SLANG Worldwide Announces Third Quarter 2022 Financial Results

Completes Integration of Acquired Vermont Cannabis Operations in Preparation for Launch of Adult-Use Sales 

Successfully Launched Alchemy Naturals in Colorado

Leveraged New Streamlined Infrastructure in Vermont and Colorado to Sustain Higher Gross Margins and Increase Cash Flow

Toronto, Ontario–(Newsfile Corp. – November 29, 2022) – SLANG Worldwide Inc. (CSE: 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 and nine months ended September 30, 2022. All figures in this press release are stated in Canadian dollars unless otherwise noted. 

John Moynan, CEO of SLANG, said, “As I was appointed CEO in October, SLANG had been set on a new growth trajectory as we neared the completion of our operational restructuring. In the third quarter, SLANG strategically advanced upon a number of key growth opportunities in our Core Markets of Colorado and Vermont which have significantly enhanced our leadership position and are now driving a new level of financial success. Most notably, we completed the integration of our newly acquired Vermont cannabis operations and successfully launched adult-use sales in our Burlington store in October as the first adult-use dispensary in the state. As sales continue to build from the launch of new products, we face a greater opportunity to serve a more expansive consumer base and believe Vermont will serve as a key revenue channel for our business.” 

“Despite a weakening in the Colorado market in the quarter, our O.pen brand continued to perform strongly and remains the top selling vape product in the market. Once again, O.pen was recognized as Colorado’s best vape product by BDSA, generating $3.8 million in retail sales in September, $1.5 million more than the nearest branded competitor and private label competitor. We exceeded our sales projections for the month of October and believe that, as demand continues to build for O.pen, as well as our newly launched Alchemy products, we will continue to see steady financial growth from these products going forward. This is perhaps the most exciting time in SLANG’s history. We are operating more efficiently than ever before and we have a clear path towards profitability.” 

Third Quarter 2022 Operational Highlights and Growth Drivers:

• Vermont regulators issued a retail marijuana license to the Company on September 28, 2022, allowing the Company to open its Ceres Collaborative dispensary on October 1, 2022, Vermont’s first adult-use cannabis store;
• Successfully launched Alchemy Naturals Edibles in Colorado in July and e-commerce in September with an 8% growth in dollar sales from July to September;
• Sustained margin improvement of 44% along with significant reduction in operational expenses;
• Increased Colorado sales as one of the Company’s key accounts delivered a 229% increase in sales from August to September. SLANG achieved total Colorado sales growth for the month of September of 44.5% year-over-year and 75% from August, significantly beating the Company’s overall quarterly sales forecast in Colorado by 12%.

Subsequent Quarterly Operational Highlights:

• Cash flow positive in October^[1];
• Kicked off 10 Years of O.pen Program in October with the launch of special incentives driving strong October product sales; 
• O.pen ranked #1 Vape Brand in Colorado for its 20 month since 2019;
• Adult-use sales in Vermont began October 1, 2022.

Third Quarter 2022 Financial Highlights

• Revenue from continuing operations for the three months ended September 30, 2022 (“Q3 2022“) was $8.17 million, compared with $9.36 million in the three months ended September 30, 2021 (“Q3 2021“), representing a 13% decrease year-over-year. The primary drivers of the decrease were due to a reduction of $0.87 million in sales in our non-core markets sales, a reduction of $0.78 million in Firefly 2+ sales and a reduction of $0.29 million in Colorado Core Market sales, offset by a $0.75 million increase in revenue associated with the acquisition of High Fidelity, Inc. (“HiFi“) completed on August 11, 2021.
• Gross profit of $3.60 million (44% gross margin) in Q3 2022, compared with $3.46 million (37% gross margin) in Q3 2021, representing a 4% increase year-over-year. Despite the decrease in revenue year-over-year, gross profit increased due to lower cost of raw cannabis inputs in Colorado, higher margins associated with HiFi’s retail operations, and two previously completed strategic initiatives being the elimination of low-margin Oregon sales and the elimination of low margin products via an internal SKU rationalization process.
• EBITDA of ($3.43 million) in Q3 2022, compared with ($5.54 million) in Q3 2021. The improvement in EBITDA is primarily attributable to a reduction of $1.86 million in expected credit losses and an increase in gross profit of $0.14 million.
• Adjusted EBITDA of ($1.24 million) in Q3 2022, compared with ($1.56 million) in Q3 2021. The improvement in Adjusted EBITDA is primarily attributable to a $0.45 million increase in gross profit before fair value adjustments on biological assets, offset by an increase in operating expenditures related to HiFi, which is not presented in the comparative period before August 11, 2021.
• $12.23 million in cash and restricted cash on September 30, 2022, compared to $20.83 million on December 31, 2021, and $15.72 million on June 30, 2022.

EBITDA and Adjusted EBITDA are non-IFRS financial measures that is further described under the section “Non-IFRS Measures” herein.

Third 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 September 30, 2022.

See the Company’s management’s discussion and analysis for the three months ended September 30, 2022 (the “Q3 2022 MD&A“) for a detailed reconciliation of EBITDA and Adjusted EBITDA to Operating Income / (Loss). SLANG’s financial statements and the Q3 2022 MD&A are available on SEDAR at www.sedar.com, and on the Company’s Investor Relations website at www.slangww.com.

Subsequent to the third quarter of 2022, the Company has also granted 4,733,526 incentive stock options (the “Options“) to acquire common shares in the capital of the Company with an exercise price to equal the greater of: (i) the closing market price on November 30, 2022; and (ii) the closing market price on December 1, 2022, to its independent directors. The Options are subject to vesting provisions and are non-transferrable.

Non-IFRS Measures

EBITDA and Adjusted EBITDA 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. 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, November 29, 2022 at 10:00am ET to discuss the results.