Recently completed the acquisition of Gage Growth Corp (“Gage”), a leading high-quality premium cannabis brand and operator in Michigan
Pennsylvania facility producing highest quality product to date, recapturing top three market share2
New Jersey retail and wholesale fully prepared for adult-use launch, pending regulatory approval
Completed GAAP Conversion and became a US Filer with the SEC
TORONTO, March 16, 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 fourth quarter and full year periods ending December 31, 2021. All amounts are expressed in U.S. dollars unless indicated otherwise and are prepared under U.S. Generally Accepted Accounting principles (GAAP).
Fourth Quarter 2021 Financial Highlights
- Net Sales were $49.2 million as compared to $49.1 million in Q3 2021 and $49.6 million in Q4 2020.
- Gross Profit Margin was 42.3% as compared to 43.8% in Q3 2021 and 55.8% in Q4 2020.
- Adjusted Gross Profit Margin1 was 49.8% as compared to 46.2% in Q3 2021 and 60.5% in Q4 2020.
- Adjusted EBITDA1 was $11.9 million as compared to $9.0 million in Q3 2021 and $19.3 million in Q4 2020. Adjusted EBITDA under IFRS, excluding lease expense, was $12.8 million as compared to $10.5 million in Q3 2021.
- Adjusted EBITDA Margin1 was 24.2% as compared to 18.3% in Q3 2021 and 38.9% in Q4 2020.
- Cash and cash equivalents, totaled $79.6 million as of December 31, 2021.
Full Year 2021 Financial Highlights
- Net Sales were $210.4 million, an increase of 42% year-over-year.
- Gross Profit Margin was 53.3% compared to 54.8% in 2020.
- Adjusted Gross Profit Margin1 was 56.1% compared to 57.2% in 2020.
- Adjusted EBITDA1 of $65.6 million compared to $41.7 million in 2020, an increase of 57% year-over-year. Adjusted EBITDA under IFRS, excluding lease expense, was $70.1 million as compared to $45.5 million in 2020.
- Adjusted EBITDA Margin1 of 31.2% compared to 28.2% in 2020, an expansion of 300 basis points.
Jason Wild, Executive Chairman of TerrAscend, commented, “The strategic decisions we made in Pennsylvania have resulted in the highest quality product we have ever sold in this market. Additionally, the actions undertaken in New Jersey have our team prepared for adult use, where we have one of the largest cultivation footprints in the state, along with three ideal dispensary locations. Furthermore, I am thrilled that we have recently completed our acquisition of Gage, which provides us with a leadership position in yet another multi-billion market and the ability to launch this brand beyond Michigan. I’m proud of the hard work by the team in 2021, which has us well positioned for the explosive growth we expect in 2022 and beyond.”
Financial Summary of Q4 2021, Full Year 2021 and Comparative Periods
(in millions of U.S. dollars)
| Q4 2020 | Q3 2021 | Q4 2021 | 2020 | 2021 | ||
| Revenue, net | 49.6 | 49.1 | 49.2 | 147.8 | 210.4 | |
| QoQ increase | 30.2% | -16.4% | 0.2% | |||
| YoY increase | 69.9% | 28.9% | -0.8% | 131.7% | 42.4% | |
| Gross profit | 27.7 | 21.5 | 20.8 | 81.0 | 112.1 | |
| Adjusted Gross profit1 | 30.0 | 22.7 | 24.5 | 84.5 | 118.0 | |
| Adjusted gross margin % | 60.5% | 46.2% | 49.8% | 57.2% | 56.1% | |
| Share-based compensation expense | 4.7 | 5.2 | 1.5 | 10.1 | 14.9 | |
| General & Administrative expense (excluding share based comp) | 12.5 | 16.1 | 17.0 | 55.5 | 66.0 | |
| % of revenue, net | 25.2% | 32.8% | 34.6% | 37.6% | 31.4% | |
| Adjusted EBITDA1 | 19.3 | 9.0 | 11.9 | 41.7 | 65.6 | |
| Adjusted EBITDA % of revenue, net | 38.9% | 18.3% | 24.2% | 28.2% | 31.2% | |
| Net income / (loss) | (94.0) | 55.8 | (5.9) | (142.3) | 6.1 | |
| Cash Flow from Operations | (26.9) | (17.9) | (3.8) | (37.0) | (31.8) |
Fourth Quarter 2021 Business and Operational Highlights
- Pennsylvania facility producing highest quality product to date; recapturing top 3 market share for the month of December 2021.2
- New Jersey wholesale and retail fully prepared for adult-use, pending regulatory approval.
- Closed on the purchase of a 156,000 square foot facility in Hagerstown, MD for expansion of cultivation and processing, which is expected to be operational during the third quarter of 2022.
- Completed US GAAP conversion and became a US filer under SEC.
Subsequent Events
- Closed on the acquisition of Gage Growth Corp.
- Appointed Ziad Ghanem as President and Chief Operating Officer.
- Appointed Jared Anderson, SVP Finance & Strategy; Charishma Kothari, SVP Marketing and Charles Oster, SVP Sales.
- Appointed Kara DioGuardi to the Board of Directors.
- Became first major MSO to expand its ecommerce platform via proprietary Apothecarium mobile app, available in the Apple App store, with express pick-up and delivery where permitted.
| 1. Adjusted EBITDA and the respective margin and Adjusted Gross Profit and the respective margin are non-GAAP measures. Please see discussion and reconciliation of non-GAAP measures at the end of this press release. |
| 2. According to Headset Data for the period December 1, 2021 through December 26, 2021. |
Full Year and Fourth Quarter 2021 Financial Results
Net sales for the full year 2021 totaled $210.4 million as compared to $147.8 million for 2020, an increase of 42% primarily driven by the Company’s first complete year in the New Jersey medical market and retail growth in Pennsylvania, reflecting the acquisition of KCR in May of 2021, as well as a full year of operations at the three existing Apothecarium dispensaries. Total revenue also benefitted from the late 2020 expansion of State Flower cultivation in California and entry into Maryland through the acquisition of HMS Health in May of 2021.
Net sales for the fourth quarter of 2021 were $49.2 million as compared to $49.1 million for the third quarter of 2021 and $49.6 million for the fourth quarter of 2020.
Gross margin for the full year 2021 was 53.3% as compared to 54.8% for the full year 2020. Adjusted gross margin, a non-GAAP financial measure, for the full year 2021 was 56.1% compared with 57.2% in 2020 driven by second half under-absorption related to the reset of the Company’s Pennsylvania cultivation facility.
Gross margin for the fourth quarter of 2021 was 42.3% as compared to 43.8% in the third quarter of 2021 related to one-time non-cash write-downs of inventory in Canada and a step up in fair value of inventory related to the acquisition of HMS Health. Adjusted gross margin for the fourth quarter of 2021, excluding these one-time items, was 49.8% as compared to 46.2% for the third quarter of 2021, a 360 basis point improvement quarter-over-quarter.
General & Administrative expenses (G&A) for the full year 2021, excluding stock-based compensation, improved to 31.4% of revenue versus 37.6% of revenue in 2020. G&A excluding stock-based compensation was $66.0 million in 2021, up from $55.5 million in 2020 driven by increased personnel expenses to support the growth of the business and legal expenses primarily related to acquisitions and settlements. Additionally, lease expense, now part of G&A under US GAAP across all periods, rather than previously being reported as finance expense under IFRS, totaled $4.5 million for 2021 and $3.8 million for 2020, representing approximately 2% of revenue.
G&A, excluding stock-based compensation, for the fourth quarter of 2021 totaled $17.0 million as compared to $16.1 million for the third quarter of 2021 with the increase primarily related to an increase in professional fees for US filer and GAAP conversion work.
Full year 2021 adjusted EBITDA was $65.6 million, or $70.1 million excluding lease expense under IFRS, versus $41.7 million, or $45.5 millionexcluding lease expense under IFRS in 2020, representing 57% growth year over year. 2021 adjusted EBITDA margin was 31.2% versus 28.2% in 2020, a 300 basis point improvement year over year. This improvement was driven by the ramp up of New Jersey operations, the acquisition of HMS in Maryland, and profitability improvements year over year in both California and Canada.
Fourth quarter 2021 adjusted EBITDA was $11.9 million, representing a 24.2% adjusted EBITDA margin, as compared to $9.0 million and an 18.3% margin in the third quarter of 2021. This sequential improvement in adjusted EBITDA was primarily driven by growth in New Jerseyand improvement in Pennsylvania. Adjusted EBITDA, excluding lease expense under IFRS, was $12.8 million in the fourth quarter of 2021 as compared to $10.5 million in the third quarter of 2021.
Operating income for the full year 2021 totaled $23.5 million as compared to $9.6 million in full year 2020, representing an increase of 145% year over year. The increase was primarily driven by the scale up of the New Jersey business and the acquisitions of HMS in Maryland and KCR in PA.
Fourth quarter 2021 operating income was $0.3 million as compared to a loss of $1.8 million for the third quarter of 2021. The improvement quarter over quarter was due to gross margin expansion and lower share based compensation expense.
Net income for the full year 2021 totaled $6.1 million, mainly related to a non-cash $58 million gain on fair value of warrant liability compared with a net loss of $142 million in the prior year, which was impacted by a non-cash $110 million loss on fair value of warrant liability.
Net loss in the fourth quarter was $5.9 million, mainly related to a one-time loss of $3.3 million in lease termination fees, $6.9 million of finance and other expenses, $6.9 million of accrued income taxes, and $2.0 million of transaction costs mostly related to the Gage acquisition. These expenses were partially offset by a $14.4 million non-cash gain on fair value of warrant liability.
Balance Sheet and Cash Flow
Cash and cash equivalents were $79.6 million as of December 31, 2021, compared to $102.6 million as of September 30, 2021 and $59.2 millionas of December 31, 2020, providing ample capacity to fund planned organic and inorganic growth initiatives. During the quarter, the Company made the final payment of $25 million related to the partial buyout of its New Jersey partnership, taking ownership up to 87.5%, from 75%.
Cash used in operations was $3.8 million for the three months ended December 31, 2021, mainly driven by an increase in inventory related to the anticipated start of adult use sales in New Jersey. For the full year, cash used in operations was $32 million related to a $24 millionworking capital increase, mainly related to preparation for New Jersey adult use, and a contingent consideration payment of $11 million.
Capital expenditures were $11.8 million in the fourth quarter of 2021 primarily related to capacity expansions at the Pennsylvania and Maryland facilities, and completion of the third New Jersey dispensary located in Lodi. For the full year 2021 capital expenditures were $38.5 million, of which approximately half was utilized for expansion in Pennsylvania with the remainder related to the buildout of New Jersey and the acquisition of the 156,000 square foot facility in Hagerstown, Maryland.
As of March 15, 2022 there were 318.2 million basic shares outstanding including 251.8 million common shares, 14.0 million preferred shares as converted, and 52.4 million exchangeable shares, including both Canopy and Gage exchangeable shares.
Conference Call
TerrAscend will host a conference call today, March 16, 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.
| CONFERENCE CALL DETAILS | |
| DATE: | Wednesday, March 16, 2022 |
| TIME: | 5:00 p.m. Eastern Time |
| WEBCAST: | Click here |
| DIAL-IN NUMBER: | 1-888-664-6392 |
| CONFERENCE ID: | 36277662 |
| REPLAY: | (416) 764-8677 or (888) 390-0541 Available until 12:00 midnight Eastern Time Friday, April 1, 2022Replay Code: 277662 |
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.
