Second quarter GAAP revenue of $21.1 million increased 34.9% sequentially and 48.2% YoY –
– Excluding former Arizona operations, second quarter revenue increased 62.7% YoY –
MINNEAPOLIS, Aug. 11, 2022 /PRNewswire/ — Goodness Growth Holdings, Inc. (“Goodness Growth” or the “Company”) (CSE: GDNS; OTCQX: GDNSF), a physician-led, science-focused cannabis company and IP incubator, today reported financial results for its second quarter ended June 30, 2022. All currency figures referenced in this press release reflect U.S. dollar amounts.
“Our second quarter results reflect improved margin performance driven by continued growth in our Minnesota, New Mexico, and Maryland markets, as well as benefits from the recent wind down of operations in Arizona which we discussed last quarter,” said Chairman and Chief Executive Officer, Kyle Kingsley, M.D. “GAAP gross margin performance includes activities related to our Arizona operations, which were wound down prior to the end of the second quarter. Excluding Arizona operations, we estimate that second quarter pro forma gross margins would have been approximately 55.0 percent.”
Kingsley continued, “Strong sales growth catalysts resulting from the recent regulatory changes in Minnesota and New Mexico are expected to persist into next year, and we’re also looking forward to contributions from the launch of edibles products which occurred in Minnesota earlier this month. Finally, our expansion project in New York is progressing ahead of the launch of adult-use sales in that important market, and we continue to expect our pending transaction to be acquired by Verano Holdings Corp. will close sometime during the fourth quarter of this year.”
| Summary of Key Financial Metrics | ||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||
| US $ in millions | June 30, | June 30, | ||||||||||
| 2022 | 2021 | Variance | 2022 | 2021 | Variance | |||||||
| GAAP Revenue | $21.1 | $14.2 | 48.2 % | $36.7 | $27.4 | 33.9 % | ||||||
| Revenue (excl. AZ and OH) | $19.7 | $12.1 | 62.7 % | $34.4 | $21.8 | 57.9 % | ||||||
| GAAP Gross Profit | $10.4 | $6.9 | 50.0 % | $12.9 | $12.5 | 2.6 % | ||||||
| Gross Profit Margin | 49.2 % | 48.6 % | 60 bps | 35.0 % | 45.7 % | -1,070 bps | ||||||
| SG&A Expenses | $8.6 | $8.3 | 3.9 % | $17.9 | $16.3 | 9.8 % | ||||||
| SG&A Expenses (% of Sales) | 40.9 % | 58.3 % | -1,740 bps | 48.7 % | 59.6 % | -1,070 bps | ||||||
| Adjusted EBITDA (non-GAAP) | $2.3 | ($1.0) | NM | ($0.3) | ($2.7) | NM | ||||||
| Adjusted EBITDA Margin (non-GAAP) | 11.1 % | (6.8 %) | 1,790 bps | (0.8 %) | (10.0 %) | 920 bps |
Second Quarter 2022 Financial Summary
Total revenue in the second quarter was $21.1 million, an increase of 48.2 percent as compared to Q2 2021, and 34.9 percent as compared to Q1 2022. Excluding contributions from the Company’s former Arizona operations, total revenue increased 62.7 percent year-over-year and reflected strong growth in the Company’s Maryland, Minnesota, and New Mexico markets. Retail revenue excluding Arizona increased 74.5 percent to $17.0 million in Q2 2022. Wholesale revenue excluding Arizona increased by 14.2 percent to $2.7 million, driven by increased sales in Maryland and Minnesota.
Gross profit was $10.4 million, or 49.2 percent of revenue, as compared to gross profit of $6.9 million or 48.6 percent of revenue in Q2 last year. The improvement in gross profit dollars was driven by higher production volume and increased sales, with relatively stable margin performance.
Total operating expenses in the second quarter were $10.1 million, a reduction of $0.1 million as compared to $10.2 million in the second quarter of 2021.
Operating income in the second quarter was $0.3 million, an increase of $3.5 million compared to an operating loss of $3.2 million in Q2 last year. The improvement in operating performance was driven by increased revenue and gross profit dollars, as well as the slight reduction in total operating expenses.
Total other expenses were $5.4 million during Q2 2022, compared to $2.9 million in Q2 2021. The variance in other expenses is primarily attributable to increased interest expense related to the Company’s credit facility.
EBITDA, as described in accompanying non-GAAP reconciliation, was $1.1 million during Q2 2022, compared to a loss of $2.4 million in Q2 2021. Adjusted EBITDA was $2.3 million in Q2 2022, as compared to a loss of $1.0 million in Q2 2021. Please refer to the Supplemental Information and Reconciliation of Non-GAAP Financial Measures at the end of this press release for additional information.
Net loss in Q2 2022 was $6.2 million, as compared a loss of $7.0 million in Q2 2021. The variance compared to the prior year was driven by the improvement in operating income, offset by increased interest expenses.
Other Events
On February 1, 2022, the Company announced that it has entered into a definitive arrangement agreement with Verano Holdings Corp. pursuant to which Verano will acquire all of the issued and outstanding shares of the Company in an all-share transaction valued at the time of announcement at approximately US $413 million on a fully-diluted basis. Under the terms of the Arrangement Agreement, each holder of Goodness Growth subordinate voting shares will receive 0.22652 of a Verano Class A subordinate voting share for each Goodness Growth subordinate voting share held and each holder of Goodness multiple voting shares and Goodness Growth super voting shares will receive 22.652 Verano Shares for each Goodness Growth multiple voting share and Goodness Growth super voting share held, respectively. The transaction is subject to the approval of shareholders; the approvals of the Supreme Court of British Columbia; New York State regulatory requirements; and other customary conditions of closing.
On June 23, 2022, the Company announced the launch of HiColor™ cannabis-infused chews in New York, which are now available through the Company’s retail and wholesale channels in the New York market. The new line of cannabis-infused edibles is currently available in five gourmet flavors and two formulations.
On August 1, 2022, the Company announced the launch of cannabis-infused gummies at all eight of the Company’s Green Goods® dispensaries in Minnesota, in accordance with Minnesota’s new regulations allowing certified medical cannabis patients in the state to purchase certain edible products containing cannabis. Gummies are available in 10mg formulations and in Key Lime, Concord Grape, Hawaiian Pineapple and Oxnard Strawberry flavors. An additional formulation, with equal amounts of THC and CBD and in Alfonso Mango flavor, is expected to follow later this year.
Balance Sheet and Liquidity
As of June 30, 2022, the Company had 128,111,328 equity shares issued and outstanding on an as-converted basis, and 159,619,637 shares outstanding on an as-converted, fully diluted basis.
As of June 30, 2022, total current assets were $46.4 million. The Company had cash on hand of $17.0 million, which included net proceeds received from an increase on its delayed draw loan of $13.5 million during the second quarter. Total current liabilities were $18.5 million.
