss) attributable to:












Shareholders of the Company


60,371



(14,123)



20,417



(33,122)

Non-controlling interests


1,978



-477



6,059



(1,614)













Comprehensive income (loss) attributable to:












Shareholders of the Company


59,104



(14,213)



24,131



(35,221)

Non-controlling interests


1,978



-477



6,059



(1,614)













Net income (loss) per share, basic and diluted












Net income (loss) per share – basic

$

0.33


$

(0.09)


$

0.11


$

(0.22)

Weighted average number of outstanding common and proportionate voting shares


184,438,603



149,492,681



179,441,224



148,335,223

Net income (loss) per share – diluted

$

0.28


$

(0.09)


$

0.10


$

(0.22)

Weighted average number of outstanding common and proportionate voting shares, assuming dilution


214,134,641



149,492,681



214,756,569



148,335,223

Unaudited Condensed Interim Consolidated Statements of Cash Flow
(Amounts expressed in thousands of United States dollars, except for per share amounts)


For the nine months ended


September 30, 2021

September 30, 2020

Operating activities





Net income (loss)

$

26,476

$

(34,736)

Add (deduct) items not involving cash





Unrealized gain on changes in fair value of biological assets


(75,789)


(46,678)

Realized fair value amounts included in inventory sold


60,785


33,896

Non-cash write downs of inventory


961


3,258

Accretion, accrued interest and loan forgiveness


17,938


7,213

Depreciation of property, plant and equipment


7,218


4,382

Amortization of intangible assets


5,523


4,395

Share-based payments


11,910


8,109

Current income tax expense


22,054


13,596

Deferred income tax expense


1,811


(1,163)

(Gain) loss on fair value of warrants


(43,715)


17,833

Unrealized (gain) loss on investments


(6,192)


(60)

Revaluation of contingent consideration


2,652


14,667

Impairment of intangible assets


3,633


734

Impairment of goodwill


5,007


Release of indemnification asset


3,891


Forgiveness of loan principal and interest


(766)


Unrealized foreign exchange gain (loss)


4,582


111

Changes in working capital items


(11,149)


(13,304)

Income taxes paid


(37,032)


(7,023)

Cash inflow from operating activities


(202)


5,230






Financing activities





Proceeds from warrants exercised


10,365


1,426

Proceeds from options exercised


3,677


467

Proceeds from loan


766


65,769

Capital contributions and return of capital to non-controlling interests


174


662

Loan principal and interest paid


(15,932)


(56,656)

Proceeds from private placement, net of share issuance costs


173,477


70,700

Lease payments


(2,963)


(2,026)

Cash inflow from financing activities


169,564


80,342






Investing activities





Investment in property, plant and equipment


(26,706)


(29,368)

Investment in intangible assets


(342)


(1,092)

Principal and interest payments received on lease receivable


559


131

Distribution of earnings to associates


469


Advances to joint venture partner



153

Deposits for business acquisition



(1,000)

Deposits for property, plant and equipment


(1,739)


Investment in NJ partnership


(25,000)


Payments of contingent consideration


(29,668)


(31,039)

Cash portion of consideration paid on acquisition of KCR


(20,337)


Cash portion of consideration paid on acquisition of HMS


(22,399)


Cash received on acquisition of State Flower



739

Cash outflow from investing activities


(125,163)


(61,476)






Increase (decrease) in cash and cash equivalents during the period


44,199


24,096

Net effects of foreign exchange


(787)


742

Cash and cash equivalents, beginning of period


59,226


9,162

Cash and cash equivalents, end of period

$

102,638

$

34,000

SOURCE TerrAscend

Cision
Cision

View original content to download multimedia: http://www.newswire.ca/en/releases/archive/November2021/16/c8014.html