C21 Investments Announces Q3 Results

C21 Investments Inc. (CSE: CXXI) (OTCQX: CXXIF) (“C21” or the “Company”), a vertically integrated cannabis company, today announced unaudited results for its third quarter ended October 31, 2021. All currency reported in U.S. dollars (unless otherwise noted).

Financial Highlights (period ending October 31, 2021):

• Revenue of $8.2 million; Year-to-Date Nevada revenue up 3% over last year 
• Gross Profit of $4.4 million; Gross Margin of 43% before fair value adjustments 
• Adjusted EBITDA¹ of $2.2 million (a 27.4% EBITDA Margin) and $8.6 million year-to-date 
• Nevada EBITDA of $3.8 million, up 14% over Q2; Nevada EBITDA of $11.5 million Year-to-Date 
• Net Income of $3.3 million; Earnings Per Share of $0.03 for Q3 and $0.09 year-to-date 
• Cash Flow from Operations of $5.5 million Year-to-Date which includes $3.1 million Income Tax paid 
• Total Liabilities reduced by $4.2 million from Q2; $14.7 million in reductions Year-to-Date

Financial Commentary:

Revenue for the third quarter was $8.2 million, down 9% from Q2, in line with industry trends for the period. Comparatively, the State of Nevada reported a 17% decline in cannabis sales from July to September 2021². Recognizing market conditions, C21 remained vigilant in sustaining the profitability of its operations. The Nevada segment continued to deliver strong results, including $3.8 million in EBITDA for the third quarter – up 14% over Q2 – and $11.5million Nevada EBITDA year-to-date (see Nevada EBITDA table in MD&A and below).

“C21 continues to deliver positive free cash flow and profitable bottom-line performance. Despite challenging markets in the quarter, our focus on efficiency delivered $0.03 in Earnings per Share, and allowed us to make further significant reductions to Total Liabilities,” stated Sonny Newman, President and CEO of C21. “The first harvest from our expanded cultivation facility was completed in the third quarter, which delivered an 18% average increase in flower yields. As planned, we are now selling flower in the Nevada wholesale market, which we expect will drive topline growth moving forward. While the consolidation environment in the industry remains highly competitive, we continue to weigh strategic opportunities for the Company to maximize shareholder value.”

Gross Profit for the quarter was $4.4 million, with Gross Margin of 43.0% before fair value adjustments down from 52% in Q2. This was impacted primarily by a decline in sales and weaker margins in Oregon. Nevada operations continued to deliver strong Gross Margin of 52.0% before fair value adjustments, up 100 basis points over Q2. The Company delivered $2.2 million of Adjusted EBITDA¹ for the quarter, a 27.4% EBITDA Margin. Year-to-date adjusted EBITDA was $8.6 million, a 32.6% EBITDA Margin. SG&A expenses were relatively flat at $1.9 million (23% of revenue) for Q3.

Cash Flow from Operations was $1.0 million for Q3 – the tenth consecutive quarter of positive Cash Flow from Operations – and totals $5.5 million year-to-date after $3.1 million in Income Tax paid (see Statement of Cash Flows). Q3 Cash Flow from Operations was impacted by pay down of accrued Income Tax of $1.4 million as well as Special Project costs of $0.2 million.

The Company reported Net Income of $3.3 million for Q3, or $0.03 Earnings Per Share and $11.4 million Net Income ($0.09 EPS) year-to-date. This included changes in fair value of derivative liabilities (see MD&A). Excluding the changes in derivative liabilities, Adjusted Net Income¹ was $1.0 million for Q3.

Cash position at end of the third quarter was $3.3 million, down $0.9 million from Q2 reflecting the aforementioned accrued Income Tax payments and other one-time costs. The Company’s Senior Secured Note was reduced by $1.5 million in the quarter. As a result, Total Liabilities for Q3 were reduced by $4.2 million from last quarter and $14.7 millionyear-to-date (see Balance Sheet summary provided).

Subsequent to the quarter end, the Company announced plans to transition to U.S. GAAP accounting for the fourth quarter and current fiscal year ending January 31, 2022 (see news release dated November 18, 2021).

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Non-IFRS Measures:

“Adjusted EBITDA” and “Adjusted Net Income” are supplemental, non-GAAP financial measures. The Company defines EBITDA as earnings before depreciation and amortization (excluding rent classified as lease amortization), income taxes, and interest. Additionally, the Company’s Adjusted EBITDA presented above excludes fair value adjustments, accretion, impairment charges, one-time transaction costs and all other non-cash items. The Company has presented “Adjusted EBITDA” and “Adjusted Net Income” because management believes these are useful measures for investors when assessing and considering the Company’s continuing operations and prospects for the future. Furthermore, “Adjusted EBITDA” is a commonly used measurement in the financial community when evaluating the market value of similar companies. “Adjusted EBITDA” and “Adjusted Net Income” are not measures of performance calculated in accordance with IFRS, and these metrics should not be considered in isolation of, or as a substitute for, the measurement of the Company’s performance prepared in accordance with IFRS. “Adjusted EBITDA,” as calculated and reconciled in the table above, may not be comparable to similarly titled measurements used by other issuers and is not necessarily a measure of the Company’s ability to fund its cash needs.

Balance Sheet:

Financial Summary:

Adjusted EBITDA:

Nevada EBITDA (see MD&A):