Full Press Release Details
SNDL Reports Full Year and Fourth Quarter 2022
Financial and Operational Results
Record net revenue and net
cash provided by operating activities for the fourth quarter of 2022
CALGARY, AB, April 24, 2023 /CNW/ - SNDL Inc.
(NASDAQ: SNDL) ("SNDL" or the "Company") reported its financial and operational results for the full
year and fourth quarter ended December 31, 2022. All financial information in this press release is reported in millions of Canadian dollars
unless otherwise indicated. Liquor retail includes operations for the period of March 31, 2022, to December 31, 2022, and cannabis retail
includes the operations of Nova Cannabis Inc. ("Nova") retail stores for the period of March 31, 2022, to December 31,
SNDL has also posted a supplemental investor presentation
and shareholder letter on its website, which can be found at https://sndl.com.
The Company will hold a conference call and webcast
at 10:30 a.m. EST (8:30 a.m. MST) on Tuesday, April 25, 2023. The conference call details can be found below.
FULL YEAR AND FOURTH QUARTER 2022 FINANCIAL AND OPERATIONAL HIGHLIGHTS
Record net revenue for 2022
of $712.2 million, an increase of 1170% over the previous year. Net revenue for the fourth quarter of 2022 was $240.4 million, an increase
of 4% over the third quarter of 2022, with sequential growth in Liquor Retail, Cannabis Retail and Cannabis Operations segments.
Net cash used in operating activities
for 2022 was $6.7 million compared to $155.8 million in 2021. Net cash provided by operating activities for the fourth quarter of 2022
was a record $28.6 million, an increase of 233% when compared to $8.6 million in the third quarter of 2022.
Gross margin grew to a record
$140.4 million for 2022, compared to a loss of $9.0 million in the previous year, and represents an increase of 1,660%. Gross margin of
$43.6 million for the fourth quarter of 2022, compared to $50.3 million in the third quarter of 2022, as a result of fourth quarter monetization
of low value inventory and inventory impairments.
Net loss of $372.4 million for
2022, compared to $226.8 million in the previous year. Non-cash inventory and asset impairments were $203.0 million in 2022 compared to
$77.0 million in 2021. Net loss for the fourth quarter of 2022 was $161.6 million compared to $98.8 million in the third quarter of 2022.
The net loss for 2022 was largely driven by fourth quarter non-cash charges including the impairment of goodwill related to the Alcanna
Inc. ("Alcanna") transaction, including Nova. Despite improving fundamentals for Nova, the share price decline of 53%
since the acquisition date warranted a $88.0 million non-cash adjustment.
Adjusted EBITDA loss was $15.8
million in 2022, compared to Adjusted EBITDA of $30.4 million in the previous year. Adjusted EBITDA loss was $7.5 million for the fourth
quarter of 2022, compared to Adjusted EBITDA of $16.7 million in the fourth quarter of 2021. Excluding SNDL's equity pick-up loss of $18.3
million driven by non-cash fair value adjustments from its investment in SunStream Bancorp ("SunStream"), Adjusted EBITDA
would have been $10.8 million in the fourth quarter of 2022.
SNDL currently has six credit
exposures in the SunStream portfolio, including two that are under active negotiations regarding potential restructuring. The Company
expects that, on a structured and regulatory compliant basis, it may become a majority owner of one or more multi-state operators ("MSO")
$918.0 million of unrestricted
cash, marketable securities, and long-term investments and no outstanding debt at December 31, 2022, resulting in a net book value per
share of $5.02; and $207 million of unrestricted cash at April 19, 2023. SNDL has not raised cash through share offerings since June 2021.
In December 2022, SNDL announced
a proposed strategic partnership with its 63% owned subsidiary Nova Cannabis, designed to create a well-capitalized cannabis retail platform
through a vertical integration model leveraging SNDL's upstream and midstream capabilities. The restructuring of Nova, if approved by
Nova's minority shareholders, will enable SNDL to continue to evolve in a still immature sector by becoming a trusted partner to the Canadian
Acquired Alcanna on March 31, 2022, creating the largest private
sector liquor and cannabis retail network in Canada.
January 2023 Valens Acquisition
SNDL's acquisition of The Valens Company ("Valens")
closed in January of 2023. The combined entities create a low-cost vertically integrated Canadian company generating over a
billion dollars in annualized pro forma revenue. Through the combination of a diverse portfolio of brands, a 197 store multi-banner cannabis
retail network, low-cost biomass sourcing, premium indoor cultivation and low-cost manufacturing facilities, SNDL expects to be one of
the largest adult-use cannabis manufacturers and retailers in Canada. The Valens transaction is expected to accelerate the optimization
and rationalization of SNDL's manufacturing and operational footprint to better address market saturation and oversupply while also generating
synergies in the Company's manufacturing operations.
"2022 was another transformational year for SNDL.
We increased the sustainability of our business model by achieving record-breaking revenue and gross margin as well as positive and increasing
cash provided from operating activities in our two most recent quarters," said Zach George, Chief Executive Officer of SNDL. "Our
vertical integration strategy is beginning to show its intended results, and we are working to gain stability in a challenging and dynamic
industry. Our acquisition of Valens provides midstream capabilities in every material cannabis product category and the ability to selectively
balance higher cost cultivation costs while taking advantage of the current massive oversupply in Canadian markets. We now expect to materially
outperform our originally contemplated savings and are on target to realize more than $20.0 million in cost synergies. Despite the positive
milestones and growth we have achieved, SNDL's shares are trading at near all-time lows, well below our book value and materially less
than 1X our annualized revenue. We must continue to find ways to unlock value and evaluate all options regarding the future of our business
and operating segments. Sustainability is a key priority, which means sustainably profitable operations, sustainable product quality,
and sustainable environmental practices. Our drive to create exceptional consumer products and experiences is key to SNDL's momentum and
future success. We continue to see positive results across all of our key operating segments and remain committed to our goal of becoming
free cash flow positive."
FULL YEAR AND FOURTH QUARTER 2022 KEY FINANCIAL METRICS
| OPERATING SEGMENTS | ||||||
| ($000s) | Liquor Retail | Cannabis Retail | Cannabis Operations | Investments | Corporate | Total |
| As at December 31, 2022 | ||||||
| Total assets | 351,338 | 200,393 | 163,130 | 825,151 | 19,338 | 1,559,350 |
| Three months ended December 31, 2022 | ||||||
| Net revenue | 159,745 | 68,402 | 12,258 | - | - | 240,405 |
| Gross margin | 36,927 | 15,650 | (9,009) | - | - | 43,568 |
| Interest and fee revenue | - | - | - | 5,989 | - | 5,989 |
| Investment (loss) income | - | - | - | (6,868) | - | (6,868) |
| Share of loss of equity-accounted investees | - | - | - | (18,291) | - | (18,291) |
| Depreciation and amortization | 11,303 | 3,879 | 190 | - | 6,251 | 21,623 |
| Income (loss) before income tax | (1,316) | (98,374) | (12,932) | (28,641) | (18,932) | (160,195) |
| As at December 31, 2021 | ||||||
| Total assets (1) | - | 157,022 | 147,887 | 1,093,596 | 29,155 | 1,427,660 |
| Three months ended December 31, 2021 | ||||||
| Net revenue | - | 9,951 | 12,768 | - | - | 22,719 |
| Gross margin (1) | - | 2,840 | (7,350) | - | - | (4,510) |
| Interest and fee revenue | - | - | - | 3,647 | - | 3,647 |
| Investment loss | - | - | - | (41,755) | - | (41,755) |
| Share of profit of equity-accounted investees | - | - | - | 19,271 | - | 19,271 |
| Depreciation and amortization (1) | - | (427) | 666 | - | 428 | 667 |
| Income (loss) before income tax (1) | - | 312 | (23,190) | (23,176) | (2,919) | (48,973) |
| (1) Adjustments to provisional amounts have been made in the comparative period due to the finalization of business combination accounting for the Inner Spirit acquisition. Refer to note 5(b) in the Company's Audited Financial Statements and the notes thereto for the year ended December 31, 2022 |
FULL YEAR AND FOURTH QUARTER 2022 RESULTS
SNDL's business is operated and reported in four segments:
Liquor Retail, Cannabis Retail, Cannabis Operations and Investments.
SNDL is Canada's largest private sector liquor
retailer, operating 169 locations, predominantly in Alberta, under its three retail banners: Wine and Beyond, Liquor Depot and
Ace Liquor. The Company's Liquor Retail segment brought material stability and opportunity to SNDL in 2022. SNDL's Liquor segment
strengthens SNDL's broader regulated retail technology infrastructure, the ability to own the customer relationship and the expertise
to shape the customer retail experience.
Gross revenue for Liquor Retail sales for the three banners combined
was $462.2 million in 2022 and $159.7 million in the fourth quarter of 2022, an increase of 4.8% compared to the third quarter of 2022.
Gross margin for the Liquor Retail segment in 2022 was $106.3
million or 23% of sales. Gross margin for the Liquor Retail segment was $36.9 million, or 23% of sales, in the fourth quarter of 2022
compared to $35.6 million in the third quarter of 2022. The Liquor Retail business maintained its margin throughout the year through an
effective pricing and product mix strategy.
In 2022, the Company actively drove operational growth by expanding
its destination shopping brand, Wine and Beyond, from nine to 12 stores. This expansion effectively provided consumers with an increased
range of options, further enhancing the Company's position within the marketplace.
Subsequent to the quarter end, SNDL announced that it successfully
obtained two liquor retail licenses in Regina and Saskatoon, through the Saskatchewan Liquor and Gaming Authority auction. The Company
will leverage these licenses to further expand its premium liquor banner, Wine and Beyond, into the final stage of the liquor retail transition
to the private sector in Saskatchewan.
Preferred label sales were $41.7 million, an increase of approximately
95% compared to the previous year. The increase in preferred label sales has led to increased revenue, while also allowing SNDL to implement
a more effective margin strategy, as the gross margin on preferred label products in 2022 was 30.1%.
As of April 19, 2023, the Ace Liquor store count is 137, the Liquor
Depot store count is 20 and the Wine and Beyond store count is 12.
With its ownership interest in Nova, SNDL is Canada's largest
private sector cannabis retailer, operating 197 locations under its four retail banners: Value Buds, Spiritleaf, Superette and Firesale
Cannabis. SNDL's Cannabis Retail strategy is based on a number of factors, including the quality of its store locations, the range of
products it offers, and the unique experiences it provides to customers. The use of data and insights from a large volume of monthly transactions