TerrAscend Reports First Quarter Net Sales of $53.4 Million and Adjusted EBITDA of $22.6 Million

— Raises full year 2021 guidance for Net Sales to exceed USD $300 million and Adjusted EBITDA to exceed USD $128 million²

— Substantial cash balance of USD $234 million provides ample support for future growth initiatives

NEW YORK and TORONTO, May 19, 2021 /CNW/ – TerrAscend Corp. (“TerrAscend” or the “Company”) (CSE: TER) (OTCQX: TRSSF), a leading North American cannabis operator, today reported financial results for its first quarter ending March 31, 2021.  

First Quarter 2021 Financial Highlights
(Unless otherwise stated, all results are in U.S. dollars)²

• Net Sales increased 106% to $53.4 million compared to $25.9 million in Q1 2020. 
• Adjusted Gross Profit Margin³ increased to 65% compared to 45% in Q1 2020. 
• Adjusted EBITDA increased more than five-fold to $22.6 million compared to $3.7 million in Q1 2020. 
• Adjusted EBITDA Margin¹ was 42% compared to 14% in Q1 2020. 
• Cash Flow From Operations was $13.3 million compared to a loss of $0.8 million in Q1 2020. 
• Cash balance of $234 million at quarter end to support future growth initiatives.

Management Commentary

“In Q1, we drove strong revenue growth, margin expansion and cash generation by continued focus on operational excellence, disciplined cost control and effective allocation of capital,” said Jason Wild, Executive Chairman of TerrAscend. “I’m pleased with the strong results our team has delivered to begin the year.” 

Mr. Wild added, “Looking ahead to the rest of the year, there are strong operational tailwinds helping our business as we continue to see the benefits from recently completed cultivation expansions, and the addition of retail locations in New Jersey, Pennsylvania and Maryland.”

First Quarter 2021 Operational Highlights

• Completed 80,000 square foot indoor cultivation and manufacturing facility in New Jersey
• Received permit allowing for extraction, processing, and manufacturing in New Jersey
• Raised $175 million in an oversubscribed non-brokered private placement in January 2021
• Agreed to settlement and termination of offtake agreement with PharmHouse for an immaterial amount

Subsequent Events

• Announced and completed Pennsylvania dispensary acquisition of Keystone Canna Remedies (‘KCR’)  
• Completed Maryland grower processor acquisition of HMS Health
• Opened largest Apothecarium dispensary on East Coast in Maplewood, New Jersey

Financial Summary of Q1 2021 and Comparative Periods

Net Sales increased 106% to $53.4 million in the first quarter of 2021, as compared to $25.9 million in the first quarter of 2020. This strong year over year growth was driven by cultivation capacity expansions in Pennsylvania, New Jersey, and California as well as five new dispensary openings during 2020. Net Sales increased 8% quarter-over-quarter driven by a full quarter of capacity expansion in Pennsylvania and the initial ramp up of the operations in New Jersey.

Adjusted gross margin, before gain on fair value of biological assets, was 65% in the first quarter of 2021 compared to 45% in the first quarter of 2020 and 60% in the fourth quarter of 2020. The 500 basis point improvement quarter-over-quarter in adjusted gross margin to 65% is due to greater mix of higher margin sales from Pennsylvania and the initial ramp of retail and wholesale operations in New Jersey.  

G&A expense was $15.8 million, representing 30% of Net Sales in the first quarter of 2021, a decrease from 42% of Net Sales in the first quarter of 2020. Sequentially, G&A expense increased from 23% in the fourth quarter of 2020. Approximately half of the increase was related to one-time legal and severance costs while the remainder was related to planned investments in personnel, systems and other capabilities to enable future growth. 

Adjusted EBITDA was $22.6 million in the first quarter of 2021 compared to $3.7 million in the first quarter of 2020.  Adjusted EBITDA margin in the first quarter of 2021 was 42% compared to 14% in the first quarter of 2020 and 40% in the fourth quarter of 2020. 

Net loss for the first quarter of 2021 was $12.7 million, largely impacted by a loss on fair value of warrants of $5 millionand an unrealized foreign exchange loss of $3 million, along with income tax expense of $10 million, financing, and other expenses of $7 million, share based compensation of $4 million and depreciation and amortization, inclusive of depreciation and amortization in cost of goods sold, of $4 million.  

Cash and cash equivalents were $234 million as of March 31, 2021, compared to $59 million as of December 31, 2020 demonstrating the strong balance sheet position to support the Company’s growth initiatives. The Company raised net proceeds of $173.4 million in January in an oversubscribed non-brokered private placement and received $9 million of proceeds from warrant and option exercises during the quarter.  Cash from operations was positive $13 millionfor the quarter while free cash flow, after $8 million of capex spending, was positive $5 million for the quarter. This is the second consecutive quarter in which the Company generated a positive free cash flow.  

As of May 19, 2021, there were 319 million shares outstanding on a fully diluted basis. Fully diluted shares outstanding include approximately 184 million common shares, 14 million common share equivalent preferred shares, 39 million exchangeable non-voting shares, and 82 million warrants and options. Basic shares outstanding on an as converted basis are approximately 237 million. The warrants and options had a weighted average strike price of C$4.90 on March 31, 2021.

2021 Outlook

TerrAscend is raising full year guidance and expects Net Sales to exceed USD $300 million versus previous guidance of USD $290 million and Adjusted EBITDA to exceed USD $128 million versus previous guidance of USD $122 million.

In Pennsylvania, the Company will benefit from increased cultivation capacity completed in late 2020, as well as, the recent acquisition of KCR, which increased its dispensary footprint to six locations.  

In New Jersey, sales from the Company’s 40,000 square foot greenhouse and 80,000 square foot indoor cultivation facilities are expected to ramp up throughout 2021. TerrAscend’s Phillipsburg, New Jersey dispensary achieved its first full quarter of sales in the first quarter of 2021, a second dispensary opened in Maplewood on May 7^th, and the Company plans to open a third dispensary later this summer.  

In Maryland, the Company will benefit from the contribution of the recently acquired HMS Maryland business. 

In California, the Company will benefit from a full quarter of sales from the recently expanded State Flower cultivation facility which has increased annual production capacity of super-premium craft flower by 500%. The Company’s California retail footprint will benefit from the two Apothecarium locations in Berkeley and Capitola which opened in the second half of 2020. Both locations continue to ramp up and the overall business continues to recover from the easing of COVID restrictions in the state. 

In Canada, the Company expects to see positive contributions to sales and profits with its newly streamlined product portfolio and optimized cost structure.

Finally, the Company remains on track to become a U.S. filer with the United States Securities and Exchange Commission (SEC) by the end of 2021 and is preparing to meet the requirements necessary for its securities to be traded on a national U.S. exchange should such an event become permissible by U.S. law.

Conference Call

TerrAscend will host a conference call today, May 19, 2021, to discuss these results. Jason Wild, Executive Chairman, Keith Stauffer, Chief Financial Officer and Greg Rochlin, Chief Executive Officer of Northeast operations will host the call starting at 8:30 a.m. Eastern time. A question-and-answer session will follow management’s presentation.

Financial results and analyses are available on the Company’s website (www.terrascend.com) and SEDAR (www.sedar.com).