Full Press Release Details
Sundial Reports Full Year and Fourth Quarter
2021 Financial and Operational Results
CALGARY, AB, April 27, 2022 /CNW/ - Sundial Growers
Inc. (NASDAQ: SNDL) ("Sundial" or the "Company") reported its financial and operational results for the full year
and fourth quarter ended December 31, 2021. All financial information in this press release is reported in millions of Canadian dollars
and represents results from continuing operations unless otherwise indicated.
The Company will hold a conference call and webcast
at 10:30 a.m. EDT (8:30 a.m. MDT) on Thursday, April 28, 2022. Please see the dial-in details within the release and additional details
on Sundial's website at www.sndlgroup.com.
This press release is intended to be read in conjunction
with the Company's Financial Statements and Notes for the period and the accompanying Management's Discussion and Analysis ("MD&A").
These reports are available under the Company's profile on SEDAR at www.sedar.com along with the Company's Form 20-F, which have also
been filed on EDGAR at www.sec.gov/edgar.shtml.
Sundial has also posted a supplemental investor presentation
on its website and a Letter to Shareholders from Sundial's CEO, Zach George. Both can be found at https://sndlgroup.com/investors.
FULL YEAR AND FOURTH QUARTER 2021 OPERATIONAL AND INVESTMENT HIGHLIGHTS
"2021 was a transformational year for Sundial.
We increased the sustainability of our business model, establishing a strong balance sheet, positive Adjusted EBITDA results, and significant
improvements in gross margin," said Zach George, Chief Executive Officer of Sundial. "We continue to focus on improvements to
our supply chain and manufacturing processes, against a competitive and challenging operating environment in Canada. Sundial is working
to become a leading regulated product platform through leveraging consumer insights and innovation to deliver best-in-class products.
We are beginning to see positive momentum across all of our key operating segments and remain committed to our goal of becoming free cash
flow positive within the 2022 calendar year."
FULL-YEAR AND FOURTH QUARTER 2021 KEY FINANCIAL METRICS
| OPERATING SEGMENTS | - - - - -Cannabis - - - - - | |||||||||||||||||||
| ($000s) | Cultivation and Production | Retail | Investment | Corporate | Total | |||||||||||||||
| As at December 31, 2021 | ||||||||||||||||||||
| Total assets | 147,887 | 153,624 | 1,093,596 | 29,155 | 1,424,262 | |||||||||||||||
| Year ended December 31, 2021 | ||||||||||||||||||||
| Net revenue | 40,037 | 16,091 | - | - | 56,128 | |||||||||||||||
| Gross margin | (15,499) | 8,509 | - | - | (6,990) | |||||||||||||||
| Interest and fee revenue | - | - | 13,149 | - | 13,149 | |||||||||||||||
| Gain (loss) on marketable securities | - | - | (44,501) | - | (44,501) | |||||||||||||||
| Share of profit of equity-accounted investees | - | - | 32,913 | - | 32,913 | |||||||||||||||
| Depreciation and amortization | 3,108 | 721 | - | 897 | 4,726 | |||||||||||||||
| Earnings (loss) before tax | (117,990) | 1,835 | (5,837) | (110,461) | (232,453) | |||||||||||||||
| Three months ended December 31, 2021 | ||||||||||||||||||||
| Net revenue | 12,768 | 9,951 | - | - | 22,719 | |||||||||||||||
| Gross margin | (7,350) | 4,851 | - | - | (2,499) | |||||||||||||||
| Interest and fee revenue | - | - | 3,647 | - | 3,647 | |||||||||||||||
| Gain (loss) on marketable securities | - | - | (41,755) | - | (41,755) | |||||||||||||||
| Share of profit of equity-accounted investees | - | - | 19,271 | - | 19,271 | |||||||||||||||
| Depreciation and amortization | 666 | (742) | - | 428 | 352 | |||||||||||||||
| Earnings (loss) before tax | (23,190) | 2,311 | (23,176) | (2,919) | (46,974) |
FULL-YEAR AND FOURTH QUARTER 2021 RESULTS
The Company's Cannabis operations comprise two segments:
cannabis cultivation and production, and cannabis retail.
CANNABIS CULTIVATION AND PRODUCTION
Sundial remains focused and committed to optimizing
its cultivation and processing activities.
NET REVENUE FROM CULTIVATION AND PRODUCTION
Net revenue from cultivation and production operations for the year ended December 31, 2021, was $40.0 million compared to $60.9 million
the previous year, reflecting oversupply, price compression, and the Company's comprehensive portfolio review and SKU rationalization.
For the fourth quarter of 2021, net revenue from cultivation and production operations was $12.8 million compared to $13.9 million in
the prior year. Wholesale sales to licensed producers were also reduced in 2021 to $9.8 million from $18.0 million in 2020 as the Company
concentrated its sales efforts on retail sales.
For the year ended December 31, 2021, the average net selling price was $2.22 per gram equivalent compared to $2.59 for the year
ended December 31, 2020. The decrease of $0.37 per gram equivalent was mainly due to lower prices for provincial board sales, partially
offset by slightly higher prices for sales to other licensed producers and higher prices for a small amount of medical sales. Provincial
board sales prices have decreased due to the continued growth of the discount segment and undersupply of available quality products. For
the fourth quarter of 2021, the average net selling price was $2.45, an increase of 28% from the previous year mainly due to the rise
in prices for sales to other licensed producers and reduced inventory monetization transactions, partially offset by lower prices for
provincial board sales.
In the full-year 2021, gross revenue from Sundial's formats was:
| Year ended December 31 | ||||||||
| ($000s) | 2021 | 2020 | ||||||
| Revenue from dried flower | 39,572 | 51,424 | ||||||
| Revenue from vapes | 4,743 | 18,447 | ||||||
| Revenue from oil | 1,665 | 3,145 | ||||||
| Revenue from edibles and concentrates | 2,555 | 305 | ||||||
| Revenue from services | 2,653 | - | ||||||
| Gross revenue | 51,188 | 73,321 |
Gross margin for the year ended December 31, 2021, was negative $15.5 million compared to negative $49.9 million for the year
ended December 31, 2020. The increase of $34.4 million was due to a lower inventory impairment provision compared to the prior period as
well as Sundial's ongoing focus on cost optimization, reduction of harvested inventory subject to potential impairment, and offering the
most competitive and profitable strains and brands to its customers against the backdrop of industry-wide price compression and high relative
operating costs at our state-of-the-art facility. This demonstrates substantial progress towards the Company's goal of sustainable positive
gross margins that is critical to Sundial's success.
The Company's retail network creates an opportunity
to own the relationship with cannabis consumers and showcase both Sundial's branded products and the best offerings from other Canadian
Gross retail revenue from July 20, 2021, to December 31, 2021, was $16.1 million. Cannabis retail revenue comprised $10.2 million
of retail cannabis sales to consumers at corporate-owned Spiritleaf retail cannabis stores, $4.3 million of franchise revenue, representing
royalty revenue, advertising revenue and franchise fees and $1.6 million of other revenues, such as supply and accessories. Gross revenue
for the three months ended December 31, 2021, was $10.0 million, comprised of retail, franchise, and other revenue.
SYSTEM-WIDE RETAIL SALES
System-wide retail sales[1] were $74.9 million from July 20, 2021, to December 31, 2021, and $41.4 million for the fourth quarter.
System-wide retail sales represent the aggregate revenue earned by franchised Spiritleaf retail cannabis stores and corporate-owned
Spiritleaf retail cannabis stores and do not represent revenues that accrue to the Company. The Company receives all revenues from corporate-owned
Spiritleaf retail cannabis stores and royalties and advertising fees in respect of the franchised Spiritleaf retail cannabis store revenue.
Sundial's investment income is classified as income
from operations, as investment activities are integral to the Company's operations.
Revenue from investments in the fourth quarter of
2021 was negative $18.8 million, including unrealized losses on marketable securities of $43.8 million, due to fluctuations in share prices
from our portfolio of equity cannabis-related investments.
| Three months ended December 31 | Year ended December 31 | |||||||||||||||
| ($000s) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Interest and fee revenue | ||||||||||||||||
| Interest revenue from investments at amortized cost | 861 | - | 1,654 | - | ||||||||||||
| Interest and fee revenue from investments at Fair Value Through Profit or Loss | 2,116 | - | 8,514 | - | ||||||||||||
| Interest revenue from cash | 670 | - | 2,981 | - | ||||||||||||
| 3,647 | - | 13,149 | - | |||||||||||||
| Investment revenue | ||||||||||||||||
| Realized gains | 1,995 | - | 20,213 | - | ||||||||||||
| Unrealized losses | (43,750) | - | (64,714) | - | ||||||||||||
| (41,755) | - | (44,501) | - | |||||||||||||
| Revenue from direct investments | (38,108) | - | (31,352) | - | ||||||||||||
| Share of profit of equity-accounted investees | 19,271 | - | 32,913 | - | ||||||||||||
| Total investment activities | (18,837) | - | 1,561 | - |
CONSOLIDATED FINANCIAL RESULTS
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the year ended December 31, 2021, were $38.4 million compared to $32.0 million for the
year ended December 31, 2020. The increase of $6.4 million was mainly due to increases in salaries and wages due to the Inner Spirit
acquisition. General and administrative expenses for the three months ended December 31, 2021, were $11.6 million compared to $6.5
million for the three months ended December 31, 2020.
SALES AND MARKETING EXPENSES
Sales and marketing expenses for the year ended December 31, 2021, were $5.0 million compared to $5.7 million for the year ended
December 31, 2020. For the fourth quarter of 2021, sales and marketing expenses were $1.5 million compared to $2.3 million in the
previous fourth quarter.
NET LOSS FROM CONTINUING OPERATIONS
Net loss from continuing operations for the year ended December 31, 2021, was $230.2 million compared to a net loss from continuing
operations of $206.3 million for the year ended December 31, 2020. The 2021 net loss includes a $60 million non-recurring, non-cash
impairment charge on the Olds facility, a $77.8 million non-cash charge for change in estimate of fair value of derivative warrants and
a $17.0 million charge for inventory impairment.
ADJUSTED EBITDA FROM CONTINUING OPERATIONS
Adjusted EBITDA from continuing operations was $32.1 million for the year ended December 31, 2021, compared to a loss of $25.6
million for the year ended December 31, 2020. The increase was due to the following:
The increase was partially offset by:
Adjusted EBITDA from continuing operations was $18.4
million for the three months ended December 31, 2021, compared to a loss of $5.6 million for the three months ended December 31,
2020. The increase was due to the following:
The increase was partially offset by:
STRATEGIC AND ORGANIZATIONAL UPDATE
Sundial remains focused on building long-term shareholder
value through the accretive deployment of cash resources, the expansion of our retail distribution network, the further streamlining of
our operating structure, and the enhanced offering of high-quality brands.
With the Alcanna acquisition subsequent to year-end,
Sundial is now Canada's leading regulated products platform, with a strong balance sheet and access to capital. The acquisition is expected
to enable Sundial to expand its ownership of the consumer relationship while diversifying and stabilizing revenue streams. The acquisition
has increased the Company's cannabis distribution network while enhancing its scale and expertise in retail operations, including liquor.