TPCO Holding Corp. (“The Parent Company” or the “Company”) (NEO: GRAM.U) (OTCQX: GRAMF), a leading consumer-focused California cannabis company, today announced its financial results for the quarter ended March 31, 2022 (“Q1 2022”). All amounts are expressed in U.S. dollars.
Q1 2022 Financial Highlights
- Net sales for Q1 2022 were $33.2 million
- Q1 2022 Omni-channel retail revenue was $19.1 million, or 57% of net sales
- Q1 2022 Wholesale revenue was $14.1 million, or 43% of net sales
- Gross profit for Q1 2022 was $8.2 million, or 25% of net sales
- Net loss and comprehensive loss for Q1 2022 was $33.5 million
- Adjusted EBITDA loss for Q1 2022 was $19.2 million. Adjusted EBITDA removes the effects of changes in fair value of financial instruments, impairment charges and other non-cash items.
- Unrestricted Cash and cash equivalents totaled $143.5 million as of March 31, 2022.
Strategic Long-term Profitability Initiatives
As announced on March 31, 2022, the Company intends to maintain a minimum cash balance of approximately $100 million at fiscal 2022-year end subject to any opportunistic partnership of acquisition transactions, and expects to generate positive cash flow in fiscal year 2023. To meet these goals, the Company is in the process of implementing the following measures to reduce costs, drive efficiencies, and accelerate its path to sustainable, long-term profitability:
- Enhanced Revenue Mix: Over the last year the Company has taken action to transition its focus from high-volume, but low margin, bulk wholesale revenue to higher-margin omni-channel retail revenue (which includes: retail, pick-up, and delivery). The Company intends to continue to grow this high-margin segment while lowering its percentage of wholesale revenue and is targeting omnichannel retail revenue to account for over two thirds of revenue at the end of fiscal 2022. This anticipated revenue mix target reflects a strategic focus towards the end-consumer and brand building. Omni-channel retail revenue originally comprised 24% of net revenue in Q1 2021. The Company’s emphasis on higher-margin revenue channels, namely omni-channel retail, is expected to shift focus away from less profitable sales channels to the detriment of higher topline revenue.
- Gross Margin Expansion: Through a variety of optimization efforts, cost reduction initiatives as well as the enhanced revenue mix discussed above, the Company has set a target to expand gross margin to be in excess of 30%. Consumers can anticipate increased availability and prominence of Company-owned products and brands at its owned stores to further drive profitability improvements.
- Cost-Reduction Initiatives: The Company is committed to improving its profitability through cost-reduction initiatives and expects to reduce the Company’s cash operating expenses by $30 MM or approximately 20% over the course of 2022 compared to full year 2021.
- Strengthened Management Team: The Company has significantly evolved its management team to one that has extensive experience with turn-arounds and expertise in building strong consumer packaged goods (“CPG”) businesses to deliver on its goals.
“Our first quarter results reflect both the significant transformation we have accomplished in the last year and the potential we can achieve through further optimization,” said Troy Datcher, Chief Executive Officer and Chairman of The Parent Company. “We’ve successfully pivoted our focus to higher-quality revenue streams, with 57% of our sales now coming from our more profitable omni-channel retail segment, which expanded our gross margins to 25% in the quarter, up from a 2021 average gross margin of 12%. I am extremely proud of the talent we have attracted and the footprint we have built that enables us to connect directly with our customers to innovate, create, and launch new products directly into the market.”
Mr. Datcher added, “We are building this business for the long-haul and the steps we are taking now will help to preserve our strong balance sheet and grow our omnichannel retail business. These initiatives support our goal to become cash flow positive in fiscal 2023 are expected to deliver strong value for our shareholders. We believe we have the right plan in place to better utilize our assets and maximize our footprint, which we expect will allow us to emerge as a leader in the California cannabis market and world-class brand builder in this industry.”
Mr. Datcher concluded, “We firmly believe that long-term success in California will be earned by focusing on the consumer first. With our direct retail insights, state-wide footprint, high-quality indoor grown cannabis, and robust branded products portfolio we are well-positioned to be the number one choice for consumers.”
Q1 2022 Operational Highlights
- On January 28th, Company insiders, including the entire Board of Directors, Troy Datcher, Chief Executive Officer, Mike Batesole, Chief Financial Officer and other members of the senior leadership team, voluntarily entered into a twelve-month extension of lock-up agreements with the Company (the “Lock-Up Agreements”) with respect to an aggregate of over 34 million common shares (“Lock-up Shares”), or approximately 34% of the total issued and outstanding common shares of the Company at March 31, 2022.
- Strengthened the senior management team with the appointments of Tanisha Robinson as Chief Transformation Officer, Esther Song as Chief Marketing Officer and Mindi Basha as Vice-President of Retail.
- The Company further announced today its Board of Directors has appointed Troy Datcher as Chair of the Board of Directors, effective May 11, 2022
Q1 2022 Financial Results
|Three Months Ended March 31,||YoY% Change|
|Net Sales||$ 33,231||$ 39,917||-17%|
|Omnichannel Retail||$ 19,087||$ 9,698||97%|
|% of revenue||57%||24%||**|
|Wholesale||$ 14,144||$ 30,219||-53%|
|% of revenue||43%||76%||**|
|Gross Profit||$ 8,184||$ 7,043||16%|
|Gross Margin||25 %||18%||**|
|Total operating expenses||$ 40,615||$ 62,972||-37%|
|Net loss and comprehensive loss||$ (33,537)||$ 19,061||**|
|Adjusted EBITDA||$ (19,234)||$ (10,174)||**|
|* The Company’s financial results for the quarterly period ended March 31, 2021 (“Q1 2021”) covered 14 fewer days than its financial results for the quarterly period ended March 31, 2022 (“Q1 2022”) due to the fact that the Company’s qualifying transaction, pursuant to which the Company’s business was formed, did not occur until January 15, 2021. Accordingly, the Company’s results of operations are not necessarily comparable between those two periods.|
|** Information not meaningful.|
The Company’s consolidated financial statements, as well as its accompanying management discussion and analysis of financial condition and results of operations (“MD&A”) have been included in its Quarterly Report on Form 10-Q filed on EDGAR (www.sec.gov) as well as SEDAR (www.sedar.com). Please refer to The Parent Company’s MD&A for additional detail and discussion on the Company’s results from operations.
The Parent Company will host a conference call tomorrow, Tuesday, May 17th, to discuss these results. Troy Datcher, Chief Executive Officer, and Mike Batesole, Chief Financial Officer will host the call starting at 8:30 a.m. Eastern time. A question-and-answer session will follow management’s prepared remarks.
|DATE:||Tuesday, May 17th, 2022|
|TIME:||8:30 a.m. Eastern Time|
|DIAL-IN NUMBER:||(888) 254-3590 or (647) 794-4605|
|REPLAY:||1 (888) 203-1112 or 1 (647)-436-0148 |
Available until 12:00 midnight Eastern Time Tuesday, May 24, 2022Replay Code: 2097692