UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of August 2024
Commission File Number 001-39005
SNDL INC.
(Registrant’s name)
#300, 919 - 11 Avenue SW
Calgary, AB T2R 1P3
Tel.: (403) 948-5227
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☐ Form 40-F ☒
INCORPORATION BY REFERENCE
This report on Form 6-K shall be deemed to be incorporated by reference in SNDL Inc.’s registration statements on Form F-3 (File No. 333-253813) and Form S-8 (File No. 333-233156, File No. 333-262233, File No. 333-267510, File No. 333-269242 and File No. 333-278683) and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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SNDL INC. |
Date: August 1, 2024 |
By: |
/s/ Alberto Paredero Quiros |
|
Name: |
Alberto Paredero Quiros |
|
Title: |
Chief Financial Officer |
EXHIBIT
EXHIBIT 99.1
SNDL Inc.
Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited – expressed in thousands of Canadian dollars)
SNDL Inc.
Condensed Consolidated Interim Statements of Financial Position
(Unaudited - expressed in thousands of Canadian dollars)
|
|
|
|
|
|
|
|
As at |
Note |
June 30, 2024 |
|
December 31, 2023 |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
Current assets |
|
|
|
|
|
Cash and cash equivalents |
|
|
182,934 |
|
|
195,041 |
|
Restricted cash |
|
|
19,972 |
|
|
19,891 |
|
Marketable securities |
|
|
156 |
|
|
225 |
|
Accounts receivable |
|
|
22,361 |
|
|
27,059 |
|
Biological assets |
5 |
|
868 |
|
|
429 |
|
Inventory |
6 |
|
132,912 |
|
|
129,060 |
|
Prepaid expenses and deposits |
|
|
19,303 |
|
|
22,464 |
|
Investments |
12 |
|
28,514 |
|
|
3,400 |
|
Assets held for sale |
7 |
|
19,051 |
|
|
6,375 |
|
Net investment in subleases |
10 |
|
2,819 |
|
|
2,970 |
|
|
|
|
428,890 |
|
|
406,914 |
|
Non-current assets |
|
|
|
|
|
Long-term deposits and receivables |
|
|
6,232 |
|
|
4,837 |
|
Right of use assets |
8 |
|
119,473 |
|
|
129,679 |
|
Property, plant and equipment |
9 |
|
132,362 |
|
|
152,916 |
|
Net investment in subleases |
10 |
|
16,572 |
|
|
18,396 |
|
Intangible assets |
11 |
|
73,961 |
|
|
73,149 |
|
Investments |
12 |
|
835 |
|
|
29,660 |
|
Equity-accounted investees |
13 |
|
571,178 |
|
|
538,331 |
|
Goodwill |
|
|
124,552 |
|
|
119,282 |
|
Total assets |
|
|
1,474,055 |
|
|
1,473,164 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Accounts payable and accrued liabilities |
|
|
62,389 |
|
|
68,210 |
|
Lease liabilities |
15 |
|
32,618 |
|
|
30,537 |
|
Derivative warrants |
14 |
|
3,900 |
|
|
4,400 |
|
|
|
|
98,907 |
|
|
103,147 |
|
Non-current liabilities |
|
|
|
|
|
Lease liabilities |
15 |
|
124,994 |
|
|
136,492 |
|
Other liabilities |
|
|
6,236 |
|
|
4,185 |
|
Total liabilities |
|
|
230,137 |
|
|
243,824 |
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
|
|
|
Share capital |
16(b) |
|
2,380,753 |
|
|
2,375,950 |
|
Warrants |
16(c) |
|
667 |
|
|
2,260 |
|
Contributed surplus |
|
|
79,568 |
|
|
73,014 |
|
Contingent consideration |
|
|
2,279 |
|
|
2,279 |
|
Accumulated deficit |
|
|
(1,269,177 |
) |
|
(1,260,851 |
) |
Accumulated other comprehensive income |
|
|
33,751 |
|
|
19,417 |
|
Total shareholders’ equity |
|
|
1,227,841 |
|
|
1,212,069 |
|
Non-controlling interest |
|
|
16,077 |
|
|
17,271 |
|
Total liabilities and shareholders’ equity |
|
|
1,474,055 |
|
|
1,473,164 |
|
Commitments (note 24)
Subsequent events (note 12)
See accompanying notes to the condensed consolidated interim financial statements.
SNDL Inc.
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss
(Unaudited - expressed in thousands of Canadian dollars, except per share amounts)
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|
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|
|
|
|
|
|
|
|
|
|
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|
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
|
|
Note |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Net revenue |
|
18 |
|
|
228,127 |
|
|
|
231,916 |
|
|
|
425,877 |
|
|
|
422,961 |
|
Cost of sales |
|
6 |
|
|
169,963 |
|
|
|
179,983 |
|
|
|
317,313 |
|
|
|
338,487 |
|
Gross profit |
|
|
|
|
58,164 |
|
|
|
51,933 |
|
|
|
108,564 |
|
|
|
84,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income (loss) |
|
19 |
|
|
3,204 |
|
|
|
(599 |
) |
|
|
7,240 |
|
|
|
(1,557 |
) |
Share of profit (loss) of equity-accounted investees |
|
13 |
|
|
5,252 |
|
|
|
(936 |
) |
|
|
14,400 |
|
|
|
8,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
48,036 |
|
|
|
52,727 |
|
|
|
92,731 |
|
|
|
101,300 |
|
Sales and marketing |
|
|
|
|
3,439 |
|
|
|
4,104 |
|
|
|
6,037 |
|
|
|
7,490 |
|
Research and development |
|
|
|
|
109 |
|
|
|
20 |
|
|
|
146 |
|
|
|
160 |
|
Depreciation and amortization |
|
8,9,11 |
|
|
13,519 |
|
|
|
13,443 |
|
|
|
27,662 |
|
|
|
29,911 |
|
Share-based compensation |
|
17 |
|
|
4,883 |
|
|
|
3,893 |
|
|
|
9,726 |
|
|
|
6,102 |
|
Restructuring costs |
|
|
|
|
221 |
|
|
|
4,042 |
|
|
|
132 |
|
|
|
5,578 |
|
Asset impairment |
|
7,8,9 |
|
|
919 |
|
|
|
1,658 |
|
|
|
2,575 |
|
|
|
2,465 |
|
Loss on disposition of assets |
|
|
|
|
328 |
|
|
|
77 |
|
|
|
406 |
|
|
|
261 |
|
Operating income (loss) |
|
|
|
|
(4,834 |
) |
|
|
(29,566 |
) |
|
|
(9,211 |
) |
|
|
(61,770 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses) |
|
20 |
|
|
(1,417 |
) |
|
|
(422 |
) |
|
|
(4,689 |
) |
|
|
(2,996 |
) |
Loss before income tax |
|
|
|
|
(6,251 |
) |
|
|
(29,988 |
) |
|
|
(13,900 |
) |
|
|
(64,766 |
) |
Income tax recovery |
|
|
|
|
1,284 |
|
|
|
— |
|
|
|
4,281 |
|
|
|
— |
|
Net loss from continuing operations |
|
|
|
|
(4,967 |
) |
|
|
(29,988 |
) |
|
|
(9,619 |
) |
|
|
(64,766 |
) |
Net loss from discontinued operations |
|
|
|
|
— |
|
|
|
(3,170 |
) |
|
|
— |
|
|
|
(4,535 |
) |
Net loss |
|
|
|
|
(4,967 |
) |
|
|
(33,158 |
) |
|
|
(9,619 |
) |
|
|
(69,301 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity-accounted investees - share of other comprehensive income (loss) |
|
13 |
|
|
4,300 |
|
|
|
(11,621 |
) |
|
|
14,334 |
|
|
|
(12,006 |
) |
Gain on translation of foreign operations |
|
|
|
|
— |
|
|
|
(5 |
) |
|
|
— |
|
|
|
— |
|
Comprehensive income (loss) |
|
|
|
|
(667 |
) |
|
|
(44,784 |
) |
|
|
4,715 |
|
|
|
(81,307 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company |
|
|
|
|
(5,772 |
) |
|
|
(29,350 |
) |
|
|
(8,326 |
) |
|
|
(63,553 |
) |
Non-controlling interest |
|
|
|
|
805 |
|
|
|
(638 |
) |
|
|
(1,293 |
) |
|
|
(1,213 |
) |
|
|
|
|
|
(4,967 |
) |
|
|
(29,988 |
) |
|
|
(9,619 |
) |
|
|
(64,766 |
) |
Net loss attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company |
|
|
|
|
(5,772 |
) |
|
|
(32,520 |
) |
|
|
(8,326 |
) |
|
|
(68,088 |
) |
Non-controlling interest |
|
|
|
|
805 |
|
|
|
(638 |
) |
|
|
(1,293 |
) |
|
|
(1,213 |
) |
|
|
|
|
|
(4,967 |
) |
|
|
(33,158 |
) |
|
|
(9,619 |
) |
|
|
(69,301 |
) |
Comprehensive income (loss) attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company |
|
|
|
|
(1,472 |
) |
|
|
(44,146 |
) |
|
|
6,008 |
|
|
|
(80,094 |
) |
Non-controlling interest |
|
|
|
|
805 |
|
|
|
(638 |
) |
|
|
(1,293 |
) |
|
|
(1,213 |
) |
|
|
|
|
|
(667 |
) |
|
|
(44,784 |
) |
|
|
4,715 |
|
|
|
(81,307 |
) |
Net loss per common share attributable to owners of the Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
21 |
|
$ |
(0.02 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.26 |
) |
See accompanying notes to the condensed consolidated interim financial statements.
SNDL Inc.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity
(Unaudited - expressed in thousands of Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note |
Share capital |
|
Warrants |
|
Contributed surplus |
|
Contingent consideration |
|
Accumulated deficit |
|
Accumulated other comprehensive income |
|
Non-controlling interest |
|
Total |
|
Balance at December 31, 2023 |
|
|
2,375,950 |
|
|
2,260 |
|
|
73,014 |
|
|
2,279 |
|
|
(1,260,851 |
) |
|
19,417 |
|
|
17,271 |
|
|
1,229,340 |
|
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(8,326 |
) |
|
— |
|
|
(1,293 |
) |
|
(9,619 |
) |
Other comprehensive income |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
14,334 |
|
|
— |
|
|
14,334 |
|
Share issuances |
|
|
164 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
164 |
|
Share issuance costs |
|
|
(57 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(57 |
) |
Share issuances by subsidiaries |
|
|
— |
|
|
— |
|
|
52 |
|
|
— |
|
|
— |
|
|
— |
|
|
76 |
|
|
128 |
|
Acquisition |
3 |
|
3,693 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,693 |
|
Warrants expired |
|
|
— |
|
|
(1,593 |
) |
|
753 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(840 |
) |
Share-based compensation |
17 |
|
— |
|
|
— |
|
|
6,752 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
6,752 |
|
Employee awards exercised |
|
|
1,003 |
|
|
— |
|
|
(1,003 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Distribution declared by subsidiaries |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
23 |
|
|
23 |
|
Balance at June 30, 2024 |
|
|
2,380,753 |
|
|
667 |
|
|
79,568 |
|
|
2,279 |
|
|
(1,269,177 |
) |
|
33,751 |
|
|
16,077 |
|
|
1,243,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2024 |
|
|
2,377,163 |
|
|
667 |
|
|
75,233 |
|
|
2,279 |
|
|
(1,263,405 |
) |
|
29,451 |
|
|
15,240 |
|
|
1,236,628 |
|
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(5,772 |
) |
|
— |
|
|
805 |
|
|
(4,967 |
) |
Other comprehensive income |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,300 |
|
|
— |
|
|
4,300 |
|
Share issuance costs |
|
|
(57 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(57 |
) |
Share issuances by subsidiaries |
|
|
— |
|
|
— |
|
|
(22 |
) |
|
— |
|
|
— |
|
|
— |
|
|
32 |
|
|
10 |
|
Acquisition |
3 |
|
3,693 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,693 |
|
Share-based compensation |
17 |
|
— |
|
|
— |
|
|
4,311 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,311 |
|
Employee awards exercised |
|
|
(46 |
) |
|
— |
|
|
46 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Balance at June 30, 2024 |
|
|
2,380,753 |
|
|
667 |
|
|
79,568 |
|
|
2,279 |
|
|
(1,269,177 |
) |
|
33,751 |
|
|
16,077 |
|
|
1,243,918 |
|
SNDL Inc.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity
(Unaudited - expressed in thousands of Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note |
Share capital |
|
Warrants |
|
Contributed surplus |
|
Contingent consideration |
|
Accumulated deficit |
|
Accumulated
other
comprehensive
income |
|
Non-
controlling
interest |
|
Total equity |
|
Balance at December 31, 2022 |
|
|
2,292,810 |
|
|
2,260 |
|
|
68,961 |
|
|
2,279 |
|
|
(1,091,999 |
) |
|
32,188 |
|
|
21,156 |
|
|
1,327,655 |
|
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(68,088 |
) |
|
— |
|
|
(1,213 |
) |
|
(69,301 |
) |
Other comprehensive loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(12,006 |
) |
|
— |
|
|
(12,006 |
) |
Share repurchases |
|
|
(5,344 |
) |
|
— |
|
|
— |
|
|
— |
|
|
3,808 |
|
|
— |
|
|
— |
|
|
(1,536 |
) |
Share issuances by subsidiaries |
|
|
— |
|
|
— |
|
|
25 |
|
|
— |
|
|
— |
|
|
— |
|
|
26 |
|
|
51 |
|
Acquisition |
|
|
83,953 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
83,953 |
|
Shares acquired and cancelled |
|
|
(6,615 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(6,615 |
) |
Share-based compensation |
|
|
— |
|
|
— |
|
|
5,691 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,691 |
|
Employee awards exercised |
|
|
1,041 |
|
|
— |
|
|
(1,041 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Distribution declared by subsidiaries |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4 |
) |
|
(4 |
) |
Balance at June 30, 2023 |
|
|
2,365,845 |
|
|
2,260 |
|
|
73,636 |
|
|
2,279 |
|
|
(1,156,279 |
) |
|
20,182 |
|
|
19,965 |
|
|
1,327,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2023 |
|
|
2,365,319 |
|
|
2,260 |
|
|
70,716 |
|
|
2,279 |
|
|
(1,123,759 |
) |
|
31,808 |
|
|
20,587 |
|
|
1,369,210 |
|
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(32,520 |
) |
|
— |
|
|
(638 |
) |
|
(33,158 |
) |
Other comprehensive loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(11,626 |
) |
|
— |
|
|
(11,626 |
) |
Share issuances by subsidiaries |
|
|
— |
|
|
— |
|
|
37 |
|
|
— |
|
|
— |
|
|
— |
|
|
22 |
|
|
59 |
|
Share-based compensation |
|
|
— |
|
|
— |
|
|
3,409 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,409 |
|
Employee awards exercised |
|
|
526 |
|
|
— |
|
|
(526 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Distribution declared by subsidiaries |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(6 |
) |
|
(6 |
) |
Balance at June 30, 2023 |
|
|
2,365,845 |
|
|
2,260 |
|
|
73,636 |
|
|
2,279 |
|
|
(1,156,279 |
) |
|
20,182 |
|
|
19,965 |
|
|
1,327,888 |
|
See accompanying notes to the condensed consolidated interim financial statements.
SNDL Inc.
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited - expressed in thousands of Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
|
|
Note |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period |
|
|
|
|
(4,967 |
) |
|
|
(33,158 |
) |
|
|
(9,619 |
) |
|
|
(69,301 |
) |
Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax recovery |
|
|
|
|
(1,284 |
) |
|
|
— |
|
|
|
(4,281 |
) |
|
|
— |
|
Interest and fee income |
|
19 |
|
|
(3,218 |
) |
|
|
(3,421 |
) |
|
|
(7,309 |
) |
|
|
(7,632 |
) |
Change in fair value of biological assets |
|
|
|
|
(336 |
) |
|
|
1,413 |
|
|
|
(568 |
) |
|
|
4,948 |
|
Share-based compensation |
|
17 |
|
|
4,883 |
|
|
|
3,893 |
|
|
|
9,726 |
|
|
|
6,102 |
|
Depreciation and amortization |
|
8,9,11 |
|
|
14,139 |
|
|
|
14,674 |
|
|
|
28,709 |
|
|
|
32,933 |
|
Loss on disposition of assets |
|
|
|
|
328 |
|
|
|
77 |
|
|
|
406 |
|
|
|
261 |
|
Inventory impairment and obsolescence |
|
6 |
|
|
1,069 |
|
|
|
4,291 |
|
|
|
2,982 |
|
|
|
13,468 |
|
Finance costs, net |
|
20 |
|
|
2,157 |
|
|
|
2,458 |
|
|
|
3,782 |
|
|
|
7,631 |
|
Change in estimate of fair value of derivative warrants |
|
14 |
|
|
(1,800 |
) |
|
|
(2,240 |
) |
|
|
(500 |
) |
|
|
(7,042 |
) |
Unrealized foreign exchange loss |
|
|
|
|
51 |
|
|
|
(72 |
) |
|
|
155 |
|
|
|
(24 |
) |
Transaction costs |
|
|
|
|
— |
|
|
|
— |
|
|
|
164 |
|
|
|
— |
|
Asset impairment |
|
7,8,9 |
|
|
919 |
|
|
|
1,658 |
|
|
|
2,575 |
|
|
|
2,465 |
|
Share of (profit) loss of equity-accounted investees |
|
13 |
|
|
(5,252 |
) |
|
|
936 |
|
|
|
(14,400 |
) |
|
|
(8,580 |
) |
Realized loss on settlement of marketable securities |
|
19 |
|
|
— |
|
|
|
48,988 |
|
|
|
— |
|
|
|
92,792 |
|
Unrealized (gain) loss on marketable securities |
|
19 |
|
|
14 |
|
|
|
(44,968 |
) |
|
|
69 |
|
|
|
(83,603 |
) |
Proceeds from settlement of marketable securities |
|
|
|
|
— |
|
|
|
3,437 |
|
|
|
— |
|
|
|
3,463 |
|
Interest received |
|
|
|
|
2,649 |
|
|
|
3,217 |
|
|
|
5,821 |
|
|
|
6,920 |
|
Change in non-cash working capital |
|
|
|
|
(4,650 |
) |
|
|
(14,193 |
) |
|
|
(9,709 |
) |
|
|
(56,755 |
) |
Net cash provided by (used in) operating activities from continuing operations |
|
|
|
|
4,702 |
|
|
|
(13,010 |
) |
|
|
8,003 |
|
|
|
(61,954 |
) |
Net cash provided by operating activities from discontinued operations |
|
|
|
|
— |
|
|
|
4,167 |
|
|
|
— |
|
|
|
4,314 |
|
Net cash provided by (used in) operating activities |
|
|
|
|
4,702 |
|
|
|
(8,843 |
) |
|
|
8,003 |
|
|
|
(57,640 |
) |
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment |
|
9 |
|
|
(1,190 |
) |
|
|
(1,247 |
) |
|
|
(3,600 |
) |
|
|
(2,641 |
) |
Additions to intangible assets |
|
11 |
|
|
— |
|
|
|
(39 |
) |
|
|
— |
|
|
|
(56 |
) |
Changes to investments |
|
12 |
|
|
1,235 |
|
|
|
125 |
|
|
|
1,368 |
|
|
|
(702 |
) |
Changes to equity-accounted investees |
|
13 |
|
|
— |
|
|
|
(9,443 |
) |
|
|
168 |
|
|
|
(16,989 |
) |
Proceeds from disposal of property, plant and equipment |
|
|
|
|
188 |
|
|
|
55 |
|
|
|
126 |
|
|
|
137 |
|
Acquisitions, net of cash acquired |
|
3 |
|
|
(1,654 |
) |
|
|
— |
|
|
|
(1,654 |
) |
|
|
3,695 |
|
Change in non-cash working capital |
|
|
|
|
75 |
|
|
|
1,586 |
|
|
|
570 |
|
|
|
1,127 |
|
Net cash used in investing activities from continuing operations |
|
|
|
|
(1,346 |
) |
|
|
(8,963 |
) |
|
|
(3,022 |
) |
|
|
(15,429 |
) |
Net cash used in investing activities from discontinued operations |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net cash used in investing activities |
|
|
|
|
(1,346 |
) |
|
|
(8,963 |
) |
|
|
(3,022 |
) |
|
|
(15,429 |
) |
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in restricted cash |
|
|
|
|
150 |
|
|
|
(76 |
) |
|
|
(81 |
) |
|
|
(118 |
) |
Payments on lease liabilities, net |
|
|
|
|
(9,706 |
) |
|
|
(10,116 |
) |
|
|
(17,222 |
) |
|
|
(19,607 |
) |
Repurchase of common shares, net of costs |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,536 |
) |
Proceeds from issuance of shares, net of costs |
|
|
|
|
(57 |
) |
|
|
— |
|
|
|
(57 |
) |
|
|
— |
|
Issuance of common shares by subsidiaries |
|
|
|
|
174 |
|
|
|
— |
|
|
|
174 |
|
|
|
— |
|
Change in non-cash working capital |
|
|
|
|
63 |
|
|
|
200 |
|
|
|
98 |
|
|
|
199 |
|
Net cash used in financing activities from continuing operations |
|
|
|
|
(9,376 |
) |
|
|
(9,992 |
) |
|
|
(17,088 |
) |
|
|
(21,062 |
) |
Net cash used in financing activities from discontinued operations |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net cash used in financing activities |
|
|
|
|
(9,376 |
) |
|
|
(9,992 |
) |
|
|
(17,088 |
) |
|
|
(21,062 |
) |
Change in cash and cash equivalents |
|
|
|
|
(6,020 |
) |
|
|
(27,798 |
) |
|
|
(12,107 |
) |
|
|
(94,131 |
) |
Cash and cash equivalents, beginning of period |
|
|
|
|
188,954 |
|
|
|
213,253 |
|
|
|
195,041 |
|
|
|
279,586 |
|
Cash and cash equivalents, end of period |
|
|
|
|
182,934 |
|
|
|
185,455 |
|
|
|
182,934 |
|
|
|
185,455 |
|
See accompanying notes to the condensed consolidated interim financial statements.
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
1.Description of business
SNDL Inc. (“SNDL” or the “Company”) was incorporated under the Business Corporations Act (Alberta) on August 19, 2006. On July 25, 2022, the Company’s shareholders approved a special resolution amending the articles of SNDL to change the name of the Company from “Sundial Growers Inc.” to “SNDL Inc.”.
The Company’s head office is located at 300, 919 11th Avenue SW, Calgary, Alberta, Canada.
The principal activities of the Company are the retailing of wines, beers and spirits, the operation and support of corporate-owned and franchise retail cannabis stores in Canadian jurisdictions where the private sale of recreational cannabis is permitted, the manufacturing of cannabis products providing proprietary cannabis processing services, the production, distribution and sale of cannabis domestically and for export pursuant to the Cannabis Act (Canada) (the “Cannabis Act”), and the deployment of capital to investment opportunities. The Cannabis Act regulates the production, distribution, and possession of cannabis for both medical and adult recreational access in Canada. The Company also owns approximately 65% of Nova Cannabis Inc. (“Nova”), whose principal activities are the retail sale of cannabis.
SNDL and its subsidiaries operate solely in Canada. Through its joint venture, SunStream Bancorp Inc. (“SunStream”) (note 13), the Company provides growth capital that pursues indirect investment and financial services opportunities in the cannabis sector, as well as other investment opportunities. The Company also makes strategic portfolio investments in debt and equity securities.
The Company’s liquor retail operations are seasonal in nature. Accordingly, sales will vary by quarter based on consumer spending behaviour. The Company is able to adjust certain variable costs in response to seasonal revenue patterns; however, costs such as occupancy are fixed, causing the Company to report a higher level of earnings in the third and fourth quarters. This business seasonality results in quarterly performance that is not necessarily indicative of the year’s performance. The cannabis retail industry is a growing industry for which seasonality cannot be reliably predicted.
The Company’s common shares trade on the Nasdaq Capital Market under the ticker symbol “SNDL”.
Statement of compliance
These condensed consolidated interim financial statements (“financial statements”) have been prepared in accordance with International Accounting Standard 34 – Interim Financial Reporting as issued by the International Accounting Standards Board and interpretations of the International Financial Reporting Interpretations Committee. These financial statements were prepared using the same accounting policies and methods as those disclosed in the annual consolidated financial statements for the year ended December 31, 2023. These financial statements should be read in conjunction with the annual consolidated financial statements for the Company for the year ended December 31, 2023.
Certain prior period amounts have been reclassified to conform to current year presentation. Specifically, cost of sales, inventory impairment and obsolescence, change in fair value of biological assets and change in fair value realized through inventory have been combined as cost of sales. Interest and fee revenue and investment income (loss) have been combined as investment income (loss). Finance costs (income), change in fair value of derivative warrants, transaction costs and foreign exchange gain (loss) have been combined as other income (expenses).
These financial statements were approved and authorized for issue by the board of directors of the Company (the “Board”) on August 1, 2024.
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
On March 28, 2023, the Company announced that it had entered into an agreement with Lightbox Enterprises Ltd. (“Lightbox”) pursuant to which, in connection with Lightbox’s proceedings under the Companies’ Creditors Arrangement Act (Canada), the Company (or its designee) would acquire the assets comprising four cannabis retail stores operating under the Dutch Love cannabis retail banner (the “Lightbox Transaction”). The Lightbox Transaction consideration was comprised of (i) approximately $1.7 million in cash, (ii) the cancellation of approximately $3.0 million in debt owing by Lightbox to the Company, and (iii) the issuance of 1.1 million SNDL common shares valued at $3.7 million.
On April 1, 2024, the Company announced that it had agreed to assign its rights to own or operate the four cannabis retail stores to Nova. On May 8, 2024, the Company completed the Lightbox Transaction and the assignment of its rights to own or operate the four cannabis retail stores to Nova.
The Company has engaged independent valuation experts to assist in determining the fair value of certain assets acquired and liabilities assumed and related deferred income tax impacts. The purchase price allocation is not final as the Company is continuing to obtain and verify information required to determine the fair value of certain assets and liabilities and the amount of deferred income taxes, if any, arising on their recognition.
Due to the inherent complexity associated with valuations and the timing of the acquisition, the amounts below are provisional and subject to adjustment. The fair value of consideration paid was as follows:
|
|
|
|
|
|
|
Cash |
|
1,654 |
|
Issuance of common shares |
|
3,693 |
|
Extinguishment of convertible debenture |
|
3,000 |
|
|
|
8,347 |
|
The preliminary fair value of the assets and liabilities acquired was as follows:
|
|
|
|
|
|
|
Inventory |
|
154 |
|
Right of use assets |
|
2,828 |
|
Property, plant and equipment |
|
964 |
|
Intangible assets |
|
1,959 |
|
Lease liabilities |
|
(2,828 |
) |
Total identifiable net assets acquired |
|
3,077 |
|
Goodwill |
|
5,270 |
|
|
|
8,347 |
|
Goodwill is attributable to expansion of the store network and the Value Buds brand growth in British Columbia.
As new information is obtained within one year of the date of acquisition, about facts and circumstances that existed at the date of acquisition, the accounting for the acquisition will be revised.
The financial statements incorporate the operations of Lightbox commencing May 9, 2024. During the period May 9, 2024 to June 30, 2024 the Company recorded revenues of $1.2 million and net loss of $0.1 million from the Lightbox operations. Had the Lightbox Transaction closed on January 1, 2024, management estimates that for the period January 1, 2024, to May 8, 2024, revenue would have increased by $3.1 million and net earnings would have increased by $0.2 million. In determining these amounts, management assumes the fair values on the date of acquisition would have been the same as if the acquisition had occurred on January 1, 2024.
The Company incurred costs related to the Lightbox Transaction of $0.1 million which have been included in transaction costs.
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
The Company’s reportable segments are organized by business line and are comprised of four reportable segments: liquor retail, cannabis retail, cannabis operations, and investments.
Liquor retail includes the sale of wines, beers and spirits through owned liquor stores. Cannabis retail includes the private sale of adult-use cannabis through owned and franchise retail cannabis stores. Cannabis operations include the cultivation, distribution and sale of cannabis for the adult-use and medical markets domestically and for export, and providing proprietary cannabis processing services, in addition to product development, manufacturing, and commercialization of cannabis consumer packaged goods. Investments include the deployment of capital to investment opportunities. Certain overhead expenses not directly attributable to any operating segment are reported as “Corporate”.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquor
Retail |
|
|
Cannabis
Retail |
|
|
Cannabis
Operations |
|
|
Investments (1) |
Corporate |
|
|
Total |
|
As at June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
308,295 |
|
|
|
212,046 |
|
|
|
201,648 |
|
|
|
732,094 |
|
|
|
19,972 |
|
|
|
1,474,055 |
|
Six months ended June 30, 2024 |
|
Net revenue (2) |
|
|
256,614 |
|
|
|
147,375 |
|
|
|
47,371 |
|
|
|
— |
|
|
|
(25,483 |
) |
|
|
425,877 |
|
Gross profit |
|
|
64,519 |
|
|
|
37,627 |
|
|
|
6,418 |
|
|
|
— |
|
|
|
— |
|
|
|
108,564 |
|
Operating income (loss) |
|
|
10,661 |
|
|
|
2,860 |
|
|
|
(1,025 |
) |
|
|
21,535 |
|
|
|
(43,242 |
) |
|
|
(9,211 |
) |
Earnings (loss) before income tax |
|
|
8,414 |
|
|
|
1,309 |
|
|
|
(2,068 |
) |
|
|
20,960 |
|
|
|
(42,515 |
) |
|
|
(13,900 |
) |
Three months ended June 30, 2024 |
|
Net revenue (2) |
|
|
140,560 |
|
|
|
76,069 |
|
|
|
24,976 |
|
|
|
— |
|
|
|
(13,478 |
) |
|
|
228,127 |
|
Gross profit |
|
|
35,713 |
|
|
|
19,268 |
|
|
|
3,183 |
|
|
|
— |
|
|
|
— |
|
|
|
58,164 |
|
Operating income (loss) |
|
|
8,481 |
|
|
|
3,902 |
|
|
|
(1,916 |
) |
|
|
8,456 |
|
|
|
(23,757 |
) |
|
|
(4,834 |
) |
Earnings (loss) before income tax |
|
|
7,450 |
|
|
|
3,157 |
|
|
|
(2,766 |
) |
|
|
7,881 |
|
|
|
(21,973 |
) |
|
|
(6,251 |
) |
(1)Total assets include cash and cash equivalents.
(2)The Company has eliminated $25.5 million for the six months ended June 30, 2024 and $13.5 million for the three months ended June 30, 2024 of cannabis operations revenue and equal cost of sales associated with sales to provincial boards that are expected to be subsequently repurchased by the Company’s licensed retail subsidiaries for resale, at which point the full retail sales revenue will be recognized. The elimination was recorded in the Corporate segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquor
Retail |
|
|
Cannabis
Retail (1) |
|
|
Cannabis
Operations (2) |
|
|
Investments (3) |
Corporate |
|
|
Total |
|
As at December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
320,239 |
|
|
|
206,988 |
|
|
|
208,295 |
|
|
|
717,751 |
|
|
|
19,891 |
|
|
|
1,473,164 |
|
Six months ended June 30, 2023 |
|
Net revenue (4) |
|
|
267,601 |
|
|
|
139,289 |
|
|
|
40,073 |
|
|
|
— |
|
|
|
(24,002 |
) |
|
|
422,961 |
|
Gross profit |
|
|
61,627 |
|
|
|
33,599 |
|
|
|
(10,752 |
) |
|
|
— |
|
|
|
— |
|
|
|
84,474 |
|
Operating income (loss) |
|
|
6,257 |
|
|
|
2,257 |
|
|
|
(33,038 |
) |
|
|
7,077 |
|
|
|
(44,323 |
) |
|
|
(61,770 |
) |
Earnings (loss) before income tax |
|
|
3,751 |
|
|
|
477 |
|
|
|
(32,951 |
) |
|
|
3,453 |
|
|
|
(39,496 |
) |
|
|
(64,766 |
) |
Three months ended June 30, 2023 |
|
Net revenue (4) |
|
|
151,690 |
|
|
|
71,881 |
|
|
|
20,940 |
|
|
|
— |
|
|
|
(12,595 |
) |
|
|
231,916 |
|
Gross profit |
|
|
35,360 |
|
|
|
17,780 |
|
|
|
(1,207 |
) |
|
|
— |
|
|
|
— |
|
|
|
51,933 |
|
Operating income (loss) |
|
|
8,207 |
|
|
|
2,335 |
|
|
|
(14,206 |
) |
|
|
(1,660 |
) |
|
|
(24,242 |
) |
|
|
(29,566 |
) |
Earnings (loss) before income tax |
|
|
6,714 |
|
|
|
1,221 |
|
|
|
(13,831 |
) |
|
|
(1,917 |
) |
|
|
(22,175 |
) |
|
|
(29,988 |
) |
(1)Cannabis retail includes the operations of Superette Inc. for the period February 8, 2023 to June 30, 2023.
(2)Cannabis operations includes the operations of The Valens Company Inc. for the period January 18, 2023 to June 30, 2023.
(3)Total assets include cash and cash equivalents.
(4)The Company has eliminated $24.0 million for the six months ended June 30, 2023 and $12.6 million for the three months ended June 30, 2023 of cannabis operations revenue and equal cost of sales associated with sales to provincial boards that are expected to be subsequently repurchased by the Company’s licensed retail subsidiaries for resale, at which point the full retail sales revenue will be recognized. The elimination was recorded in the Corporate segment.
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
Geographical disclosure
As at June 30, 2024, the Company had non-current assets related to credit investments in the United States of $571.2 million (December 31, 2023 – $538.3 million). For the six months ended June 30, 2024, share of profit of equity-accounted investees related to operations in the United States was a gain of $14.4 million (six months ended June 30, 2023 – gain of $8.6 million). All other non-current assets relate to operations in Canada and revenues from external customers relate to operations in Canada.
The Company’s biological assets consist of cannabis plants in various stages of vegetation, including plants which have not been harvested. The change in carrying value of biological assets is as follows:
|
|
|
|
|
|
|
As at |
June 30, 2024 |
|
December 31, 2023 |
|
Balance, beginning of year |
|
429 |
|
|
3,477 |
|
Increase in biological assets due to capitalized costs |
|
2,775 |
|
|
21,501 |
|
Net change in fair value of biological assets |
|
(568 |
) |
|
(7,936 |
) |
Transferred to inventory upon harvest |
|
(1,768 |
) |
|
(16,613 |
) |
Balance, end of period |
|
868 |
|
|
429 |
|
Biological assets are valued in accordance with International Accounting Standard 41 – Agriculture and are presented at their fair value less costs to sell up to the point of harvest. This is determined using a model which estimates the expected harvest yield in grams for plants currently being cultivated, and then adjusts that amount for the expected selling price less costs to produce and sell per gram.
The fair value measurements for biological assets have been categorized as Level 3 fair values based on the inputs to the valuation technique used. The Company’s method of accounting for biological assets attributes value accretion on a straight-line basis throughout the life of the biological asset from initial cloning to the point of harvest.
The Company estimates the harvest yields for cannabis at various stages of growth. As at June 30, 2024, it is estimated that the Company’s biological assets will yield approximately 3,480 kilograms (December 31, 2023 – 2,230 kilograms) of dry cannabis when harvested. During the six months ended June 30, 2024, the Company harvested 3,453 kilograms of dry cannabis (six months ended June 30, 2023 – 10,865 kilograms).
|
|
|
|
|
|
|
As at |
June 30, 2024 |
|
December 31, 2023 |
|
Retail liquor |
|
84,909 |
|
|
83,923 |
|
Retail cannabis |
|
20,430 |
|
|
19,516 |
|
Harvested cannabis |
|
|
|
|
Raw materials, packaging and components |
|
9,849 |
|
|
7,781 |
|
Extracted cannabis & hemp oils |
|
14,695 |
|
|
11,989 |
|
Work-in-progress |
|
— |
|
|
995 |
|
Finished goods |
|
3,029 |
|
|
4,856 |
|
|
|
132,912 |
|
|
129,060 |
|
During the three and six months ended June 30, 2024, inventories of $169.2 million and $315.1 million were recognized in cost of sales as an expense (three and six months ended June 30, 2023 – $176.3 million and $323.1 million).
During the three and six months ended June 30, 2024, the Company recognized inventory write downs of $1.1 million and $3.0 million (three and six months ended June 30, 2023 – $4.3 million and $13.5 million).
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
At June 30, 2024, assets held for sale were measured at their fair value less costs to sell and comprised of the following:
|
|
|
|
|
|
|
As at |
June 30, 2024 |
|
December 31, 2023 |
|
Olds facility |
|
18,800 |
|
|
— |
|
Stellarton facility |
|
— |
|
|
6,375 |
|
Extraction equipment |
|
251 |
|
|
— |
|
|
|
19,051 |
|
|
6,375 |
|
The Olds facility is located in Olds, Alberta, and its primary purpose was the cultivation of cannabis for the adult-use cannabis market. Management is committed to a plan to sell the Olds facility and the asset is available for immediate sale.
The Stellarton facility is located in Stellarton, Nova Scotia, and its primary purpose was the packaging and processing of value added and derivative products for the adult-use cannabis market. The Stellarton facility was acquired as part of the Zenabis acquisition. During the six months ended June 30, 2024, the Company concluded that the Stellarton facility no longer met certain criteria for assets held for sale due to secondary commercial real estate market conditions in Nova Scotia. The facility was reclassified to property, plant and equipment and a $1.3 million impairment loss was recognized.
|
|
|
|
|
Cost |
|
|
|
Balance at December 31, 2023 |
|
|
199,032 |
|
Acquisition (note 3) |
|
|
2,828 |
|
Additions |
|
|
826 |
|
Renewals, remeasurements and dispositions |
|
|
3,019 |
|
Balance at June 30, 2024 |
|
|
205,705 |
|
|
|
|
|
Accumulated depreciation and impairment |
|
|
|
Balance at December 31, 2023 |
|
|
69,353 |
|
Depreciation |
|
|
15,697 |
|
Impairment |
|
|
1,182 |
|
Balance at June 30, 2024 |
|
|
86,232 |
|
|
|
|
|
Net book value |
|
|
|
Balance at December 31, 2023 |
|
|
129,679 |
|
Balance at June 30, 2024 |
|
|
119,473 |
|
As at June 30, 2024, the Company recorded impairment losses of right of use assets of $1.2 million, $1.6 million for the three months ended March 31, 2024 and a reversal of $0.4 million for the three months ended June 30, 2024 (June 30, 2023 – nil) with $1.5 million ($1.8 million for the three months ended March 31, 2024 and a reversal of $0.3 million for the three months ended June 30, 2024) in the cannabis retail reporting segment and an impairment reversal of $0.3 million ($0.2 million reversal for the three months ended March 31, 2024 and $0.1 million reversal for the three months ended June 30, 2024) in the liquor retail reporting segment. Refer to note 9 for the significant assumptions applied in the impairment test.
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
9.Property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land |
|
Production facilities |
|
Leasehold improvements |
|
Equipment |
|
Construction
in progress |
|
Total |
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2023 |
|
20,953 |
|
|
179,156 |
|
|
76,899 |
|
|
99,164 |
|
|
8,674 |
|
|
384,846 |
|
Acquisition (note 3) |
|
— |
|
|
— |
|
|
964 |
|
|
— |
|
|
— |
|
|
964 |
|
Additions |
|
— |
|
|
— |
|
|
454 |
|
|
2,870 |
|
|
1,721 |
|
|
5,045 |
|
Reclass to assets held for sale |
|
(11,834 |
) |
|
(143,540 |
) |
|
— |
|
|
(411 |
) |
|
(6,013 |
) |
|
(161,798 |
) |
Dispositions |
|
— |
|
|
— |
|
|
(559 |
) |
|
(1,594 |
) |
|
(90 |
) |
|
(2,243 |
) |
Balance at June 30, 2024 |
|
9,119 |
|
|
35,616 |
|
|
77,758 |
|
|
100,029 |
|
|
4,292 |
|
|
226,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation and impairment |
|
Balance at December 31, 2023 |
|
— |
|
|
145,420 |
|
|
28,448 |
|
|
52,241 |
|
|
5,821 |
|
|
231,930 |
|
Depreciation |
|
— |
|
|
637 |
|
|
5,480 |
|
|
5,716 |
|
|
— |
|
|
11,833 |
|
Impairment |
|
— |
|
|
— |
|
|
(53 |
) |
|
77 |
|
|
— |
|
|
24 |
|
Reclass to assets held for sale |
|
— |
|
|
(141,811 |
) |
|
— |
|
|
(165 |
) |
|
(5,821 |
) |
|
(147,797 |
) |
Dispositions |
|
— |
|
|
— |
|
|
(559 |
) |
|
(979 |
) |
|
— |
|
|
(1,538 |
) |
Balance at June 30, 2024 |
|
— |
|
|
4,246 |
|
|
33,316 |
|
|
56,890 |
|
|
— |
|
|
94,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2023 |
|
20,953 |
|
|
33,736 |
|
|
48,451 |
|
|
46,923 |
|
|
2,853 |
|
|
152,916 |
|
Balance at June 30, 2024 |
|
9,119 |
|
|
31,370 |
|
|
44,442 |
|
|
43,139 |
|
|
4,292 |
|
|
132,362 |
|
During the six months ended June 30, 2024, depreciation expense of $1.0 million was capitalized to biological assets and inventory (six months ended June 30, 2023 – $3.0 million).
During the six months ended June 30, 2024, the Company determined that indicators of impairment existed relating to certain cannabis retail stores due to underperforming store level operating results as well as indicators of impairment reversal relating to certain previously impaired liquor retail stores now overperforming store level operating results. For impairment testing of retail property, plant and equipment and right of use assets, the Company determined that a cash generating unit (“CGU”) was defined as each individual retail store. The Company completed impairment tests for each CGU determined to have an indicator of potential impairment or impairment reversal using a discounted cash flow model. The recoverable amounts for each CGU were based on the higher of its estimated value in use and fair value less costs of disposal using Level 3 inputs. The significant assumptions applied in the impairment test are described below:
•Cash flows: Projected future sales and earnings for cash flows are based on actual operating results and operating forecasts. Management determined forecasted growth rates of sales based on past performance, expectations of future performance for each location and industry averages. Expenditures were based upon a combination of historical percentages of revenue, sales growth rates, forecasted inflation rates and contractual lease payments. The duration of the cash flow projections for individual CGUs varies based on the remaining lease term of the CGU.
•Discount rate: A pre-tax discount rate range of 12.0% – 13.8% was estimated and is based on market assessments of the time value of money and CGU specific risks. To determine a pre-tax discount rate, a weighted average cost of capital was used as a reference point which is based on market capital structure of debt, risk-free rate, equity risk premium, beta adjustment to the equity risk premium based on a review of betas of comparable publicly traded companies, the Company’s historical data, an unsystematic risk premium and after-tax cost of debt based on corporate bond yields.
As at June 30, 2024, the Company recorded impairment losses of property, plant and equipment of $0.56 million, $0.77 million for the three months ended March 31, 2024 and a reversal of $0.21 million for the three months ended June 30, 2024 (June 30, 2023 – $0.5 million) in the cannabis retail reporting segment and an impairment reversal of $0.54 million, $0.76 million reversal for the three months ended March 31, 2024 and impairment of $0.22 million for
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
the three months ended June 30, 2024 (June 30, 2023 – nil) in the liquor retail reporting segment. The Company also recorded impairment losses and impairment reversals of right of use assets (note 8).
10.Net investment in subleases
|
|
|
|
|
|
|
|
June 30, 2024 |
|
December 31, 2023 |
|
Balance, beginning of year |
|
21,366 |
|
|
23,319 |
|
Additions |
|
— |
|
|
832 |
|
Finance income |
|
386 |
|
|
857 |
|
Rents recovered (payments made directly to landlords) |
|
(1,800 |
) |
|
(4,004 |
) |
Dispositions and remeasurements |
|
(561 |
) |
|
362 |
|
Balance, end of period |
|
19,391 |
|
|
21,366 |
|
|
|
|
|
|
Current portion |
|
2,819 |
|
|
2,970 |
|
Long-term |
|
16,572 |
|
|
18,396 |
|
Net investment in subleases represent leased retail stores that have been subleased to certain franchise partners. These subleases are classified as a finance lease as the sublease terms are for the remaining term of the head lease.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brands and trademarks |
|
Franchise agreements |
|
Software |
|
Retail
Licenses |
|
Total |
|
Cost |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2023 |
|
81,900 |
|
|
10,000 |
|
|
5,556 |
|
|
750 |
|
|
98,206 |
|
Acquisition (note 3) |
|
— |
|
|
— |
|
|
— |
|
|
1,959 |
|
|
1,959 |
|
Additions |
|
— |
|
|
— |
|
|
32 |
|
|
— |
|
|
32 |
|
Balance at June 30, 2024 |
|
81,900 |
|
|
10,000 |
|
|
5,588 |
|
|
2,709 |
|
|
100,197 |
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization and impairment |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2023 |
|
20,447 |
|
|
3,061 |
|
|
1,549 |
|
|
— |
|
|
25,057 |
|
Amortization |
|
86 |
|
|
623 |
|
|
470 |
|
|
— |
|
|
1,179 |
|
Balance at June 30, 2024 |
|
20,533 |
|
|
3,684 |
|
|
2,019 |
|
|
— |
|
|
26,236 |
|
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2023 |
|
61,453 |
|
|
6,939 |
|
|
4,007 |
|
|
750 |
|
|
73,149 |
|
Balance at June 30, 2024 |
|
61,367 |
|
|
6,316 |
|
|
3,569 |
|
|
2,709 |
|
|
73,961 |
|
|
|
|
|
|
|
|
As at |
June 30, 2024 |
|
December 31, 2023 |
|
Investments at amortized cost |
|
20,187 |
|
|
24,405 |
|
Investments at fair value through profit and loss ("FVTPL") |
|
9,162 |
|
|
8,655 |
|
|
|
29,349 |
|
|
33,060 |
|
|
|
|
|
|
Current portion |
|
28,514 |
|
|
3,400 |
|
Long-term |
|
835 |
|
|
29,660 |
|
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
Investments at amortized cost
On April 1, 2024, the Company and Indiva Limited (“Indiva”) entered into an amendment to the Second Amended and Restated Promissory Note dated August 28, 2023, whereby Indiva repaid $2.0 million of principal and certain financial and reporting conditions were amended.
On June 12, 2024, the Company agreed to lend Indiva up to an additional $2.4 million as a debtor-in-possession loan, of which $0.9 million was drawn upon as of June 30, 2024.
On July 5, 2024, the Company announced that it had entered into a purchase agreement (the “Bid Agreement”) with Indiva and its direct and indirect subsidiaries (collectively with Indiva, the “Indiva Group”), pursuant to which the Company offered to purchase all of the issued and outstanding shares of Indiva and the business and assets of the Indiva Group (collectively, the “Indiva Assets”) for consideration comprising of a credit bid of all of the indebtedness of the Indiva Group owing to the Company, the retention of certain liabilities of the Indiva Group, and cash payments sufficient to repay certain priority indebtedness of the Indiva Group and costs associated with the Indiva Group’s proceedings under the Companies’ Creditors Arrangement Act (Canada) (the “CCAA Proceedings”).
The Bid Agreement was entered into in the context of the CCAA Proceedings, as part of a sales process where the Indiva Assets will be marketed to prospective purchasers (the “Sale Process”) and, accordingly, is subject to approval by the court overseeing the CCAA Proceedings and to potential alternative bids submitted pursuant to the Sale Process.
Investments at fair value through profit and loss
On March 7, 2024, the Company provided notice to Delta-9 Cannabis Inc. (“Delta 9”) regarding non-compliance with certain covenants and conditions related to the Second Waiver that had been granted on September 9, 2022.
On July 5, 2024, the Company announced that it had completed the acquisition (the “Debt Acquisition”) of the principal indebtedness (the “Purchased Indebtedness”) of Delta 9 from Connect First and Servus Credit Union Ltd. for a purchase price of $28.1 million pursuant to a purchase and sale of indebtedness agreement dated July 5, 2024. As a result of the Debt Acquisition, the Company became Delta 9’s senior secured creditor with a first priority security interest in all of the assets of Delta 9 and certain Delta 9 subsidiaries. As of July 5, 2024, the Purchased Indebtedness increased Delta 9’s total indebtedness owing to the Company to $40.7 million.
13.Equity-accounted investees
|
|
|
|
|
|
|
As at |
June 30, 2024 |
|
December 31, 2023 |
|
Interest in joint venture |
|
571,178 |
|
|
538,331 |
|
SunStream is a joint venture in which the Company has a 50% ownership interest. SunStream is a private company, incorporated under the Business Corporations Act (Alberta), which provides growth capital that pursues indirect investment and financial services opportunities in the cannabis sector, as well as other investment opportunities.
SunStream is structured separately from the Company, and the Company has a residual interest in the net assets of SunStream. Accordingly, the Company has classified its interest in SunStream as a joint venture, which is accounted for using the equity-method.
The current investment portfolio of SunStream is comprised of secured debt, hybrid debt and derivative instruments with United States based cannabis businesses. These investments are recorded at fair value each reporting period with any changes in fair value recorded through profit or loss. SunStream actively monitors these investments for changes in credit risk, market risk and other risks specific to each investment.
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
The following table summarizes the carrying amount of the Company’s interest in the joint venture:
|
|
|
|
|
|
|
Carrying amount |
|
Balance at December 31, 2023 |
|
|
538,331 |
|
Capital contributions (refunds) |
|
|
(168 |
) |
Share of net earnings |
|
|
14,400 |
|
Share of other comprehensive income (loss) (taxes at 23%) |
|
|
18,615 |
|
Balance at June 30, 2024 |
|
|
571,178 |
|
SunStream is a related party due to it being classified as a joint venture of the Company. Capital contributions to the joint venture and distributions received from the joint venture are classified as related party transactions.
The following table summarizes the financial information of SunStream:
|
|
|
|
|
|
|
As at |
June 30, 2024 |
|
June 30, 2023 |
|
Current assets (including cash and cash equivalents - 2024: $0.4 million, 2023: $2.0 million) |
|
1,045 |
|
|
8,720 |
|
Non-current assets |
|
565,911 |
|
|
520,211 |
|
Current liabilities |
|
(332 |
) |
|
(662 |
) |
Non-current liabilities |
|
— |
|
|
— |
|
Net assets (liabilities) (100%) |
|
566,624 |
|
|
528,269 |
|
|
|
|
|
|
Six months ended June 30 |
2024 |
|
2023 |
|
Revenue |
|
18,418 |
|
|
12,280 |
|
Profit from operations |
|
14,765 |
|
|
8,933 |
|
Other comprehensive income (loss) |
|
18,615 |
|
|
(12,006 |
) |
Total comprehensive income (loss) |
|
33,364 |
|
|
(3,026 |
) |
|
|
|
|
|
|
|
|
June 30, 2024 |
|
December 31, 2023 |
|
Balance, beginning of year |
|
4,400 |
|
|
11,002 |
|
Change in fair value recognized in profit or loss |
|
(500 |
) |
|
(6,602 |
) |
Balance, end of period |
|
3,900 |
|
|
4,400 |
|
During the six months ended June 30, 2024, the 50,000 remaining unsecured convertible note warrants expired. The unsecured convertible notes warrants were issued in 2020 as part of the Company’s debt restructuring transactions. A total of 1.45 million derivative warrants were issued in such transactions, of which 1.4 million were exercised during the year ended December 31, 2020.
The following table summarizes outstanding derivative warrants as at June 30, 2024:
|
|
|
|
|
|
|
|
|
|
|
Exercise price (US$) |
|
Number of warrants |
|
Weighted average contractual life |
|
2020 Series A Warrants (1) |
|
1.77 |
|
|
50,000 |
|
|
1.1 |
|
New Warrants |
|
2.29 |
|
|
9,833,333 |
|
|
0.2 |
|
|
|
|
|
9,883,333 |
|
|
0.2 |
|
(1)The conversion or exercise price, as applicable, is subject to full ratchet antidilution protection upon any subsequent transaction at a price lower than the price then in effect and standard adjustments in the event of any share split, share dividend, share combination, recapitalization or other similar transaction. If the Company issues, sells or enters into any agreement to issue or sell, any variable rate securities, the investors have the additional right to substitute the variable price (or formula) of such securities for the conversion or exercise price, as applicable.
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
|
|
|
|
|
|
|
|
June 30, 2024 |
|
December 31, 2023 |
|
Balance, beginning of year |
|
167,029 |
|
|
169,831 |
|
Acquisitions |
|
2,828 |
|
|
4,336 |
|
Additions |
|
826 |
|
|
4,362 |
|
Lease payments |
|
(19,022 |
) |
|
(45,017 |
) |
Renewals, remeasurements and dispositions |
|
2,096 |
|
|
25,505 |
|
Tenant inducement allowances received |
|
— |
|
|
91 |
|
Accretion expense |
|
3,855 |
|
|
7,921 |
|
Balance, end of period |
|
157,612 |
|
|
167,029 |
|
|
|
|
|
|
Current portion |
|
32,618 |
|
|
30,537 |
|
Long-term |
|
124,994 |
|
|
136,492 |
|
The following table presents the contractual undiscounted cash flows, excluding periods covered by lessee lease extension options that have been included in the determination of the lease term, related to the Company’s lease liabilities as at June 30, 2024:
|
|
|
|
|
|
|
June 30, 2024 |
|
Less than one year |
|
|
40,564 |
|
One to three years |
|
|
68,477 |
|
Three to five years |
|
|
45,837 |
|
Thereafter |
|
|
27,763 |
|
Minimum lease payments |
|
|
182,641 |
|
16.Share capital and warrants
The authorized capital of the Company consists of an unlimited number of voting common shares and preferred shares with no par value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2024 |
|
December 31, 2023 |
|
|
Note |
Number of
Shares |
|
Carrying
Amount |
|
Number of
Shares |
|
Carrying
Amount |
|
Balance, beginning of year |
|
|
262,775,853 |
|
|
2,375,950 |
|
|
235,194,236 |
|
|
2,292,810 |
|
Share issuances |
|
|
96,399 |
|
|
164 |
|
|
931,740 |
|
|
1,900 |
|
Share issuance costs |
|
|
— |
|
|
(57 |
) |
|
— |
|
|
— |
|
Share repurchases |
|
|
— |
|
|
— |
|
|
(546,700 |
) |
|
(5,344 |
) |
Acquisitions |
3 |
|
1,099,744 |
|
|
3,693 |
|
|
27,605,782 |
|
|
83,953 |
|
Shares acquired and cancelled |
|
|
— |
|
|
— |
|
|
(2,261,778 |
) |
|
(6,879 |
) |
Employee awards exercised |
|
|
312,844 |
|
|
1,003 |
|
|
1,852,573 |
|
|
9,510 |
|
Balance, end of period |
|
|
264,284,840 |
|
|
2,380,753 |
|
|
262,775,853 |
|
|
2,375,950 |
|
During the six months ended June 30, 2024, the Company issued 1.1 million common shares as part of the consideration for the Lightbox Transaction (note 3) and 0.1 million common shares related to the acquisition of certain franchise stores in Ontario.
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
C)COMMON SHARE PURCHASE WARRANTS
|
|
|
|
|
|
|
|
Number of Warrants |
|
Carrying Amount |
|
Balance at December 31, 2023 |
|
308,612 |
|
|
2,260 |
|
Warrants expired |
|
(190,212 |
) |
|
(1,593 |
) |
Balance at June 30, 2024 |
|
118,400 |
|
|
667 |
|
During the six months ended June 30, 2024, the remaining Inner Spirit Holdings Ltd. warrants that comprised the contingent consideration from the acquisition expired.
The following table summarizes outstanding warrants as at June 30, 2024:
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding and exercisable |
|
Issued in relation to |
Weighted average exercise price |
|
Number of warrants |
|
Weighted average
contractual remaining life (years) |
|
Financial services |
|
45.98 |
|
|
54,400 |
|
|
5.1 |
|
Acquisition of intellectual property |
|
9.40 |
|
|
64,000 |
|
|
1.5 |
|
|
$ |
26.21 |
|
|
118,400 |
|
|
3.1 |
|
17.Share-based compensation
The Company has a number of share-based compensation plans which include simple and performance warrants, stock options, restricted share units (“RSUs”) and deferred share units (“DSUs”). Subsequent to the Company’s initial public offering, the Company established the stock option, RSU and DSU plans to replace the granting of simple warrants and performance warrants.
The components of share-based compensation expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
Six months ended
June 30 |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Equity-settled expense |
|
|
|
|
|
|
|
|
Simple warrants (A) |
|
— |
|
|
2 |
|
|
— |
|
|
(335 |
) |
Stock options (B) |
|
1 |
|
|
3 |
|
|
1 |
|
|
(2 |
) |
Restricted share units (1) (C) |
|
4,310 |
|
|
3,485 |
|
|
6,751 |
|
|
6,109 |
|
Cash-settled expense |
|
|
|
|
|
|
|
|
Deferred share units (1)(2) (D) |
|
572 |
|
|
403 |
|
|
2,974 |
|
|
330 |
|
|
|
4,883 |
|
|
3,893 |
|
|
9,726 |
|
|
6,102 |
|
(1)For the six months ended June 30, 2024, the Company recognized share-based compensation expense under Nova’s RSU plan of $6 (2023 — $21) and share-based compensation expense under Nova’s DSU plan of $903 (2023 — $201).
(2)Cash-settled DSUs are accounted for as a liability and are measured at fair value based on the market value of the Company’s common shares at each period end. Fluctuations in the fair value are recognized during the period in which they occur.
Equity-settled plans
A)Simple and performance warrants
The Company issued simple warrants and performance warrants to employees, directors and others at the discretion of the Board. Simple and performance warrants granted generally vest annually over a three-year period, simple warrants expire five years after the grant date and performance warrants expire five years after vesting criteria met.
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
The following table summarizes changes in the simple and performance warrants during the six months ended June 30, 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Simple
warrants
outstanding |
|
|
Weighted
average
exercise price |
|
|
Performance
warrants
outstanding |
|
|
Weighted
average
exercise price |
|
Balance at December 31, 2023 |
|
|
66,700 |
|
|
$ |
39.77 |
|
|
|
54,400 |
|
|
$ |
38.62 |
|
Expired |
|
|
(8,780 |
) |
|
|
6.25 |
|
|
|
— |
|
|
|
0.00 |
|
Balance at June 30, 2024 |
|
|
57,920 |
|
|
$ |
44.85 |
|
|
|
54,400 |
|
|
$ |
38.62 |
|
The following table summarizes outstanding simple and performance warrants as at June 30, 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding |
|
|
Warrants exercisable |
|
Range of exercise prices |
|
Number of
warrants |
|
|
Weighted
average
exercise
price |
|
|
Weighted
average
contractual
life (years) |
|
|
Number of
warrants |
|
|
Weighted
average
exercise
price |
|
|
Weighted
average
contractual
life (years) |
|
Simple warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$6.25 - $9.38 |
|
|
27,520 |
|
|
|
8.07 |
|
|
|
0.57 |
|
|
|
27,520 |
|
|
|
8.07 |
|
|
|
0.57 |
|
$29.69 - $45.31 |
|
|
7,200 |
|
|
|
34.90 |
|
|
|
1.32 |
|
|
|
7,200 |
|
|
|
34.90 |
|
|
|
1.32 |
|
$62.50 - $93.75 |
|
|
17,280 |
|
|
|
64.81 |
|
|
|
2.39 |
|
|
|
17,280 |
|
|
|
64.81 |
|
|
|
2.39 |
|
$125.00 - $312.50 |
|
|
5,920 |
|
|
|
169.62 |
|
|
|
2.94 |
|
|
|
5,920 |
|
|
|
169.62 |
|
|
|
2.94 |
|
|
|
|
57,920 |
|
|
$ |
44.85 |
|
|
|
1.45 |
|
|
|
57,920 |
|
|
$ |
44.85 |
|
|
|
1.45 |
|
Performance warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$6.25 - $9.38 |
|
|
19,200 |
|
|
|
6.25 |
|
|
|
0.69 |
|
|
|
19,200 |
|
|
|
6.25 |
|
|
|
0.69 |
|
$29.69 - $45.31 |
|
|
23,200 |
|
|
|
32.60 |
|
|
|
0.77 |
|
|
|
23,200 |
|
|
|
32.60 |
|
|
|
0.77 |
|
$62.50 - $93.75 |
|
|
9,334 |
|
|
|
77.68 |
|
|
n/a |
|
|
|
1,334 |
|
|
|
93.75 |
|
|
|
1.67 |
|
$125.00 - $218.75 |
|
|
2,666 |
|
|
|
187.50 |
|
|
n/a |
|
|
|
— |
|
|
|
— |
|
|
n/a |
|
|
|
|
54,400 |
|
|
$ |
38.62 |
|
|
n/a |
|
|
|
43,734 |
|
|
$ |
22.90 |
|
|
|
0.76 |
|
The Company issues stock options to employees and others at the discretion of the Board. Stock options granted generally vest annually over a three-year period and generally expire ten years after the grant date.
The following table summarizes changes in stock options during the six months ended June 30, 2024:
|
|
|
|
|
|
|
|
|
|
|
Stock options outstanding |
|
|
Weighted
average
exercise price |
|
Balance at December 31, 2023 |
|
|
853,705 |
|
|
$ |
17.92 |
|
Forfeited |
|
|
(89,331 |
) |
|
|
18.03 |
|
Expired |
|
|
(83,350 |
) |
|
|
37.89 |
|
Balance at June 30, 2024 |
|
|
681,024 |
|
|
$ |
15.46 |
|
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
The following table summarizes outstanding stock options as at June 30, 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options outstanding |
|
|
Stock options exercisable |
|
Exercise prices |
|
Number of
options |
|
|
Weighted
average
contractual
life (years) |
|
|
Number of
options |
|
|
Weighted
average
contractual
life (years) |
|
$11.50 |
|
|
10,000 |
|
|
|
5.91 |
|
|
|
10,000 |
|
|
|
5.91 |
|
$11.90 |
|
|
8,160 |
|
|
|
5.99 |
|
|
|
8,160 |
|
|
|
5.99 |
|
$31.50 |
|
|
3,000 |
|
|
|
4.23 |
|
|
|
2,700 |
|
|
|
4.23 |
|
$11.79 - $38.88 |
|
|
659,864 |
|
|
|
2.08 |
|
|
|
659,864 |
|
|
|
2.08 |
|
|
|
|
681,024 |
|
|
|
2.19 |
|
|
|
680,724 |
|
|
|
2.19 |
|
RSUs are granted to employees and the vesting requirements and maximum term are at the discretion of the Board. RSUs are exchangeable for an equal number of common shares.
The following table summarizes changes in RSUs during the six months ended June 30, 2024:
|
|
|
|
|
|
|
|
|
|
|
RSUs
outstanding |
|
Balance at December 31, 2023 |
|
|
|
|
8,629,716 |
|
Granted |
|
|
|
|
5,461,726 |
|
Forfeited |
|
|
|
|
(249,759 |
) |
Exercised |
|
|
|
|
(349,093 |
) |
Balance at June 30, 2024 |
|
|
|
|
13,492,590 |
|
At June 30, 2024, no RSUs were vested or exercisable.
Cash-settled plans
DSUs are granted to directors and generally vest in equal instalments over one year. DSUs are settled by making a cash payment to the holder equal to the fair value of the Company’s common shares calculated at the date of such payment.
As at June 30, 2024, the Company recognized a liability of $6.0 million relating to the fair value of cash-settled DSUs (December 31, 2023 – $3.9 million). The liability is included as a non-current liability within other liabilities.
The following table summarizes changes in DSUs during the six months ended June 30, 2024:
|
|
|
|
|
|
|
|
|
|
|
DSUs
outstanding |
|
Balance at December 31, 2023 |
|
|
|
|
2,398,333 |
|
Granted |
|
|
|
|
345,840 |
|
Balance at June 30, 2024 |
|
|
|
|
2,744,173 |
|
At June 30, 2024, 1.8 million DSUs were vested but none were exercisable. At December 31, 2023, 1.5 million DSUs were vested but none were exercisable. DSUs can only be exercised once a director ceases to be on the Board.
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
Liquor retail revenue is derived from the sale of wines, beers and spirits to customers and proprietary licensing. Cannabis retail revenue is derived from retail cannabis sales to customers, franchise revenue consisting of royalty and franchise fee revenue, and other revenue consisting of millwork, supply and accessories revenue and proprietary licensing. Cannabis operations revenue is derived from contracts with customers and is comprised of sales to provincial boards that sell cannabis through their respective distribution models, sales to licensed producers for further processing, provision of proprietary cannabis processing services, product development, manufacturing and commercialization of cannabis consumer products and sales to medical customers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
Six months ended
June 30 |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Liquor retail revenue |
|
|
|
|
|
|
|
|
Retail |
|
140,223 |
|
|
151,690 |
|
|
256,027 |
|
|
267,601 |
|
Other |
|
337 |
|
|
— |
|
|
587 |
|
|
— |
|
Liquor retail revenue |
|
140,560 |
|
|
151,690 |
|
|
256,614 |
|
|
267,601 |
|
Cannabis retail revenue |
|
|
|
|
|
|
|
|
Retail |
|
70,740 |
|
|
67,423 |
|
|
137,092 |
|
|
131,523 |
|
Proprietary licensing |
|
3,847 |
|
|
2,583 |
|
|
7,349 |
|
|
4,043 |
|
Franchise |
|
1,482 |
|
|
1,799 |
|
|
2,934 |
|
|
3,566 |
|
Other |
|
— |
|
|
76 |
|
|
— |
|
|
157 |
|
Cannabis retail revenue |
|
76,069 |
|
|
71,881 |
|
|
147,375 |
|
|
139,289 |
|
Cannabis operations revenue |
|
|
|
|
|
|
|
|
Provincial boards |
|
17,689 |
|
|
19,119 |
|
|
30,437 |
|
|
33,841 |
|
Wholesale |
|
7,609 |
|
|
1,780 |
|
|
15,135 |
|
|
4,929 |
|
Analytical testing and other |
|
334 |
|
|
360 |
|
|
658 |
|
|
662 |
|
Cannabis operations revenue |
|
25,632 |
|
|
21,259 |
|
|
46,230 |
|
|
39,432 |
|
Gross revenue |
|
242,261 |
|
|
244,830 |
|
|
450,219 |
|
|
446,322 |
|
Excise taxes |
|
14,134 |
|
|
12,914 |
|
|
24,342 |
|
|
23,361 |
|
Net revenue |
|
228,127 |
|
|
231,916 |
|
|
425,877 |
|
|
422,961 |
|
19.Investment income (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
Six months ended
June 30 |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Interest income from investments at amortized cost |
|
733 |
|
|
980 |
|
|
1,614 |
|
|
1,986 |
|
Interest and fee income from investments at FVTPL |
|
449 |
|
|
250 |
|
|
1,499 |
|
|
874 |
|
Interest income from cash |
|
2,036 |
|
|
2,191 |
|
|
4,196 |
|
|
4,772 |
|
Gains (losses) on marketable securities |
|
(14 |
) |
|
(4,020 |
) |
|
(69 |
) |
|
(9,189 |
) |
|
|
3,204 |
|
|
(599 |
) |
|
7,240 |
|
|
(1,557 |
) |
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
20.Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
Six months ended
June 30 |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Finance costs (income) |
|
|
|
|
|
|
|
|
Accretion on lease liabilities |
|
1,933 |
|
|
2,293 |
|
|
3,887 |
|
|
4,239 |
|
Change in fair value of investments at FVTPL |
|
575 |
|
|
257 |
|
|
575 |
|
|
3,625 |
|
Financial guarantee liability recovery |
|
8 |
|
|
— |
|
|
(19 |
) |
|
(139 |
) |
Other finance (recoveries) costs |
|
(169 |
) |
|
123 |
|
|
(275 |
) |
|
341 |
|
Interest income |
|
(190 |
) |
|
(215 |
) |
|
(386 |
) |
|
(435 |
) |
Total finance costs |
|
2,157 |
|
|
2,458 |
|
|
3,782 |
|
|
7,631 |
|
Change in fair value of derivative warrants (note 14) |
|
(1,800 |
) |
|
(2,240 |
) |
|
(500 |
) |
|
(7,042 |
) |
Transaction costs |
|
857 |
|
|
173 |
|
|
995 |
|
|
2,213 |
|
Foreign exchange loss |
|
203 |
|
|
31 |
|
|
412 |
|
|
194 |
|
|
|
1,417 |
|
|
422 |
|
|
4,689 |
|
|
2,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Weighted average shares outstanding (000s) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted (1) |
|
|
263,832 |
|
|
|
260,228 |
|
|
|
263,400 |
|
|
|
257,905 |
|
Continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to owners of the Company |
|
|
(5,772 |
) |
|
|
(29,350 |
) |
|
|
(8,326 |
) |
|
|
(63,553 |
) |
Per share - basic and diluted |
|
$ |
(0.02 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.24 |
) |
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to owners of the Company |
|
|
— |
|
|
|
(3,170 |
) |
|
|
— |
|
|
|
(4,535 |
) |
Per share - basic and diluted |
|
|
— |
|
|
$ |
(0.01 |
) |
|
$ |
— |
|
|
$ |
(0.02 |
) |
Net loss attributable to owners of the Company |
|
|
(5,772 |
) |
|
|
(32,520 |
) |
|
|
(8,326 |
) |
|
|
(68,088 |
) |
Per share - basic and diluted |
|
$ |
(0.02 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.26 |
) |
(1)For the six months ended June 30, 2024, there were 0.1 million equity classified warrants, 9.9 million derivative warrants, 0.1 million simple warrants, 0.1 million performance warrants, 0.7 million stock options and 13.5 million RSUs that were excluded from the calculation as the impact was anti-dilutive (six months ended June 30, 2023– 0.3 million equity classified warrants, 9.9 million derivative warrants, 0.1 million simple warrants, 0.1 million performance warrants, 0.03 million stock options and 8.7 million RSUs).
The financial instruments recognized on the consolidated statement of financial position are comprised of cash and cash equivalents, restricted cash, marketable securities, accounts receivable, investments at amortized cost, investments at FVTPL, accounts payable and accrued liabilities and derivative warrants.
Fair value
The carrying value of cash and cash equivalents, restricted cash, accounts receivable and accounts payable and accrued liabilities approximate their fair value due to the short-term nature of the instruments. The carrying value of
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
investments at amortized cost approximate their fair value as the fixed interest rates approximate market rates for comparable transactions.
Fair value measurements of marketable securities, investments at FVTPL and derivative warrants are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurements using |
|
June 30, 2024 |
Carrying
amount |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Recurring measurements: |
|
|
|
|
|
|
|
|
Financial assets |
|
|
|
|
|
|
|
|
Marketable securities |
|
156 |
|
|
156 |
|
|
— |
|
|
— |
|
Investments at FVTPL |
|
9,162 |
|
|
— |
|
|
— |
|
|
9,162 |
|
Financial liabilities |
|
|
|
|
|
|
|
|
Derivative warrants (1) |
|
3,900 |
|
|
— |
|
|
— |
|
|
3,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurements using |
|
December 31, 2023 |
Carrying
amount |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Recurring measurements: |
|
|
|
|
|
|
|
|
Financial assets |
|
|
|
|
|
|
|
|
Marketable securities |
|
225 |
|
|
225 |
|
|
— |
|
|
— |
|
Investments at FVTPL |
|
8,655 |
|
|
— |
|
|
— |
|
|
8,655 |
|
Financial liabilities |
|
|
|
|
|
|
|
|
Derivative warrants (1) |
|
4,400 |
|
|
— |
|
|
— |
|
|
4,400 |
|
(1)The carrying amount is an estimate of the fair value of the derivative warrants and is presented as a current liability. The Company has no cash obligation with respect to the derivative warrants, rather it will deliver common shares if and when warrants are exercised.
At June 30, 2024, a 10% change in the material assumptions would change the estimated fair value of derivative warrant liabilities by approximately $0.5 million.
There were no transfers between Levels 1, 2 and 3 inputs during the period.
The Company entered into the following related party transactions during the periods noted, in addition to those disclosed in note 13 relating to the Company’s joint venture.
A member of key management personnel jointly controls a company that owns property leased to SNDL for one of its retail liquor stores. The lease term is from November 1, 2017 to October 31, 2027 and includes extension terms from November 1, 2027 to October 31, 2032 and November 1, 2032 to October 31, 2037. Monthly rent for the location includes base rent, common area costs and sign rent. The rent amounts are subject to increases in accordance with the executed lease agreement. For the six months ended June 30, 2024, the Company paid $83.4 thousand in total rent with respect to this lease (six months ended June 30, 2023 — $83.4 thousand).
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2024
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
24.Commitments and contingencies
The following table summarizes contractual commitments at June 30, 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than
one year |
|
One to three
years |
|
Three to five
years |
|
Thereafter |
|
Total |
|
Accounts payable and accrued liabilities |
|
62,389 |
|
|
— |
|
|
— |
|
|
— |
|
|
62,389 |
|
Financial guarantee liability |
|
— |
|
|
248 |
|
|
— |
|
|
— |
|
|
248 |
|
Balance, end of year |
|
62,389 |
|
|
248 |
|
|
— |
|
|
— |
|
|
62,637 |
|
The Company has entered into certain supply agreements to provide dried cannabis and cannabis products to third parties. The contracts require the provision of various amounts of dried cannabis on or before certain dates. Should the Company not deliver the product in the agreed timeframe, financial penalties apply which may be paid either in product in-kind or cash. Under these agreements, the Company has accrued financial penalties payable as at June 30, 2024 of $2.5 million (December 31, 2023 – $2.5 million). The corresponding expenses were recognized during the years ended December 31, 2019 ($1.5 million) and December 31, 2021 ($1.0 million).
From time to time, the Company and its subsidiaries are or may become involved in various legal claims and actions which arise in the ordinary course of their business and operations. While the outcome of any such claim or action is inherently uncertain, after consulting with counsel, the Company believes that the losses that may result, if any, will not be material to the financial statements.
EXHIBIT 99.2
SNDL Inc.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2024
Management’s Discussion and Analysis
This Management’s Discussion and Analysis (“MD&A”) of the financial condition and performance of SNDL Inc. (“SNDL” or the “Company”) for the three and six months ended June 30, 2024 is dated August 1, 2024. This MD&A should be read in conjunction with the Company’s condensed consolidated interim financial statements and the notes thereto for the three and six months ended June 30, 2024 (the “Interim Financial Statements”) and the audited consolidated financial statements and notes thereto for the year ended December 31, 2023 (the “Audited Financial Statements”) and the risks identified in the Company’s Annual Information Form for the year ended December 31, 2023 (the “AIF”) and elsewhere in this MD&A. This MD&A has been prepared in accordance with National Instrument 51-102 - Continuous Disclosure Obligations and is presented in thousands of Canadian dollars, except where otherwise indicated.
MD&A – Table of Contents
COMPANY OVERVIEW
SNDL operates under four reportable segments:
•Liquor retail sales of wines, beers and spirits;
•Cannabis retail sales of cannabis products and accessories through corporate-owned and franchised cannabis retail operations;
•Cannabis operations as a licensed producer that grows cannabis using indoor facilities and manufactures cannabis products, providing proprietary cannabis processing services; and
•Investments targeting the cannabis industry.
The principal activities of the Company are the retailing of wines, beers and spirits under the Wine and Beyond, Ace Liquor and Liquor Depot retail banners; the operation and support of corporate-owned and franchise retail cannabis stores in certain Canadian jurisdictions where the private sale of recreational cannabis is permitted, under the Value Buds, Spiritleaf, Superette and Firesale retail banners; the manufacturing of cannabis products providing proprietary cannabis processing services, the production, distribution and sale of cannabis domestically and for export pursuant to the Cannabis Act (Canada) (the “Cannabis Act”) through a cannabis brand portfolio that includes Top Leaf, Contraband, Citizen Stash, Sundial Cannabis, Vacay, Spiritleaf Selects, Palmetto, Value Buds, Versus, Bonjak, Namaste, Re-up and Grasslands; and, the provision of financial services through the deployment of capital to direct and indirect investments and partnerships throughout the cannabis industry.
The Company produces and markets cannabis products for the Canadian adult-use market and for the international medicinal market. SNDL’s operations cultivate cannabis using approximately 380,000 square feet of total space in Atholville, New Brunswick. SNDL’s extraction and manufacturing operations include approximately 84,506 square feet of total space in British Columbia and approximately 25,500 square feet of total space in Ontario. The Company has a distribution network that covers 98% of the national adult-use cannabis market.
SNDL and its subsidiaries operate solely in Canada. Through its joint venture, SunStream Bancorp Inc. (“SunStream”), the Company provides growth capital that pursues indirect investment and financial services opportunities in the cannabis sector, as well as other investment opportunities. The current investment portfolio of SunStream is comprised of secured debt, hybrid debt and derivative instruments issued by United States based cannabis businesses. The Company also makes strategic portfolio investments in debt and equity securities.
The Company also owns approximately 65% of Nova Cannabis Inc. (“Nova”), whose principal activities are related to the retail sale of cannabis.
SNDL was incorporated under the Business Corporations Act (Alberta) on August 19, 2006. The Company’s common shares are listed under the symbol “SNDL” on the Nasdaq Capital Market.
SNDL is headquartered in Calgary, Alberta, with operations in Edmonton, Alberta, Kelowna, British Columbia, Bolton, Ontario, Toronto, Ontario and Atholville, New Brunswick, and corporate-owned and franchised retail liquor and cannabis stores in five provinces across Canada.
SNDL’s overall strategy is to build sustainable, long-term shareholder value by improving liquidity and cost of capital while optimizing the capacity and capabilities of its production facilities in the creation of a consumer-centric brand and product portfolio. SNDL’s retail operations will continue to build a Canadian retail liquor brand and a network of retail cannabis stores across Canadian jurisdictions where the private distribution of cannabis is legal. SNDL’s investment operations seek to deploy capital through direct and indirect investments and partnerships throughout the cannabis industry.
RECENT DEVELOPMENTS
Overheads restructuring project and operational adjustments
On July 16, 2024, the Company announced a restructuring project aimed at reducing corporate overheads and improving the efficiency of its organizational structure to position the Company for future growth (the “Restructuring Project”). The Restructuring Project is expected to deliver over $20 million in annualized cost savings driven primarily by the optimization of corporate overhead spending, including the reduction in 106 full-time employees. The Restructuring Project will require a one-time investment of $11 million over the next 18 months.
As part of these operational adjustments, the Company is consolidating its cannabis segments into a single unit under the leadership of Tyler Robson. This consolidation is intended to enhance efficiency, improve alignment and improve process speed within the Company’s vertical model. The Company expects to achieve most of the anticipated annualized savings by mid-2025, while starting to capture some of the opportunities as early as Q3 2024.
Indiva
On July 5, 2024, the Company announced that it had entered into a purchase agreement (the “Bid Agreement”) with Indiva Limited (“Indiva”) and its direct and indirect subsidiaries (collectively with Indiva, the “Indiva Group”), pursuant to which the Company offered to purchase all of the issued and outstanding shares of Indiva and the business and assets of the Indiva Group (collectively, the “Indiva Assets”) for consideration comprising of a credit bid of all of the indebtedness of the Indiva Group owing to the Company, the retention of certain liabilities of the Indiva Group, and cash payments sufficient to repay certain priority indebtedness of the Indiva Group and costs associated with the Indiva Group’s proceedings under the Companies’ Creditors Arrangement Act (Canada) (the “CCAA Proceedings”).
The Bid Agreement was entered into in the context of the CCAA Proceedings, as part of a sales process where the Indiva Assets will be marketed to prospective purchasers (the “Sale Process”) by PricewaterhouseCoopers Inc., the monitor in the CCAA Proceedings (the “Monitor”) and, accordingly, is subject to approval by the court overseeing the CCAA Proceedings and to potential alternative bids submitted pursuant to the Sale Process.
Based on a report of the Monitor, dated July 4, 2024, issued in the CCAA Proceedings, the Monitor estimated the value of the credit bid and cash consideration payable by the Company under the Bid Agreement to be in the range of approximately $25 million to $28 million. The Company is the stalking horse bidder in the Sale Process, such that the Bid Agreement will set the “floor”, or minimum acceptable bid, for other bidders and will be deemed accepted if there are no other bids submitted. If the Monitor determines that there is another bid that offers superior terms to the Bid Agreement, the Company will also have the opportunity to participate in an auction process for the Indiva Assets. The Sale Process is currently expected to conclude by September 30, 2024.
Delta 9
On July 5, 2024, the Company announced that it had completed the acquisition (the “Debt Acquisition”) of the principal indebtedness (the “Purchased Indebtedness”) of Delta-9 Cannabis Inc. (“Delta 9”) from Connect First and Servus Credit Union Ltd. for a purchase price of $28.1 million pursuant to a purchase and sale of indebtedness agreement dated July 5, 2024.
As a result of the Debt Acquisition, the Company has become Delta 9’s senior secured creditor with a first priority security interest in all of the assets of Delta 9 and certain Delta 9 subsidiaries. As of July 5, 2024, the Purchased Indebtedness increased Delta 9’s total indebtedness owing to the Company to $40.7 million.
Lightbox acquisition and assignment
On March 28, 2023, the Company announced that it had entered into an agreement with Lightbox Enterprises Ltd. (“Lightbox”) pursuant to which, in connection with Lightbox’s proceedings under the Companies’ Creditors Arrangement Act (Canada), the Company (or its designee) would acquire the assets comprising four cannabis retail stores operating under the Dutch Love cannabis retail banner (the “Lightbox Transaction”). The Lightbox Transaction consideration was comprised of (i) approximately $1.7 million in cash, (ii) the cancellation of approximately $3.0 million of debt owing by Lightbox to the Company, and (iii) the issuance of 1.1 million SNDL common shares valued at $3.7 million.
On April 1, 2024, the Company announced that it had agreed to assign its rights to own or operate the four cannabis retail stores to Nova. On May 8, 2024, the Company completed the Lightbox Transaction and the assignment of its rights to own or operate the four cannabis retail stores to Nova.
OTHER DEVELOPMENTS
share repurchase program
On November 13, 2023, the Company announced that the board of directors of the Company (the “Board”) approved a renewal of the share repurchase program upon its expiry on November 20, 2023. The share repurchase program
authorizes the Company to repurchase up to $100 million of its outstanding common shares through open market purchases at prevailing market prices. SNDL may purchase up to a maximum of approximately 13.1 million common shares under the share repurchase program, representing approximately 5% of the issued and outstanding common shares as at the date of announcement, and will expire on November 20, 2024. The share repurchase program does not require the Company to purchase any minimum number of common shares and repurchases may be suspended or terminated at any time at the Company’s discretion. The actual number of common shares which may be purchased pursuant to the share repurchase program and the timing of any purchases will be determined by SNDL’s management and the Board. All common shares purchased pursuant to the share repurchase program will be returned to treasury for cancellation.
The Company did not repurchase any common shares for cancellation during the period. Refer to “Liquidity and Capital Resources – Equity” below for further details regarding common shares purchased and cancelled.
FINANCIAL HIGHLIGHTS
The following table summarizes selected financial information of the Company for the periods noted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($000s, except per share amounts) |
Q2 2024 |
|
Q2 2023 |
|
Change |
|
% Change |
|
Financial Results |
|
|
|
|
|
|
|
|
Net revenue |
|
228,127 |
|
|
231,916 |
|
|
(3,789 |
) |
|
-2 |
% |
Cost of sales |
|
169,963 |
|
|
179,983 |
|
|
(10,020 |
) |
|
-6 |
% |
Gross profit |
|
58,164 |
|
|
51,933 |
|
|
6,231 |
|
|
12 |
% |
Gross profit % (1) |
|
25 |
% |
|
22 |
% |
|
|
|
3 |
% |
Operating income (loss) |
|
(4,834 |
) |
|
(29,566 |
) |
|
24,732 |
|
|
84 |
% |
Adjusted operating income (loss) (2) |
|
(4,613 |
) |
|
(25,524 |
) |
|
20,911 |
|
|
82 |
% |
Net loss from continuing operations attributable to owners of the Company |
|
(5,772 |
) |
|
(29,350 |
) |
|
23,578 |
|
|
80 |
% |
Per share, basic and diluted |
|
(0.02 |
) |
|
(0.11 |
) |
|
0.09 |
|
|
82 |
% |
Net loss from discontinued operations attributable to owners of the Company |
|
— |
|
|
(3,170 |
) |
|
3,170 |
|
|
-100 |
% |
Per share, basic and diluted |
|
— |
|
|
(0.01 |
) |
|
0.01 |
|
|
-100 |
% |
Net loss attributable to owners of the Company |
|
(5,772 |
) |
|
(32,520 |
) |
|
26,748 |
|
|
82 |
% |
Per share, basic and diluted |
|
(0.02 |
) |
|
(0.12 |
) |
|
0.10 |
|
|
83 |
% |
Change in cash and cash equivalents |
|
(6,020 |
) |
|
(27,798 |
) |
|
21,778 |
|
|
78 |
% |
Free cash flow (1) |
|
(5,601 |
) |
|
(18,480 |
) |
|
12,879 |
|
|
70 |
% |
|
|
|
|
|
|
|
|
|
Statement of Financial Position |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
182,934 |
|
|
185,455 |
|
|
(2,521 |
) |
|
-1 |
% |
Inventory |
|
132,912 |
|
|
160,407 |
|
|
(27,495 |
) |
|
-17 |
% |
Property, plant and equipment |
|
132,362 |
|
|
181,841 |
|
|
(49,479 |
) |
|
-27 |
% |
Total assets |
|
1,474,055 |
|
|
1,571,775 |
|
|
(97,720 |
) |
|
-6 |
% |
(1)Gross profit % is a supplementary financial measure calculated by dividing gross profit by net revenue for the periods noted.
(2)Adjusted operating income (loss) and free cash flow are specified financial measures that do not have standardized meanings prescribed by International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS Accounting Standards”) and therefore may not be comparable to similar measures used by other companies. Refer to the “Non-IFRS Financial Measures” section of this MD&A for further information.
CONSOLIDATED RESULTS
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
($000s) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Salaries and wages |
|
|
29,693 |
|
|
|
29,705 |
|
|
|
59,614 |
|
|
|
58,568 |
|
Consulting fees |
|
|
1,604 |
|
|
|
999 |
|
|
|
2,535 |
|
|
|
1,746 |
|
Office and general |
|
|
12,173 |
|
|
|
13,681 |
|
|
|
23,162 |
|
|
|
26,507 |
|
Professional fees |
|
|
2,040 |
|
|
|
2,536 |
|
|
|
3,542 |
|
|
|
5,691 |
|
Merchant processing fees |
|
|
1,739 |
|
|
|
1,609 |
|
|
|
3,149 |
|
|
|
2,880 |
|
Director fees |
|
|
243 |
|
|
|
134 |
|
|
|
362 |
|
|
|
265 |
|
Other |
|
|
544 |
|
|
|
4,063 |
|
|
|
367 |
|
|
|
5,643 |
|
|
|
|
48,036 |
|
|
|
52,727 |
|
|
|
92,731 |
|
|
|
101,300 |
|
General and administrative expenses for the three months ended June 30, 2024 were $48.0 million compared to $52.7 million for the three months ended June 30, 2023. The decrease of $4.7 million was mainly due to decreases in office and general and other expenses.
General and administrative expenses for the six months ended June 30, 2024 were $92.7 million compared to $101.3 million for the six months ended June 30, 2023. The decrease of $8.6 million was mainly due to decreases in office and general, professional fees and other expenses which were mainly comprised of decreases in expected credit losses.
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
($000s) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Equity-settled expense |
|
|
|
|
|
|
|
|
|
|
|
|
Simple warrants |
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
|
(335 |
) |
Stock options |
|
|
1 |
|
|
|
3 |
|
|
|
1 |
|
|
|
(2 |
) |
Restricted share units |
|
|
4,310 |
|
|
|
3,485 |
|
|
|
6,751 |
|
|
|
6,109 |
|
Cash-settled expense |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred share units |
|
|
572 |
|
|
|
403 |
|
|
|
2,974 |
|
|
|
330 |
|
|
|
|
4,883 |
|
|
|
3,893 |
|
|
|
9,726 |
|
|
|
6,102 |
|
Share-based compensation expense includes the expense related to the Company’s issuance of simple and performance warrants, stock options, restricted share units (“RSUs”) and deferred share units (“DSUs”) to employees, directors, and others at the discretion of the Board. DSUs are accounted for as a liability instrument and measured at fair value based on the market value of the Company’s common shares at each period end. Share-based compensation also includes the expense related to Nova’s issuance of RSUs and DSUs.
Share-based compensation expense for the three months ended June 30, 2024 was $4.9 million compared to $3.9 million for the three months ended June 30, 2023. The increase of $1.0 million was due to an increase in RSU expense and a minor increase in DSU expense. The increase in RSU expense was due to the issuance of new RSUs, partially offset by the vesting of RSUs granted in prior years. The increase in DSU expense was caused by the change in fair value. Both the current and comparative periods experienced a decrease in fair value resulting from a decrease in the Company’s share price, however, the current period decrease was less than the comparative period.
Share-based compensation expense for the six months ended June 30, 2024 was $9.7 million compared to $6.1 million for the six months ended June 30, 2023. The increase of $3.6 million was due to an increase in DSU expense and a minor increase in RSU expense. The increase in DSU expense was caused by the change in fair value. The current period had an increase in fair value resulting from an increase in the Company’s share price compared to the prior period decrease in fair value resulting from a decrease in the Company’s share price.
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
($000s) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Cash finance expense |
|
|
|
|
|
|
|
|
|
|
|
|
Other finance costs |
|
|
(2 |
) |
|
|
17 |
|
|
|
93 |
|
|
|
45 |
|
|
|
|
(2 |
) |
|
|
17 |
|
|
|
93 |
|
|
|
45 |
|
Non-cash finance expense |
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of investments at fair value through profit or loss |
|
|
575 |
|
|
|
257 |
|
|
|
575 |
|
|
|
3,625 |
|
Accretion on lease liabilities |
|
|
1,933 |
|
|
|
2,293 |
|
|
|
3,887 |
|
|
|
4,239 |
|
Financial guarantee liability recovery |
|
|
8 |
|
|
|
— |
|
|
|
(19 |
) |
|
|
(139 |
) |
Other |
|
|
(167 |
) |
|
|
106 |
|
|
|
(368 |
) |
|
|
296 |
|
|
|
|
2,349 |
|
|
|
2,656 |
|
|
|
4,075 |
|
|
|
8,021 |
|
Interest income |
|
|
(190 |
) |
|
|
(215 |
) |
|
|
(386 |
) |
|
|
(435 |
) |
|
|
|
2,157 |
|
|
|
2,458 |
|
|
|
3,782 |
|
|
|
7,631 |
|
Finance costs include accretion expense related to lease liabilities, finance income related to net investment in subleases, change in fair value of investments at fair value through profit or loss (“FVTPL”) and certain other expenses.
Finance costs for the three months ended June 30, 2024 were $2.2 million compared to $2.5 million for the three months ended June 30, 2023. The decrease of $0.3 million was due to a decrease in accretion on lease liabilities and other costs, partially offset by an increase in the change in fair value of investments at FVTPL.
Finance costs for the six months ended June 30, 2024 were $3.8 million compared to $7.6 million for the six months ended June 30, 2023. The decrease of $3.8 million was due to the comparative period change in fair value of investments at FVTPL, caused by a decrease in the value of the Superette promissory note.
Change in estimate of fair value of derivative warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
($000s) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Change in estimate of fair value of derivative warrants |
|
|
(1,800 |
) |
|
|
(2,240 |
) |
|
|
(500 |
) |
|
|
(7,042 |
) |
Change in estimate of fair value of derivative warrants for the three months ended June 30, 2024 was a recovery of $1.8 million compared to a recovery of $2.2 million for the three months ended June 30, 2023. The recovery in the current period relates to a decrease in fair value, mainly due to a decrease in the Company’s share price from US$2.01 on March 31, 2024, to US$1.90 on June 30, 2024. The recovery in the prior period relates to a decrease in fair value, mainly due to a decrease in the Company’s share price from US$1.60 on March 31, 2023, to US$1.37 on June 30, 2023.
Change in estimate of fair value of derivative warrants for the six months ended June 30, 2024 was a recovery of $0.5 million compared to a recovery of $7.0 million for the six months ended June 30, 2023. The recovery in the current period relates to a decrease in fair value, mainly due to the approaching expiry date of most of the derivative warrants in the third quarter. The recovery in the prior period relates to a decrease in fair value, mainly due to a decrease in the Company’s share price from US$2.09 on December 31, 2022, to US$1.37 on June 30, 2023.
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
($000s) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Operating income (loss) |
|
|
(4,834 |
) |
|
|
(29,566 |
) |
|
|
(9,211 |
) |
|
|
(61,770 |
) |
Operating loss for the three months ended June 30, 2024 was $4.8 million compared to $29.6 million for the three months ended June 30, 2023. The increase of $24.8 million was due to increases in gross profit ($6.2 million), investment income ($3.8 million) and share of profit of equity-accounted investees ($6.2 million), decreased general and administrative expenses ($4.7 million) and restructuring costs ($3.8 million).
Operating loss for the six months ended June 30, 2024 was $9.2 million compared to $61.8 million for the six months ended June 30, 2023. The increase of $52.6 million was due to increases in gross profit ($24.1 million), investment income ($8.8 million) and share of profit of equity-accounted investees ($5.8 million), decreased general and administrative expenses ($8.6 million), depreciation and amortization ($2.2 million) and restructuring costs ($5.4 million), partially offset by increased share-based compensation expense ($3.6 million).
Net loss from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
($000s) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Net loss from continuing operations |
|
|
(4,967 |
) |
|
|
(29,988 |
) |
|
|
(9,619 |
) |
|
|
(64,766 |
) |
Net loss from continuing operations for the three months ended June 30, 2024 was $5.0 million compared to $30.0 million for the three months ended June 30, 2023. The decrease in net loss from continuing operations of $25.0 million was largely due to increases in gross profit ($6.2 million), investment income ($3.8 million) and share of profit of equity-accounted investees ($6.2 million), decreased general and administrative expenses ($4.7 million) and restructuring costs ($3.8 million).
Net loss from continuing operations for the six months ended June 30, 2024 was $9.6 million compared to $64.8 million for the six months ended June 30, 2023. The decrease in net loss from continuing operations of $55.2 million was largely due to increases in gross profit ($24.1 million), investment income ($8.8 million) and share of profit of equity-accounted investees ($5.8 million), decreased general and administrative expenses ($8.6 million), depreciation and amortization ($2.2 million), restructuring costs ($5.4 million) and a deferred income tax recovery ($4.3 million), partially offset by increased share-based compensation expense ($3.6 million).
OPERATING SEGMENTS
The Company’s reportable segments are organized by business line and are comprised of four reportable segments: liquor retail, cannabis retail, cannabis operations, and investments.
Liquor retail includes the sale of wines, beers and spirits through wholly owned liquor stores. Cannabis retail includes the private sale of recreational cannabis through wholly owned and franchise retail cannabis stores. Cannabis operations include the cultivation, distribution and sale of cannabis for the adult-use and medical markets domestically and for export, and providing proprietary cannabis processing services, in addition to product development, manufacturing, and commercialization of cannabis consumer packaged goods. Investments include the deployment of capital to investment opportunities. Certain overhead expenses not directly attributable to any operating segment are reported as “Corporate”.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($000s) |
|
Liquor
Retail |
|
|
Cannabis
Retail |
|
|
Cannabis
Operations |
|
|
Investments (1) |
Corporate |
|
|
Total |
|
As at June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
308,295 |
|
|
|
212,046 |
|
|
|
201,648 |
|
|
|
732,094 |
|
|
|
19,972 |
|
|
|
1,474,055 |
|
Six months ended June 30, 2024 |
|
Net revenue (2) |
|
|
256,614 |
|
|
|
147,375 |
|
|
|
47,371 |
|
|
|
— |
|
|
|
(25,483 |
) |
|
|
425,877 |
|
Gross profit |
|
|
64,519 |
|
|
|
37,627 |
|
|
|
6,418 |
|
|
|
— |
|
|
|
— |
|
|
|
108,564 |
|
Operating income (loss) |
|
|
10,661 |
|
|
|
2,860 |
|
|
|
(1,025 |
) |
|
|
21,535 |
|
|
|
(43,242 |
) |
|
|
(9,211 |
) |
Adjusted operating income (loss) (3) |
|
|
10,661 |
|
|
|
2,860 |
|
|
|
(770 |
) |
|
|
21,535 |
|
|
|
(43,365 |
) |
|
|
(9,079 |
) |
Three months ended June 30, 2024 |
|
Net revenue (2) |
|
|
140,560 |
|
|
|
76,069 |
|
|
|
24,976 |
|
|
|
— |
|
|
|
(13,478 |
) |
|
|
228,127 |
|
Gross profit |
|
|
35,713 |
|
|
|
19,268 |
|
|
|
3,183 |
|
|
|
— |
|
|
|
— |
|
|
|
58,164 |
|
Operating income (loss) |
|
|
8,481 |
|
|
|
3,902 |
|
|
|
(1,916 |
) |
|
|
8,456 |
|
|
|
(23,757 |
) |
|
|
(4,834 |
) |
Adjusted operating income (loss) (3) |
|
|
8,481 |
|
|
|
3,902 |
|
|
|
(1,916 |
) |
|
|
8,456 |
|
|
|
(23,536 |
) |
|
|
(4,613 |
) |
(1)Total assets include cash and cash equivalents.
(2)The Company has eliminated $25.5 million for the six months ended June 30, 2024 and $13.5 million for the three months ended June 30, 2024 of cannabis operations revenue and equal cost of sales associated with sales to provincial boards that are expected to be subsequently repurchased by the Company’s licensed retail subsidiaries for resale, at which point the full retail sales revenue will be recognized. The elimination was recorded in the Corporate segment.
(3)Adjusted operating income (loss) is a specified financial measure that does not have standardized meaning prescribed by IFRS Accounting Standards and therefore may not be comparable to similar measures used by other companies. Refer to the “Non-IFRS Financial Measures” section of this MD&A for further information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($000s) |
|
Liquor
Retail |
|
|
Cannabis
Retail (1) |
|
|
Cannabis
Operations (2) |
|
|
Investments (3) |
Corporate |
|
|
Total |
|
As at December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
320,239 |
|
|
|
206,988 |
|
|
|
208,295 |
|
|
|
717,751 |
|
|
|
19,891 |
|
|
|
1,473,164 |
|
Six months ended June 30, 2023 |
|
Net revenue (4) |
|
|
267,601 |
|
|
|
139,289 |
|
|
|
40,073 |
|
|
|
— |
|
|
|
(24,002 |
) |
|
|
422,961 |
|
Gross profit |
|
|
61,627 |
|
|
|
33,599 |
|
|
|
(10,752 |
) |
|
|
— |
|
|
|
— |
|
|
|
84,474 |
|
Operating income (loss) |
|
|
6,257 |
|
|
|
2,257 |
|
|
|
(33,038 |
) |
|
|
7,077 |
|
|
|
(44,323 |
) |
|
|
(61,770 |
) |
Adjusted operating income (loss) (5) |
|
|
6,257 |
|
|
|
2,257 |
|
|
|
(30,860 |
) |
|
|
7,077 |
|
|
|
(40,116 |
) |
|
|
(55,385 |
) |
Three months ended June 30, 2023 |
|
Net revenue (4) |
|
|
151,690 |
|
|
|
71,881 |
|
|
|
20,940 |
|
|
|
— |
|
|
|
(12,595 |
) |
|
|
231,916 |
|
Gross profit |
|
|
35,360 |
|
|
|
17,780 |
|
|
|
(1,207 |
) |
|
|
— |
|
|
|
— |
|
|
|
51,933 |
|
Operating income (loss) |
|
|
8,207 |
|
|
|
2,335 |
|
|
|
(14,206 |
) |
|
|
(1,660 |
) |
|
|
(24,242 |
) |
|
|
(29,566 |
) |
Adjusted operating income (loss) (5) |
|
|
8,207 |
|
|
|
2,335 |
|
|
|
(12,924 |
) |
|
|
(1,660 |
) |
|
|
(21,482 |
) |
|
|
(25,524 |
) |
(1)Cannabis retail includes the operations of Superette Inc. (“Superette”) for the period February 8, 2023 to June 30, 2023.
(2)Cannabis operations include the operations of The Valens Company Inc. (“Valens”) for the period January 18, 2023 to June 30, 2023.
(3)Total assets include cash and cash equivalents.
(4)The Company has eliminated $24.0 million for the six months ended June 30, 2023 and $12.6 million for the three months ended June 30, 2023 of cannabis operations revenue and equal cost of sales associated with sales to provincial boards that are expected to be subsequently repurchased by the Company’s licensed retail subsidiaries for resale, at which point the full retail sales revenue will be recognized. The elimination was recorded in the Corporate segment.
(5)Adjusted operating income (loss) is a specified financial measure that does not have standardized meaning prescribed by IFRS Accounting Standards and therefore may not be comparable to similar measures used by other companies. Refer to the “Non-IFRS Financial Measures” section of this MD&A for further information.
LIQUOR RETAIL SEGMENT RESULTS
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
($000s) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Net revenue |
|
|
140,560 |
|
|
|
151,690 |
|
|
|
256,614 |
|
|
|
267,601 |
|
Cost of sales |
|
|
104,847 |
|
|
|
116,330 |
|
|
|
192,095 |
|
|
|
205,974 |
|
Gross profit |
|
|
35,713 |
|
|
|
35,360 |
|
|
|
64,519 |
|
|
|
61,627 |
|
Gross profit % (1) |
|
|
25.4 |
% |
|
|
23.3 |
% |
|
|
25.1 |
% |
|
|
23.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
17,901 |
|
|
|
17,311 |
|
|
|
35,986 |
|
|
|
34,357 |
|
Sales and marketing |
|
|
797 |
|
|
|
1,681 |
|
|
|
1,290 |
|
|
|
2,492 |
|
Depreciation and amortization |
|
|
8,395 |
|
|
|
8,161 |
|
|
|
17,368 |
|
|
|
18,507 |
|
Asset impairment |
|
|
92 |
|
|
|
— |
|
|
|
(833 |
) |
|
|
— |
|
Loss on disposition of assets |
|
|
47 |
|
|
|
— |
|
|
|
47 |
|
|
|
14 |
|
Operating income (loss) |
|
|
8,481 |
|
|
|
8,207 |
|
|
|
10,661 |
|
|
|
6,257 |
|
(1)Gross profit % is a supplementary financial measure calculated by dividing gross profit by net revenue for the periods noted.
Net revenue for the three months ended June 30, 2024 was $140.6 million compared to $151.7 million for the three months ended June 30, 2023. The decrease of $11.1 million was due to a reduction in overall customer traffic and changing consumer preferences.
Net revenue for the six months ended June 30, 2024 was $256.6 million compared to $267.6 million for the six months ended June 30, 2023. The decrease of $11.0 million was due to a reduction in overall customer traffic and changing consumer preferences.
Cost of sales for liquor retail operations is comprised of the cost of wine, beer and spirits. Cost of sales for the three months ended June 30, 2024 was $104.8 million compared to $116.3 million for the three months ended June 30, 2023.
The decrease of $11.5 million was due to a decrease in sales and decreases in average item costs, shifting consumer purchases from lower to higher margin item categories and further optimization of the Company’s preferred label offerings.
Cost of sales for the six months ended June 30, 2024 was $192.1 million compared to $206.0 million for the six months ended June 30, 2023. The decrease of $13.9 million was due to decreases in sales, further optimization of the Company’s preferred label offerings and procurement productivity.
Gross profit for the three months ended June 30, 2024 was $35.7 million (25.4%) compared to $35.4 million (23.3%) for the three months ended June 30, 2023. The increase of $0.3 million was partly due to the introduction of new proprietary licensing arrangements and the factors contributing to the reduction to cost of sales noted above, partially offset by a reduction in net revenue.
Gross profit for the six months ended June 30, 2024 was $64.5 million (25.1%) compared to $61.6 million (23.0%) for the six months ended June 30, 2023. The increase of $2.9 million was due to the introduction of new proprietary licensing arrangements and the factors contributing to the reduction to cost of sales noted above, partially offset by a reduction in net revenue.
At August 1, 2024, the Ace Liquor store count was 135, the Liquor Depot store count was 20 and the Wine and Beyond store count was 13.
CANNABIS RETAIL SEGMENT RESULTS
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
($000s) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 (1) |
|
Net revenue |
|
|
76,069 |
|
|
|
71,881 |
|
|
|
147,375 |
|
|
|
139,289 |
|
Cost of sales |
|
|
56,801 |
|
|
|
54,101 |
|
|
|
109,748 |
|
|
|
105,690 |
|
Gross profit |
|
|
19,268 |
|
|
|
17,780 |
|
|
|
37,627 |
|
|
|
33,599 |
|
Gross profit % (2) |
|
|
25.3 |
% |
|
|
24.7 |
% |
|
|
25.5 |
% |
|
|
24.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and fee revenue |
|
|
— |
|
|
|
58 |
|
|
|
— |
|
|
|
58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
11,409 |
|
|
|
11,164 |
|
|
|
24,029 |
|
|
|
23,131 |
|
Sales and marketing |
|
|
172 |
|
|
|
500 |
|
|
|
698 |
|
|
|
726 |
|
Depreciation and amortization |
|
|
3,830 |
|
|
|
3,361 |
|
|
|
7,557 |
|
|
|
7,051 |
|
Share-based compensation |
|
|
1 |
|
|
|
15 |
|
|
|
1 |
|
|
|
4 |
|
Asset impairment |
|
|
(498 |
) |
|
|
458 |
|
|
|
2,030 |
|
|
|
458 |
|
Loss on disposition of assets |
|
|
452 |
|
|
|
5 |
|
|
|
452 |
|
|
|
30 |
|
Operating income (loss) |
|
|
3,902 |
|
|
|
2,335 |
|
|
|
2,860 |
|
|
|
2,257 |
|
(1)Cannabis retail results include the operations of Superette from February 8, 2023 to June 30, 2023.
(2)Gross profit % is a supplementary financial measure calculated by dividing gross profit by net revenue for the periods noted.
Net revenue for the three months ended June 30, 2024 was $76.1 million compared to $71.9 million for the three months ended June 30, 2023. The increase of $4.2 million is mainly attributable to an increase in corporate store sales, an increase in the number of stores and proprietary licensing arrangements. Corporate store sales increased partly as a result of newly opened and acquired stores and the increase in proprietary licensing arrangements was due to a new variable services agreement.
Net revenue for the six months ended June 30, 2024 was $147.4 million compared to $139.3 million for the six months ended June 30, 2023. The increase of $8.1 million is mainly attributable to an increase in corporate store sales, an increase in the number of stores and proprietary licensing arrangements. Corporate store sales increased partly as a result of newly opened and acquired stores and the increase in proprietary licensing arrangements was due to a new variable services agreement.
Cost of sales for the three months ended June 30, 2024 was $56.8 million compared to $54.1 million for the three months ended June 30, 2023. The increase of $2.7 million was due to an increase in corporate store sales.
Cost of sales for the six months ended June 30, 2024 was $109.7 million compared to $105.7 million for the six months ended June 30, 2023. The increase of $4.0 million was due to an increase in corporate store sales.
Gross profit for the three months ended June 30, 2024 was $19.3 million (25.3%) compared to $17.8 million (24.7%) for the three months ended June 30, 2023. The increase of $1.5 million was due to proprietary licensing arrangements which do not have an associated cost of sales, increased corporate store sales and shifting consumer purchases from lower to higher margin item categories.
Gross profit for the six months ended June 30, 2024 was $37.6 million (25.5%) compared to $33.6 million (24.1%) for the six months ended June 30, 2023. The increase of $4.0 million was due to proprietary licensing arrangements which do not have an associated cost of sales, increased corporate store sales and shifting consumer purchases from lower to higher margin item categories.
At August 1, 2024, the Spiritleaf store count was 82 (20 corporate stores and 62 franchise stores), the Superette store count was 4 corporate stores, the Firesale store count was 1 corporate store and the Value Buds store count was 100 corporate stores. The Company owns approximately 65% of Nova.
CANNABIS OPERATIONS SEGMENT RESULTS
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
($000s) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 (1) |
|
Net revenue |
|
|
24,976 |
|
|
|
20,940 |
|
|
|
47,371 |
|
|
|
40,073 |
|
Cost of sales |
|
|
21,793 |
|
|
|
22,147 |
|
|
|
40,953 |
|
|
|
50,825 |
|
Gross profit |
|
|
3,183 |
|
|
|
(1,207 |
) |
|
|
6,418 |
|
|
|
(10,752 |
) |
Gross profit % (2) |
|
|
12.7 |
% |
|
|
-5.8 |
% |
|
|
13.5 |
% |
|
|
-26.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on marketable securities |
|
|
— |
|
|
|
(214 |
) |
|
|
— |
|
|
|
(497 |
) |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
General and administrative |
|
|
1,373 |
|
|
|
8,000 |
|
|
|
1,467 |
|
|
|
13,380 |
|
Sales and marketing |
|
|
1,942 |
|
|
|
1,550 |
|
|
|
3,031 |
|
|
|
2,847 |
|
Research and development |
|
|
109 |
|
|
|
31 |
|
|
|
146 |
|
|
|
171 |
|
Depreciation and amortization |
|
|
521 |
|
|
|
650 |
|
|
|
1,259 |
|
|
|
1,796 |
|
Restructuring costs |
|
|
— |
|
|
|
1,282 |
|
|
|
255 |
|
|
|
1,371 |
|
Asset impairment |
|
|
1,325 |
|
|
|
1,200 |
|
|
|
1,378 |
|
|
|
2,007 |
|
(Gain) loss on disposition of assets |
|
|
(171 |
) |
|
|
72 |
|
|
|
(93 |
) |
|
|
217 |
|
Operating income (loss) |
|
|
(1,916 |
) |
|
|
(14,206 |
) |
|
|
(1,025 |
) |
|
|
(33,038 |
) |
(1)Cannabis operations include the operations of Valens for the period January 18, 2023 to June 30, 2023.
(2)Gross profit % is a supplementary financial measure calculated by dividing gross profit by net revenue for the periods noted.
The Company’s revenue comprises bulk and packaged sales under the Cannabis Act pursuant to its supply agreements with Canadian provincial boards, other licensed producers and international exports, proprietary extraction services, white label product formulation and manufacturing, the sale of bulk winterized oil and distillate, toll processing and co-packaging services and analytical testing.
Net revenue for the three months ended June 30, 2024 was $25.0 million compared to $20.9 million for the three months ended June 30, 2023. The increase of $4.1 million was mainly due to increased wholesale and international sales.
Net revenue for the six months ended June 30, 2024 was $47.4 million compared to $40.1 million for the six months ended June 30, 2023. The increase of $7.3 million was mainly due to increased wholesale and international sales, partially offset by a minor decrease in provincial board sales.
Cost of sales for the three months ended June 30, 2024 were $21.8 million compared to $22.1 million for the three months ended June 30, 2023. The decrease of $0.3 million was mainly due to a decrease in inventory impairment and obsolescence of $3.2 million, partially offset by an increase in costs associated with higher sales volumes.
Cost of sales for the six months ended June 30, 2024 were $41.0 million compared to $50.8 million for the six months ended June 30, 2023. The decrease of $9.8 million was mainly due to a decrease in inventory impairment and obsolescence of $10.8 million.
Gross profit for the three months ended June 30, 2024 was $3.2 million (12.7%) compared to negative $1.2 (-5.8%) million for the three months ended June 30, 2023. The increase of $4.4 million was due to the increase in net revenue, decrease in inventory impairment and obsolescence and increased production efficiencies.
Gross profit for the six months ended June 30, 2024 was $6.4 million (13.5%) compared to negative $10.8 million (-26.8%) for the six months ended June 30, 2023. The increase of $17.2 million was due to the increase in net revenue, decrease in inventory impairment and obsolescence and increased production efficiencies.
The decrease in general and administrative expenses for the three and six months ended June 30, 2024 was due to the reversal of expected credit losses in the current period and a decrease in costs from the closure of the Olds facility.
INVESTMENTS SEGMENT RESULTS
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
($000s) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Investment income (loss) |
|
|
3,204 |
|
|
|
(620 |
) |
|
|
7,240 |
|
|
|
(1,295 |
) |
Share of profit (loss) of equity-accounted investees |
|
|
5,252 |
|
|
|
(936 |
) |
|
|
14,400 |
|
|
|
8,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
— |
|
|
|
104 |
|
|
|
105 |
|
|
|
208 |
|
Operating income (loss) |
|
|
8,456 |
|
|
|
(1,660 |
) |
|
|
21,535 |
|
|
|
7,077 |
|
Investment income for the three months ended June 30, 2024 was $3.2 million compared to a loss of $0.6 million for the three months ended June 30, 2023. The increase of $3.8 million was mainly due to a decrease in loss on marketable securities. The Company disposed of the majority of its marketable securities in the prior year resulting in a minor loss in the current period.
Investment income for the six months ended June 30, 2024 was $7.2 million compared to a loss of $1.3 million for the six months ended June 30, 2023. The increase of $8.5 million was mainly due to a decrease in loss on marketable securities. The Company disposed of the majority of its marketable securities in the prior year resulting in a minor loss in the current period.
Share of profit of equity-accounted investees is comprised of the Company’s share of the net profit generated from its investments in SunStream. The current investment portfolio of SunStream is comprised of secured debt, hybrid debt and derivative instruments issued by United States based cannabis businesses.
Share of profit of equity-accounted investees for the three months ended June 30, 2024 was $5.3 million compared to a loss of $0.9 million for the three months ended June 30, 2023. The increase of $6.2 million was due to accounting fair value adjustments to the investments.
Share of profit of equity-accounted investees for the six months ended June 30, 2024 was $14.4 million compared to $8.6 million for the six months ended June 30, 2023. The increase of $5.8 million was due to accounting fair value adjustments to the investments.
SELECTED QUARTERLY INFORMATION
The following table summarizes selected consolidated operating and financial information of the Company for the preceding eight quarters.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2024 |
|
2023 |
|
2022 |
|
($000s, except per share amounts) |
Q2 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Net revenue |
|
228,127 |
|
|
197,750 |
|
|
248,450 |
|
|
237,595 |
|
|
231,916 |
|
|
191,045 |
|
|
240,405 |
|
|
230,500 |
|
Gross profit |
|
58,164 |
|
|
50,400 |
|
|
57,336 |
|
|
48,605 |
|
|
51,933 |
|
|
32,541 |
|
|
43,568 |
|
|
50,309 |
|
Investment (loss) income |
|
3,204 |
|
|
4,036 |
|
|
3,400 |
|
|
3,416 |
|
|
(599 |
) |
|
(958 |
) |
|
(879 |
) |
|
(1,201 |
) |
Net loss from continuing operations attributable to owners of the Company |
|
(5,772 |
) |
|
(2,554 |
) |
|
(82,788 |
) |
|
(21,784 |
) |
|
(29,350 |
) |
|
(34,203 |
) |
|
(125,801 |
) |
|
(98,108 |
) |
Per share, basic and diluted |
|
(0.02 |
) |
|
(0.01 |
) |
|
(0.32 |
) |
|
(0.08 |
) |
|
(0.11 |
) |
|
(0.13 |
) |
|
(0.53 |
) |
|
(0.41 |
) |
Net loss attributable to owners of the Company |
|
(5,772 |
) |
|
(2,554 |
) |
|
(82,788 |
) |
|
(21,784 |
) |
|
(32,520 |
) |
|
(35,568 |
) |
|
(125,801 |
) |
|
(98,108 |
) |
Per share, basic and diluted |
|
(0.02 |
) |
|
(0.01 |
) |
|
(0.32 |
) |
|
(0.08 |
) |
|
(0.12 |
) |
|
(0.14 |
) |
|
(0.53 |
) |
|
(0.41 |
) |
During the eight most recent quarters the following items have had a significant impact on the Company’s financial results and results of operations:
•Implementing several streamlining and efficiency initiatives which included workforce optimizations;
•Entering into and acquiring several cannabis-related investments;
•Disposing of marketable securities;
•Price discounts and provisions for product returns;
•Impairment of property, plant and equipment;
•Provisions for inventory obsolescence and impairment;
•Investments in SunStream;
•Acquisitions of Alcanna Inc. (“Alcanna”) (inclusive of its ownership interest in Nova), Zenabis Ltd., Valens and Superette;
•Impairment of goodwill and intangible assets from the Inner Spirit and Alcanna acquisitions;
•Impairment of goodwill from the Valens acquisition; and
•Impairment of the Olds facility due to the consolidation of all cultivation activities to the Atholville facility.
LIQUIDITY AND CAPITAL RESOURCES
|
|
|
|
|
|
|
|
|
($000s) |
|
June 30, 2024 |
|
|
December 31, 2023 |
|
Cash and cash equivalents |
|
|
182,934 |
|
|
|
195,041 |
|
Capital resources are financing resources available to the Company and are defined as the Company’s debt and equity. The Company manages its capital resources with the objective of maximizing shareholder value and sustaining future development of the business. The Company manages its capital structure and adjusts it, based on the funds available to the Company, in order to support the Company’s activities. The Company may adjust capital spending, issue new equity or issue new debt, subject to the availability of such debt or equity financing on commercial terms.
The Company’s primary need for liquidity is to fund investment opportunities, capital expenditures, working capital requirements and for general corporate purposes. The Company’s primary source of liquidity historically has been from funds received from the proceeds of common share issuances and debt financing. The Company’s ability to fund operations and investments and make planned capital expenditures depends on future operating performance and cash flows, as well as the availability of future financing–all of which is subject to prevailing economic conditions and financial, business and other factors.
Management believes its current capital resources will be sufficient to satisfy cash requirements associated with funding the Company’s operating expenses and future development activities for at least the next 12 months. However, no assurance can be given that this will be the case or that future sources of capital will not be necessary.
Debt
As at June 30, 2024, the Company had no outstanding bank debt or other debt.
Equity
As at June 30, 2024, the Company had the following share capital instruments outstanding:
|
|
|
|
|
|
|
|
|
(000s) |
|
June 30, 2024 |
|
|
December 31, 2023 |
|
Common shares |
|
|
264,285 |
|
|
|
262,776 |
|
Common share purchase warrants (1) |
|
|
118 |
|
|
|
309 |
|
Simple warrants (2) |
|
|
58 |
|
|
|
67 |
|
Performance warrants (3) |
|
|
54 |
|
|
|
54 |
|
Stock options (4) |
|
|
681 |
|
|
|
854 |
|
Restricted share units |
|
|
13,493 |
|
|
|
8,630 |
|
Derivative warrants (5) |
|
|
9,883 |
|
|
|
9,933 |
|
(1)0.1 million warrants were exercisable as at June 30, 2024.
(2)0.1 million simple warrants were exercisable as at June 30, 2024.
(3)43.7 thousand performance warrants were exercisable as at June 30, 2024.
(4)0.7 million stock options were exercisable as at June 30, 2024.
(5)9.9 million derivative warrants were exercisable as at June 30, 2024.
Common shares were issued during the six months ended June 30, 2024 in connection with the following transactions:
•The Company issued 0.3 million common shares in connection with the vesting of RSUs under its long term incentive plan;
•The Company issued 0.1 million common shares related to the acquisition of certain franchise stores in Ontario; and
•The Company issued 1.1 million common shares valued at $3.3 million as part of the consideration for the Lightbox Transaction.
The Company did not repurchase any common shares for cancellation during the period.
As at August 1, 2024, a total of 265.1 million common shares were outstanding.
Cash Flow Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
($000s) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
4,702 |
|
|
|
(8,843 |
) |
|
|
8,003 |
|
|
|
(57,640 |
) |
Investing activities |
|
|
(1,346 |
) |
|
|
(8,963 |
) |
|
|
(3,022 |
) |
|
|
(15,429 |
) |
Financing activities |
|
|
(9,376 |
) |
|
|
(9,992 |
) |
|
|
(17,088 |
) |
|
|
(21,062 |
) |
Change in cash and cash equivalents |
|
|
(6,020 |
) |
|
|
(27,798 |
) |
|
|
(12,107 |
) |
|
|
(94,131 |
) |
Cash Flow – Operating Activities
Net cash provided by operating activities was $4.7 million for the three months ended June 30, 2024 compared to $8.8 million used in operating activities for the three months ended June 30, 2023. The increase of $13.5 million was due to a decrease in net loss adjusted for non-cash items and the change in non-cash working capital, partially offset by proceeds received in the comparative period for the disposition of marketable securities. The change in non-cash working capital is comprised of changes in inventory, accounts receivable, prepaid expenses and deposits and accounts payable.
Net cash provided by operating activities was $8.0 million for the six months ended June 30, 2024 compared to $57.6 million used in operating activities for the six months ended June 30, 2023. The increase of $65.6 million was due to a decrease in net loss adjusted for non-cash items and the change in non-cash working capital, partially offset by proceeds received in the comparative period for the disposition of marketable securities and a decrease in interest received. The change in non-cash working capital is comprised of changes in inventory, accounts receivable, prepaid expenses and deposits and accounts payable.
Cash Flow – Investing Activities
Net cash used in investing activities was $1.3 million for the three months ended June 30, 2024 compared to $9.0 million used in investing activities for the three months ended June 30, 2023. The decrease of $7.7 million was primarily due to lower additions to equity-accounted investees and an increase in principal receipts from investments.
Net cash used in investing activities was $3.0 million for the six months ended June 30, 2024 compared to $15.4 million used in investing activities for the six months ended June 30, 2023. The decrease of $12.4 million was primarily due to lower additions to equity-accounted investees and an increase in principal receipts from investments, partially offset by acquisitions, net of cash acquired in the comparative period.
Cash Flow – Financing Activities
Net cash used in financing activities was $9.4 million for the three months ended June 30, 2024 compared to $10.0 million used in financing activities for the three months ended June 30, 2023. The decrease of $0.6 million was largely due to decreased payments on lease liabilities.
Net cash used in financing activities was $17.1 million for the six months ended June 30, 2024 compared to $21.1 million used in financing activities for the six months ended June 30, 2023. The decrease of $4.0 million was largely due to decreased payments on lease liabilities and no repurchases of common shares in the current period.
Free cash flow
Free cash flow is a specified financial measure that does not have standardized meaning prescribed by IFRS Accounting Standards and therefore may not be comparable to similar measures used by other companies. Refer to the “Non-IFRS Financial Measures” section of this MD&A for further information. The Company defines free cash flow as the total change in cash and cash equivalents less cash used for common share repurchases, dividends (if any), changes to debt instruments, changes to long-term investments, net cash used for acquisitions plus cash provided by dispositions (if any).
Free cash flow was negative $5.6 million for the three months ended June 30, 2024 compared to negative $18.5 million for the three months ended June 30, 2023. The increase of $12.9 million was mainly due to a decrease in net loss adjusted for non-cash items ($12.2 million) and a decrease in non-cash working capital ($7.9 million), partially offset by a decrease in proceeds received in the comparative period for the disposition of marketable securities ($3.4 million).
Free cash flow was negative $12.0 million for the six months ended June 30, 2024 compared to negative $78.6 million for the six months ended June 30, 2023. The increase of $66.6 million was mainly due to a decrease in net loss adjusted for non-cash items ($27.5 million), a decrease in non-cash working capital ($46.3 million) and a decrease in payments on lease liabilities ($2.4 million), partially offset by a decrease in proceeds received in the comparative period for the disposition of marketable securities ($3.5 million) and a decrease in interest received ($1.1 million).
Financial Instruments
Refer to note 22 in the Interim Financial Statements for additional information on the Company’s financial instruments and the related fair value estimates and disclosures.
Liquidity risks associated with financial instruments
Credit risk
Credit risk is the risk of financial loss if the counterparty to a financial transaction fails to meet its obligations. The maximum amount of the Company’s credit risk exposure is the carrying amounts of cash and cash equivalents, accounts receivable, and investments. The Company attempts to mitigate such exposure to its cash and cash equivalents by investing only in financial institutions with investment grade credit ratings or secured investments. The Company manages risk over its accounts receivable by issuing credit only to creditworthy counterparties. The Company limits its exposure to credit risk over its investments by ensuring the agreements governing the investments are secured in the event of counterparty default. The Company considers financial instruments to have low credit risk when its credit risk rating is equivalent to investment grade. The Company assumes that the credit risk on a financial asset has increased significantly if it is outstanding past the contractual payment terms. The Company considers a financial asset to be in default when the debtor is unlikely to pay its credit obligations to the Company.
The Company applies the simplified approach under IFRS 9 and has calculated expected credit losses based on lifetime expected credit losses, taking into consideration historical credit loss experience and financial factors specific to the debtors and general economic conditions.
Liquidity risk
Liquidity risk is the risk that the Company cannot meet its financial obligations when due. The Company manages liquidity risk by monitoring operating and growth requirements. The Company prepares forecasts to ensure sufficient liquidity to fulfil obligations and operating plans. Management believes its current capital resources will be sufficient to satisfy cash requirements associated with funding the Company’s operating expenses and future development activities for at least the next 12 months. However, no assurance can be given that this will be the case or that future sources of capital will not be necessary.
Market risk
Market risk is the risk that changes in market prices will affect the Company’s income or value of its holdings of financial instruments. The Company is exposed to market risk in that changes in market prices will cause fluctuations in the fair value of its marketable securities. The fair value of marketable securities is based on quoted market prices as the Company’s marketable securities are shares of publicly traded entities.
Regulatory risk
Regulatory risk pertains to the risk that the Company’s business objectives are contingent, in part, upon compliance with regulatory requirements. Due to the nature of the industries in which the Company operates, the Company recognizes that regulatory requirements are more stringent and punitive in nature than most other sectors of the economy. Any delays in obtaining, or failure to obtain, regulatory approvals could significantly delay operational and/or product development and could have a material adverse effect on the Company’s business, results of operations, and financial condition. The Company is cognizant of the advent of regulatory changes in these industries on the city, provincial, and national levels in Canada and is aware of the effect that unforeseen regulatory changes in these industries could have on the goals and operations of the business as a whole.
CONTRACTUAL COMMITMENTS AND CONTINGENCIES
The information presented in the table below reflects management’s estimate of the contractual maturities of the Company’s obligations at June 30, 2024.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($000s) |
Less than
one year |
|
One to three
years |
|
Three to five
years |
|
Thereafter |
|
Total |
|
Accounts payable and accrued liabilities |
|
62,389 |
|
|
— |
|
|
— |
|
|
— |
|
|
62,389 |
|
Lease liabilities |
|
40,564 |
|
|
68,477 |
|
|
45,837 |
|
|
27,763 |
|
|
182,641 |
|
Financial guarantee liability |
|
— |
|
|
248 |
|
|
— |
|
|
— |
|
|
248 |
|
Total |
|
102,953 |
|
|
68,725 |
|
|
45,837 |
|
|
27,763 |
|
|
245,278 |
|
The Company has entered into certain supply agreements to provide dried cannabis and cannabis products to third parties. The contracts require the provision of various amounts of dried cannabis on or before certain dates. Should the Company not deliver the product in the agreed timeframe, financial penalties apply which may be paid either in product in-kind or cash. Under these agreements, the Company has accrued financial penalties payable as at June 30, 2024 of $2.5 million (December 31, 2023 – $2.5 million).
From time to time, the Company and its subsidiaries are or may become involved in various legal claims and actions which arise in the ordinary course of their business and operations. While the outcome of any such claim or action is inherently uncertain, the Company believes that the losses that may result, if any, will not be material to the financial statements.
NON-IFRS FINANCIAL MEASURES
Certain specified financial measures in this MD&A including adjusted operating income (loss) and free cash flow are non-IFRS measures. These terms are not defined by IFRS Accounting Standards and, therefore, may not be comparable to similar measures reported by other companies. These non-IFRS financial measures should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS Accounting Standards.
Adjusted operating income (loss)
Adjusted operating income (loss) is a non-IFRS financial measure which the Company uses to evaluate its operating performance. Adjusted operating income (loss) provides information to investors, analysts, and others to aid in understanding and evaluating the Company’s operating results in a similar manner to its management team. The Company defines adjusted operating income (loss) as operating income (loss) less restructuring costs (recovery), goodwill and intangible asset impairments and asset impairments triggered by restructuring activities.
The following tables reconcile adjusted operating income (loss) to operating income (loss) for the periods noted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($000s) |
Liquor
Retail |
|
Cannabis
Retail |
|
Cannabis
Operations |
|
Investments |
|
Corporate |
|
Total |
|
Three months ended June 30, 2024 |
|
Operating income (loss) |
|
8,481 |
|
|
3,902 |
|
|
(1,916 |
) |
|
8,456 |
|
|
(23,757 |
) |
|
(4,834 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring costs (recovery) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
221 |
|
|
221 |
|
Adjusted operating income (loss) |
|
8,481 |
|
|
3,902 |
|
|
(1,916 |
) |
|
8,456 |
|
|
(23,536 |
) |
|
(4,613 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($000s) |
Liquor
Retail |
|
Cannabis
Retail |
|
Cannabis
Operations |
|
Investments |
|
Corporate |
|
Total |
|
Six months ended June 30, 2024 |
|
Operating income (loss) |
|
10,661 |
|
|
2,860 |
|
|
(1,025 |
) |
|
21,535 |
|
|
(43,242 |
) |
|
(9,211 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring costs |
|
— |
|
|
— |
|
|
255 |
|
|
— |
|
|
(123 |
) |
|
132 |
|
Adjusted operating income (loss) |
|
10,661 |
|
|
2,860 |
|
|
(770 |
) |
|
21,535 |
|
|
(43,365 |
) |
|
(9,079 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($000s) |
Liquor
Retail |
|
Cannabis
Retail |
|
Cannabis
Operations |
|
Investments |
|
Corporate |
|
Total |
|
Three months ended June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
8,207 |
|
|
2,335 |
|
|
(14,206 |
) |
|
(1,660 |
) |
|
(24,242 |
) |
|
(29,566 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring costs |
|
— |
|
|
— |
|
|
1,282 |
|
|
— |
|
|
2,760 |
|
|
4,042 |
|
Adjusted operating income (loss) |
|
8,207 |
|
|
2,335 |
|
|
(12,924 |
) |
|
(1,660 |
) |
|
(21,482 |
) |
|
(25,524 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($000s) |
Liquor
Retail |
|
Cannabis
Retail |
|
Cannabis
Operations |
|
Investments |
|
Corporate |
|
Total |
|
Six months ended June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
6,257 |
|
|
2,257 |
|
|
(33,038 |
) |
|
7,077 |
|
|
(44,323 |
) |
|
(61,770 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring costs |
|
— |
|
|
— |
|
|
1,371 |
|
|
— |
|
|
4,207 |
|
|
5,578 |
|
Intangible asset impairments |
|
— |
|
|
— |
|
|
807 |
|
|
— |
|
|
— |
|
|
807 |
|
Adjusted operating income (loss) |
|
6,257 |
|
|
2,257 |
|
|
(30,860 |
) |
|
7,077 |
|
|
(40,116 |
) |
|
(55,385 |
) |
Free cash flow
Free cash flow is a non-IFRS financial measure which the Company uses to evaluate its financial performance. Free cash flow provides information which management believes to be useful to investors, analysts and others in understanding and evaluating the Company’s ability to generate positive cash flows as it removes cash used for non-operational items. The Company defines free cash flow as the total change in cash and cash equivalents less cash used for common share
repurchases, dividends (if any), changes to debt instruments, changes to long-term investments, net cash used for acquisitions plus cash provided by dispositions (if any).
The following table reconciles free cash flow to change in cash and cash equivalents for the periods noted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30 |
|
|
Six months ended
June 30 |
|
($000s) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Change in cash and cash equivalents |
|
|
(6,020 |
) |
|
|
(27,798 |
) |
|
|
(12,107 |
) |
|
|
(94,131 |
) |
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common shares |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,536 |
|
Changes to long-term investments |
|
|
(1,235 |
) |
|
|
9,318 |
|
|
|
(1,536 |
) |
|
|
17,691 |
|
Acquisitions, net of cash acquired |
|
|
1,654 |
|
|
|
— |
|
|
|
1,654 |
|
|
|
(3,695 |
) |
Free cash flow |
|
|
(5,601 |
) |
|
|
(18,480 |
) |
|
|
(11,989 |
) |
|
|
(78,599 |
) |
RELATED PARTIES
SunStream is a joint venture in which the Company has a 50% ownership interest and is a related party due to it being classified as a joint venture of the Company. SunStream is a private company, incorporated under the Business Corporations Act (Alberta), which provides growth capital that pursues indirect investment and financial services opportunities in the cannabis sector, as well as other investment opportunities. Capital contributions to the joint venture and distributions received from the joint venture are classified as related party transactions.
A member of key management personnel (Tank Vander – President, Liquor Retail) jointly controls a company that owns property leased to SNDL for one of its retail liquor stores. The lease term is from November 1, 2017 to October 31, 2027 and includes extension terms from November 1, 2027 to October 31, 2032 and November 1, 2032 to October 31, 2037. Monthly rent for the location includes base rent, common area costs and sign rent. The rent amounts are subject to increases in accordance with the executed lease agreement. For the six months ended June 30, 2024, the Company paid $83.4 in total rent with respect to this lease (six months ended June 30, 2023 – $83.4).
OFF BALANCE SHEET ARRANGEMENTS
As at June 30, 2024, the Company did not have any off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company makes assumptions in applying critical accounting estimates that are uncertain at the time the accounting estimate is made and may have a significant effect on its consolidated financial statements. Critical accounting estimates include the classification and recoverable amounts of cash generating units, value of inventory, estimating potential future returns on revenue, convertible instruments, value of investments, value of equity-accounted investees, value of leases, acquisitions and fair value of assets acquired and liabilities assumed in a business combination. Critical accounting estimates are based on variable inputs including but not limited to:
•Demand for cannabis for recreational and medical purposes;
•Expected cannabis sales volumes;
•Expected liquor sales volumes;
•Changes in market interest and discount rates;
•Future development and operating costs;
•Costs to convert harvested cannabis to finished goods;
•Expected yields from cannabis plants;
•Potential returns and pricing adjustments; and
•Market prices, volatility and discount rates used to determine fair value of equity-accounted investees.
Changes in critical accounting estimates can have a significant effect on profit or loss as a result of their impact on revenue, costs of sales, provisions and impairments. Changes in critical accounting estimates can have a significant effect on the valuation of biological assets, inventory, property, plant and equipment, provisions and derivative financial instruments.
For a detailed discussion regarding the Company’s critical accounting policies and estimates, refer to the notes to the Audited Financial Statements.
NEW ACCOUNTING PRONOUNCEMENTS
The International Accounting Standards Board and the IFRS Interpretations Committee regularly issue new and revised accounting pronouncements which have future effective dates and therefore are not reflected in the Company’s consolidated financial statements. Once adopted, these new and amended pronouncements may have an impact on the Company’s consolidated financial statements. The Company’s analysis of recent accounting pronouncements is included in the notes to the Audited Financial Statements.
RISK FACTORS
In addition to the risks described elsewhere in this document, for a detailed discussion regarding the Company’s risk factors, refer to the “Risk Factors” section of the AIF.
DISCLOSURE CONTROLS AND PROCEDURES
The Company has designed disclosure controls and procedures (as defined in National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”) and Rules 13a-15(e) and 15d-15(e) under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”)) to provide reasonable assurance that: (i) material information relating to the Company is made known to the Company’s Chief Executive Officer and Chief Financial Officer by others, particularly during the period in which the annual and interim filings are being prepared; and (ii) information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time period specified in such securities legislation.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2024. Based upon evaluation of the Company’s disclosure controls and procedures as of June 30, 2024, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as June 30, 2024, due to a material weakness described in our MD&A for the year ended December 31, 2023.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in NI 52-109 and Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Refer to our MD&A for the year ended December 31, 2023, for a discussion regarding our internal control over financial reporting and the material weakness identified.
REMEDIATION
Management has implemented and continues to implement measures designed to ensure that control deficiencies are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include:
•continuing to strengthen procedures and controls related to the provisioning of and periodic review of user access to IT systems;
•enhancing the timeliness and precision of executing user access reviews;
•working with our advisors to continue to assist with process improvements and strengthening of controls over financial systems; and
•augmentation of our internal audit staff with the hiring of 3 qualified personnel to leverage co-sourcing with external advisors to enhance the effectiveness and scope of our internal audit function.
At August 1, 2024 the above remediation measures are in progress but will not be considered remediated until the updated controls operate for a sufficient period of time, and management has concluded through testing, that these controls are operating effectively.
The Company is pursuing remediation of the above material weakness during the 2024 fiscal year.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
Except for the remediation activities described above, as of June 30, 2024, there have been no other changes in our internal control over financial reporting (as defined in NI 52-109 and Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ABBREVIATIONS
The following provides a summary of common abbreviations used in this document:
|
|
Financial and Business Environment |
$ or C$ |
Canadian dollars |
U.S. |
United States |
US$ |
United States dollars |
FORWARD-LOOKING INFORMATION
This MD&A may contain forward-looking information concerning the Company’s business, operations and financial performance and condition, as well as the Company’s plans, objectives and expectations for its business operations and financial performance and condition, such as the expected acquisition of certain assets from Lightbox. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim”, “anticipate”, “assume”, “believe”, “contemplate”, “continue”, “could”, “due”, “estimate”, “expect”, “goal”, “intend”, “may”, “objective”, “plan”, “predict”, “potential”, “positioned”, “pioneer”, “seek”, “should”, “target”, “will”, “would”, and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology.
These forward-looking statements include, but are not limited to, statements about:
•expectations with respect to retail and investment operations;
•expectations with respect to the Restructuring Project, including the costs and savings associated therewith and the timing thereof;
•the impact of consolidating cannabis segments;
•expectations with respect to the CCAA Proceedings involving Indiva, including the timing of closing;
•the value of the credit bid and cash consideration payable by the Company under the Bid Agreement;
•the Company’s share repurchase program;
•expectations with respect to sales to provincial boards;
•the Company’s ability to adjust its capital resources;
•the Company’s liquidity needs, including its ability to source its liquidity requirements;
•the sufficiency of the Company’s capital resources;
•risks associated with financial instruments and the methods by which the Company manages such risks;
•expectations with respect to various contingencies, including the impact of such on the Company’s financial statements;
•the impact of changes to critical accounting estimates and new accounting pronouncements; and
•expectations with respect to remediation measures to control deficiencies.
Although the forward-looking statements contained in this MD&A are based on assumptions that the Company believes are reasonable, you are cautioned that actual results and developments (including Company results of operations, financial condition and liquidity, and the development of the industry in which the Company operates) may differ materially from those made in or suggested by the forward-looking statements contained in this MD&A. In addition, even if results and developments are consistent with the forward-looking statements contained in this MD&A, those results and developments may not be indicative of results or developments in subsequent periods.
These forward-looking statements are based on current expectations, estimates, forecasts and projections about the Company’s business and the industry in which it operates and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond its control. As a result, any or all of the forward-looking information in this MD&A may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section titled “Risk Factors” in the AIF and otherwise described in this MD&A. Readers of this MD&A are urged to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements speak only as of the date of this MD&A and, except as required by applicable law, the Company assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with applicable securities regulators, including the Canadian securities regulators and the U.S. Securities and Exchange Commission (the “SEC”), after the date of this MD&A.
This MD&A contains estimates, projections and other information concerning the Company’s industry, its business and the markets for its products. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, the Company obtained this industry, business, market and other data from its own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. Certain statements included in this MD&A may be considered “financial outlook” for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this MD&A. The purpose of the financial outlook is to provide readers with disclosure of the Company’s reasonable expectations of its anticipated results. The financial outlook is provided as of the date of this MD&A.
In addition, assumptions and estimates of the Company’s and industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors” in the AIF and elsewhere in this MD&A. These and other factors could cause the Company’s future performance to differ materially from the Company’s assumptions and estimates. Readers of this MD&A are cautioned against placing undue reliance on forward-looking statements.
Further information regarding the assumptions and risks inherent in the making of forward-looking statements can be found in the AIF, along with the Company’s other public disclosure documents. Copies of the AIF and other public disclosure documents are available under the Company’s profile on the System for Electronic Document Analysis and Retrieval (“SEDAR+”) at www.sedarplus.ca and on the EDGAR section of the SEC’s website at www.sec.gov.
ADDITIONAL INFORMATION
Additional information relating to the Company, including the Company’s most recent AIF, can be viewed under the Company’s profile on SEDAR+ at www.sedarplus.ca, on the EDGAR section of the SEC’s website at www.sec.gov, or on the Company’s website at www.sndl.com. The information on or accessible through our website is not part of and is not incorporated by reference into this MD&A, and the inclusion of our website address in this MD&A is only for reference.
EXHIBIT 99.3
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Zachary George, Chief Executive Officer of SNDL Inc., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of SNDL Inc. (the “issuer”) for the interim period ended June 30, 2024.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3.Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4.Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5.Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
5.1 Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is “Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)”.
5.2 ICFR – material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period
(a) a description of the material weakness;
(b) the impact of the material weakness on the issuer’s financial reporting and its ICFR; and
(c) the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2024 and ended on June 30, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
Date: August 1, 2024
/s/ Zachary George
_______________________
Zachary George
Chief Executive Officer
EXHIBIT 99.4
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Alberto Paredero Quiros, Chief Financial Officer of SNDL Inc., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of SNDL Inc. (the “issuer”) for the interim period ended June 30, 2024.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3.Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4.Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5.Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
5.1 Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is “Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)”.
5.2 ICFR – material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period
(a) a description of the material weakness;
(b) the impact of the material weakness on the issuer’s financial reporting and its ICFR; and
(c) the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2024 and ended on June 30, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
Date: August 1, 2024
/s/ Alberto Paredero Quiros
_______________________
Alberto Paredero Quiros
Chief Financial Officer
Sundial Growers (NASDAQ:SNDL)
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