TerrAscend Reports Second Quarter 2023 Record Net Revenue of $72.1 Million, an Increase of 12.7% Year-Over-Year and 3.9% Sequentially

 TerrAscend Corp. (“TerrAscend” or the “Company”) (TSX: TSND) (OTCQX: TSNDF), a leading North American cannabis operator, today reported its financial results for the second quarter ended June 30, 2023. All amounts are expressed in U.S. dollars and are prepared under U.S. Generally Accepted Accounting Principles (GAAP), unless indicated otherwise.

The following financial measures are reported as results from continuing operations due to the shutdown of the licensed producer business in Canada, which is reported as discontinued operations for all of 2022. All historical periods have been restated accordingly.

Second Quarter 2023 Financial Highlights

• Net Revenue was $72.1 million, an increase of 3.9% sequentially and 12.7% year-over-year.
• Gross Profit Margin was 50.2%, compared to 48.8% in Q1 2023 and 37.5% in Q2 2022.
• GAAP Net loss from continuing operations was $12.9 million, compared to $19.2 million in Q1 2023 and net income of $16.9 million in Q2 2022.
• EBITDA from continuing operations¹ was $6.5 million, compared to $6.1 million in Q1 2023 and $38.4 million in Q2 2022.
• Adjusted EBITDA from continuing operations¹ was $12.8 million, compared to $12.2 million in Q1 2023 and $8.8 million in Q2 2022.
• Adjusted EBITDA Margin from continuing operations¹ was 17.8%, compared to 17.6% in Q1 2023 and 13.8% in Q2 2022.
• Net cash provided by (used in) operating activities – continuing operations was $1.8 million compared to $10.5 million in Q1 2023 and ($14.9) million in Q2 2022.
• Cash and Cash Equivalents, including restricted cash, totaled $34.5 million as of June 30, 2023, of which $2.5 million was long term restricted, as compared to $33.5 million as of March 31, 2023.

Second Quarter 2023 Business and Operational Highlights 

• Announced three dispensary acquisitions in Maryland to reach the four store limit in the state
• Closed on the acquisitions of Blue Ridge Wellness and Peninsula Alternative Health dispensaries in Maryland
• Closed Private Placements for total aggregate proceeds of $21.0 million
• Closed on a $25.0 million commercial loan with Stearns Bank carrying an interest rate of prime plus 2.25%, equivalent to 10.5%, with proceeds used to pay down higher interest debt
• Paid down $37.0 million of senior secured term loan in Pennsylvania
• Completed sale of Mississauga facility for $14.3 million
• Launched Legend brand in Michigan
• Introduced Wana infused gummies in New Jersey and Maryland
• Opened fifth Cookies dispensary in Michigan
• Expanded Cookies partnership into Maryland
• Completed a re-organization of the Company in order to list on the TSX

Subsequent Events

• Reached four dispensary limit in Maryland with the closing of the Herbiculture acquisition
• Commenced trading on the TSX under the symbol ‘TSND’ and announced symbol change on OTC markets to ‘TSNDF’

“We are pleased to deliver results in the second quarter that exceeded our internal forecasts. We have made substantial progress over the last several months across virtually all facets of our business. We have significantly improved our margins, transformed our balance sheet, materially lowered our interest expense, delivered positive operating cashflow, acquired four dispensaries in Maryland and successfully listed on the TSX, all while driving sector leading revenue growth of 26% in the first half of 2023,” stated Jason Wild, Executive Chairman of TerrAscend. “These achievements give us confidence in the remainder of the year, as evidenced by our full year revenue and Adjusted EBITDA guidance. We expect to deliver significant growth in revenue and profitability as we realize the benefits of our now vertically integrated operations in Maryland as well as continued strong execution in our other geographies.”

Financial Summary Q2 2023 and Comparative Periods 
All figures are restated for the Canadian business recorded as discontinued operations.

Second Quarter 2023 Financial Results 
Net revenue for the second quarter of 2023 was $72.1 million as compared to $69.4 million in the first quarter of 2023 and $64.0 million in the second quarter of 2022, representing 3.9% growth sequentially and 12.7% growth year-over-year. The sequential growth was driven primarily by a full quarter of the Allegany dispensary acquisition in Maryland and same store sales growth in Michigan.

Gross margin for the second quarter of 2023 was 50.2% as compared to 48.8% in the first quarter of 2023 and 35.5% in the second quarter of 2022. The 140-basis point improvement in gross margin from the first quarter to the second quarter of 2023 follows a 420-basis point sequential improvement in the first quarter of 2023. These improvements were driven by increased yields, optimization of mix and better utilization of capacity in New Jersey, Michigan and Maryland.

General & Administrative (G&A) expenses for the second quarter of 2023 were $30.5 million as compared to $27.7 million in the first quarter of 2023 and $32.9 million in the second quarter of 2022. G&A expenses for the second quarter of 2023 included $2.5 million of one-time items including M&A costs related to the acquisitions in Maryland, capital raising transaction costs, legal settlement fees, and TSX listing related costs.

Net loss from continuing operations in the second quarter of 2023 was $12.9 million compared to $19.2 million in the first quarter of 2023 and a net income of $16.9 million in the second quarter of 2022.

Adjusted EBITDA from continuing operations for the second quarter of 2023, a non-GAAP measure, was $12.8 million, representing a 17.8% margin, compared to $12.2 million and a 17.6% margin in the first quarter of 2023 and $8.8 million and a 13.8% margin in the second quarter of 2022.  

Balance Sheet and Cash Flow
Cash and cash equivalents, including restricted cash, were $34.5 million as of June 30, 2023, compared to $33.5 million as of March 31, 2023. Net cash provided by continuing operations was $1.8 million for the second quarter of 2023, representing the fourth consecutive quarter of positive cashflow from operations. No cash income tax payments were made during the quarter. Capital expenditure spending was $2.2 million in the second quarter of 2023, primarily relating to store openings in Michigan. Free cashflow, a non-GAAP financial measure, was ($0.4) million for the quarter.

During the quarter, the Company completed the sale of its facility in Canada for $14.3 million, completed private placements for gross proceeds of $21.5 million, closed on a $25 million loan with Stearns bank at a rate of prime plus 2.25%, paid down $43 million of higher interest debt on its Ilera term loan, and made cash consideration payments totaling $4.9 million for two Maryland acquisitions which closed in the quarter.  

As of August 10, 2023, there were 363 million basic shares outstanding, including 287 million common shares, 13 million preferred shares as converted, and 63 million exchangeable non-voting shares. Additionally, there are 51 million warrants and options outstanding at a weighted average price of $4.44. 

Outlook for 2023
The Company is reiterating its outlook for Net Revenue and Adjusted EBITDA from continuing operations¹ for 2023 to be at least $305 million and at least $58 million, respectively, representing year-over-year growth of 23% in Net Revenue and 49% in Adjusted EBITDA from continuing operations¹.

Conference Call
TerrAscend will host a conference call today, August 10, 2023, to discuss these results. Jason Wild, Executive Chairman, Ziad Ghanem, Chief Executive Officer, and Keith Stauffer, Chief Financial Officer, will host the call starting at 5:00 p.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).