SLANG Worldwide Announces First Quarter 2022 Financial Results

SLANG Worldwide Inc. (CNSX: SLNG) (OTCQB: SLGWF) (“SLANG” or the “Company“), a leading global cannabis consumer packaged goods (CPG) company with a diversified portfolio of popular brands, today released financial results for the three months ended March 31, 2022. All figures in this press release are stated in Canadian dollars unless otherwise noted. 

Drew McManigle, Interim CEO and Chairman of SLANG, said, “We entered 2022 as a new company, advancing a more streamlined and efficient infrastructure to more effectively operate and expand in today’s largest and fastest growing cannabis markets. We are recognizing higher margin sales due to the successful implementation of our transformational growth strategy, eliminating non-performing assets and consolidating our supply chain. I am pleased to report that we have reduced our operating expenses by 32% while increasing our gross margins. I believe we will continue upon this path to recognize stronger financial results going forward and successfully scale our operations in our Core and Emerging markets.” 

“With a strong balance sheet in place and growing demand for our market-leading cannabis products, such as our O.pen vape cartridge, we are well positioned to build upon our leadership position in each of our target markets. In the upcoming quarters, we will continue to focus on new M&A opportunities while organically growing our most popular brands. I look forward to sharing our continued progress and the new level of growth we are set to achieve as the NEW SLANG.” 

First Quarter 2022 Operational Highlights and Growth Drivers:

• Continued build-out of Vermont operations following the acquisition of High Fidelity, Inc. (“HiFi“), one of Vermont’s largest medical cannabis companies, in August 2021, to advance the Company’s ability to leverage a vertically integrated infrastructure and adding Vermont as a Core Market to become a first mover for adult use sales in the state, which is expected later this year. 
• Continued wind down and elimination of non-performing assets, including manufacturing operations of all SLANG branded THC products in Oregon and cultivation operations in Colorado, in order to advance its restructured growth strategy focused on cost control, operating efficiencies and an optimized infrastructure. 
• Advanced discussions with prospective Board Members to build upon the already strengthened management team put in place during the Company’s rollout of its transformational business plan. 
• Strengthened the SLANG brand portfolio by implementing, rebranding and reformulating the product portfolio initiatives to increase margins in Core Markets and enhance product offerings. 
• SLANG’s brands continued to earn market-leading positions in its core markets in Q1 2021, highlighted by O.pen maintaining its #1 ranking in the vape cartridge category In Colorado, according to BDSA.
• 498,476 SLANG Branded Units were sold across The SLANG Network in the three months ended March 31, 2022. 

Subsequent Quarterly Operational Highlights:

• Launched operations in Michigan through an exclusive strategic partnership with a leading high-quality premium cannabis brand and operator in the state in May 2022, beginning with the launch of the Company’s best-selling, premium vape produce line, O.pen Daily Strains.
• Launched operations in Maryland through a strategic partnership with Trulieve Cannabis Corp. (“Trulieve“), a leading and top-performing cannabis company based in the United States, in May 2022. This is the third market that SLANG has entered in partnership with Trulieve.

First Quarter 2022 Financial Highlights

• Revenue from continuing operations for Q1 2022 was $8.37 million, compared to Q1 2021 revenue of $9.09 million.
• Gross profit of $3.66 million (44% gross margin) in Q1 2022, compared with $3.90 million (43% gross margin) in Q1 2021.
• EBITDA of ($2.36 million) in Q1 02022, compared with ($4.0 million) in Q1 2021. The improvement in EBITDA is primarily attributable to a reduction in share-based compensation payments offset by a decrease in gross profit and an increase in salaries & wages and consulting and subcontractor expense.
• The Company reduced operating expenses from continuing operations by $3.57 million, or 32%, in Q1 2022 when compared to Q4 2021, which is a result of the cost cutting and restructuring initiatives implemented over the last two quarters.
• $16.56 million in cash and restricted cash on March 31, 2022, compared to $20.83 million on December 31, 2021.

First Quarter 2022 Consolidated Financial Statements
The consolidated financial statements were prepared in accordance with IFRS. The following is selected presentation of the Income Statement for the three months ended March 31, 2022.

See the Company’s management’s discussion and analysis for the three months ended March 31, 2022 (the “Q1 2022 MD&A“) for a detailed reconciliation of EBITDA and Adjusted EBITDA to Operating Income / (Loss). SLANG’s financial statements and the Q1 2022 MD&A are available on SEDAR at www.sedar.com, and on the Company’s Investor Relations website at www.slangww.com.

Non-IFRS Measures

EBITDA, Adjusted EBITDA and Branded Unit volume are non-IFRS financial measures that the Company uses to assess its operating performance. EBITDA is defined as net earnings (loss) before net finance costs, income tax expense (benefit) and depreciation and amortization expense. Management defines Adjusted EBITDA as EBITDA adjusted for other non-cash items such as the impact of unrealized fair values, share based compensation expense, impairments, one-time gains and losses, and one-time revenues and expenses. See the heading “Key Performance Indicators” in the Q1 2022 MD&A for a description of how Branded Unit volume is calculated. This data is furnished to provide additional information and are non-IFRS measures and do not have any standardized meaning prescribed by IFRS. The Company uses these non-IFRS measures to provide shareholders and others with supplemental measures of its operating performance. The Company also believes that securities analysts, investors and other interested parties, frequently use these non-IFRS measures in the evaluation of companies, many of which present similar metrics when reporting their results. As other companies may calculate these non-IFRS measures differently than the Company, these metrics may not be comparable to similarly titled measures reported by other companies. We caution readers that Adjusted EBITDA should not be substituted for determining net loss as an indicator of operating results, or as a substitute for cash flows from operating and investing activities.

Conference Call Details

Management plans to host an investor conference call today, May 26, 2022 at 10:00am ET to discuss the results.