SNDL - Earnings call transcript Q1 2022

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Operator

Good morning, and welcome to Sundial Growers First Quarter 2020 Financial Results Conference Call. Yesterday, Sundial issued a press release announcing their financial results for the first quarter ended on March 31, 2022. This press release is available on the company's website at sndlgroup.com and filed on EDGAR and SEDAR as well. The webcast replay of the conference call will also be available on the sndlgroup.com website. Sundial has also posted a supplemental investor presentation found on the sndlgroup.com website. call, Chief Zach Stordeur, Financial Chief Officer. morning's Officer; Chief President this Operating Keough, Jim Officer; on we George, have Executive and Presenting and Andrew

financial certain would and answers anticipated. or may Risk and from affect made Actual be reports could could remind Before results conference questions that like results to factors in forward-looking on start, in today's available that filings I EDGAR. investors we the public are those that that constitute matters given could discussed call materially company's to other detailed statements. differ are SEDAR

Additionally, figures are unless dollars all financial in indicated. Canadian mentioned otherwise

Zach We then would George. we'll will questions. and turn I prepared now analyst now remarks, move like on to the make to to over call

Zach George

for and on call. Good us earnings XXXX you our quarter morning, everyone, joining first thank

XXXX sector Through Sundial. now The sheet capital. both first our Canada's of Sundial with access quarter to industry-leading distributor largest cannabis both Alcanna, acquisition of transitional transformational and an is and for private and was of balance liquor

amounted the the Had approximately would single of approximately QX net XXXX, an of Alcanna $XXX quarter and revenue day million, X $X Alcanna day Alcanna on acquisition million, including million revenue. of and the XX% acquisition to of have from January XXXX. in X, Nova a revenue March our terms over occurred over of XX, of in revenue which on results, increase was represents $XX.X increased In first by contribution of from

cannabis powerful gross improvement operations. most this material in of is in highlights quarter of the our the margins One

a that balanced reduced yet higher work higher-quality focuses costs cannabis. and amount diverse While and we a significant mix to do, have we margin, on product have more created of

in larger Sundial in than enable relationship. a the will and daily The This infrastructure owning and insights competitiveness. more liquor and direct-to-consumer at our average entity, quality XXXX Alcanna put strategies XXX now to and processes of insights from flower The shopper Sundial's with to of potency banners will broader be cannabis of and customers. competitors. $XXX,XXX of results I QX at experience up our promotions highest against Olds, Alberta pricing would XX% gained Across The network talent THC also continue and cannabis access retail Canada, now customer in customer our the and strong any been serve will for Our transactions average I this to us all-time provides tens and has liquor transactions am the us in average critical that company's base retail cannabis cultivation over in to retail proud transaction key QX. with a access team cannabis during of in The and now of acquisition. value locations improved facility optimize chain unique offerings, a north daily achieved improve stores. better to revenue. retail approximately refined, daily foundation our have acquired we be through techniques of largest has our in materially these combined bolstered Spiritleaf the represent with distribution and XX,XXX infrastructure both to thousands e-commerce Nova our into

We Additionally, the support for remain strategies label and we and Value entire banners. of to targeted private our will continue merchandising development to develop and Spiritleaf the opportunities assess Bud committed portfolio. retail

than Bud than million an much Canadian Alberta, run a is average LPs. Calgary role Circle which door against quarter have for shipping of of with to in retail break that due Bud thrilled focus for total current including Canada's in a balance end Nova's industry banner cannabis-related the will in twice of with the less the the to In an to partners around and stores engagement venture. Bancorp strategic absolute increase disruptive the By welcome the about $X event, more our we highly the Following product been average year. joint June products $XXX.X to deployed synergies rate to are facilitate velocity franchise SunStream we X-year as annual discussions, branded several started store, COVID, investments, to top X in has XXXX, to has Value in as province. the become Value resulting our integration realize education be months, machine million, which have million capital Sundial and able per has $XXX plan first a will of distribution on of a by been

interest current quarter first unrealized losses of on and quarter. generated equity $XX.X portfolio marketable industry. make SunStream revenue Village the fee and pickup Company. Valens environment to the on investment largest in our XXXX, loss The contribution in includes has resulting the million, remains the securities, $X.X accounting to SunStream of publicly million funded The of portfolio, us caused portfolio in noncash $X.X SunStream an adjustments investment fixed Canadian adjusted EBITDA rate strategic for largely interest which rate and million investments rising Farms the from disclosed muted of International For previously credit

as turmoil extreme saturation equity challenges valuations Cannabis compression the cannabis Given such as being been geopolitical interest in with pressure. and the market. industry retail rising price as rates have oversupply, and right well under

immune our As not market been are these has well challenges. investors to Sundial aware,

reserves creation. relentless committed X outperformed witness Canadian May cash our and to are taking global year Canadian we we market. While we and violent value XX, year-to-date have a cannabis and the hold in the us as and Sundial's cannabis a believe that through position basis on pursuit and indices enviable shares undervalued swift ample in sheet an reckoning shareholder place debt-free of balance are

of waning our reduced slowly sector the and likely oligopoly. appetite peers, risk industry by consumption cash an accelerate to access aggressive are towards as to Continued capital the rationalization moves investor formation

showing slowing down look and be XX may likely industry's of will difficult entering is no its change the of sector hours, vastly next different Canadian the to XX signs starkest months. and over the While is rate

and our industry focus the business We delighting state are we keenly the focused consumers. on of as future on

close, Before to the management of recent assets, Sundial's share like capital. on the price as of of previously our program. equity, shares company's announced operations on views light and of In I'd view an repurchase trading liquidity, provide update the an use I accretive the we repurchase

Commissions In Sundial to in streamlining remains options we our addition, the sought for Securities enhance put remain the and approval focused Alberta Ontario sell summation, structure company about the on building enable of to pass Thank including the Sundial company's further from to integration, enhanced operating program. comments Canada. value Jim regulated recently consumers. this In of you, of shareholder to results. our products optimistic the and financial retail of through network, future the to vertical expansion an offering on I'll brands the and call long-term high-quality

Jim Keough

morning, measures. analysis good measures. I'd unless discussion and that remind you Zach, are to that I you, management Sundial's I of in that these Please Certain Thank will the Canadian are everyone. otherwise and to refer amounts dollars, all for definitions refer amounts today stated. on like GAAP non-IFRS to call denominated discuss this

we and its Inc., last fourth segment, March a day Retail. and are operating Alcanna XX% owned now acquired of the Nova Liquor subsidiary, reflecting Sundial On Inc. XXXX, Cannabis

operations retail Please XX, comprised are the and the of Alcanna platform. note Nova of that With inclusions X the Sundial acquisition acquisition, regulated private day on is just XXXX. products following Canada's leading March

XX% XXXX for However, $XX.X first revenue discuss of the increase would X, revenue million, will the have gross I of I'll occurred been results our for full first been consolidated an Alcanna, on acquisition the was acquisition estimated quarter have Net $XXX million approximately first of begin over quarter of approximately quarter XXXX, $XX also the margin XXXX XXXX. Had of the of on these the with day Alcanna and January including X million. entities. results. revenue would

of largely following XXXX. The in largely value general, compared outstanding million $X.X a in over downward adjusted day by profit decrease from venture due XXXX due in to expenses rate a X loss change and had fair fair fees investments general investment for and office in was securities offset XXXX of liabilities of and of months $XXX $X.X increase months noncash in $X.X XXXX in XXXX, just well in $XX at first loss in for ended of increase to acquisition. central of salaries to first warrant of joint bank the first EBITDA share changes of to due the net March reported our in $X.X XXXX derivative loss a million no audit. $X improved professional The a of to administrative The adjustments X to was $XXX adjusted $X.X partially quarter the securities of XX. to professional $X.X We first of compared we billion $X.X million XXXX, cash to XX, $X.X disposition higher were improvement. XXXX. SunStream SunStream the value reduced of and to had first and for cash, the change million Holdings million, $XX.X mainly expenses for $XX XX, and a net due net is the a improvement debt a Spirit compared XXXX, gains Inner wages, million loss March quarter The in the of of July of was XXXX. increase marketable margin million Our completion $XX X and of of million. is in as long-term million at ended the driven the for We quarter May million primarily extent, of marketable This a and as acquisition quarter Alcanna on quarter and million fees by in March realized administrative XXX% to $X.X to of XXXX. General million lesser and revenue unrestricted of million. $XXX EBITDA first of had an the year-end quarter loss the gross and XXXX, interest revenue of and the XXXX compared of to Sundial related million million increases of XX, million

let's demonstrates in approximately Sundial XXXX between XXXX. first XX, terminated the quarter sales X to Sun to negative further million the compared more of shift to of months and Gross price Now ended service X have first the improvement $X.X despite Holdings $XX.X X% of prior margin for and provide was sale March compression compared Sundial the and cannabis chain Sundial a Sundial the cash lower production eliminated Gross small This revenue first we production. the agreement cultivation was revenue. first turn Sundial for the the has supply shares. will for product royalty that of to million reflects in decontracted to The $X.X Inc. of achieved and a negative for progress Sundial's XXXX optimization to XXXX. Andrew and of was to decrease the X, and date. of $X.X consideration quarter and has million million on million cost compared $X.X for of details Sun and quarter improvements the paying year. quarter which cannabis $X.X million branded fee was annual royalty in XXXX. cultivation the

Nova acquisition cannabis of revenue that for Sundial gross million while of first and for of quarter as does including X sales XXXX, months sales XXXX X of first of the million. were million, XX.X% Nova, quarter Nova representing Gross stores for day million revenue $X.X margin to Our were retail And results full sales. results, account margin X $X.X and retail And date, system-wide prior store were the the $XX.X results gross Nova the day million the including of revenue margin XX, X The was gross Nova. gross including $X.X of day retail NOVA results for day million $XX.X of for of revenue. $X.X retail of $X.X of not XXXX, was the million, for Gross quarter ended $X.X for follows. million. X the or March the are

date, results, to Liquor, Retail Wine and follows. Beyond margin million sales. Liquor or investment million does Sundial banners operations. account while of of $XXX million Liquor of the of are had finally, first Revenue in $X.X cannabis-related which and losses. margin million the million totaling interest review the the from $XX.X the million. of from and gross strategic investments $XXX end joint the for the to And $XX $X.X quarter Ace retail retail the investments XX.X% results Bancorp, like revenue these XXXX directly cannabis investments million. loans negative in of Again, and was by from Canadian remarks prices was to prior further provide This day of $X.X was Downward liquor segment held I'd our Inc. investments venture. credits QX share a to mark-to-market. marketable SunStream million, was performance $X.X deployed profit joint X first million to Gross Depot Alcanna's Sundial, as were of quarter XXXX, unrealized $X.X million capital the unrealized resulted was losses and of cannabis-related Andrew Revenue I is results of gross invite of locations our SunStream of for on on acquisition As from to share & company By gross the including like venture for of comprised for operations. securities, portfolio would $XXX in equity now related the on not our

Andrew Stordeur

our I'm Jim. and to excellence with team's you, past commitment this continued quarter. execution pleased Thank cultivation

be pose Our These consumer business remain of but too to also our and pricing sustainable, continuing a as on profitable low-quality cannabis differentiating to pockets through product volatile a headwinds geographical much better understanding to product, remains they've by challenges operations the build and cannabis needs. focused momentum are opportunistic with high market The retail of saturation. customer we Canadian driving and forced business.

our fourth X% a million the XXXX showed net XXXX. of in year-over-year to selling average quarter and XXXX first of on Our quarter gross of negative in to the increased with compared in supported price pricing XX% million This margin quarter basis $X.X and material first improvements quarter first increase focus the the negative mix compared at of the by an $X.X XXXX versus XXXX. first quarter

operations required. making are with We more work margins in progress our with gross cannabis

agreement licensing cultivation executing year, progress February was declines, slightly and had net increased, by and cannabis repeated impacted that operations XXXX last our for Quebec for X% revenue and measured the compared Stats January stable and notably commitment factors quarter-over-quarter onetime in mainly decreased through as a by of to Canada. in From as basis on QX sales our declined cannabis strategy onetime due While province some that overall in province our revenue to industry most production we the X% about a industry across Accounting QX announced sequential previously standpoint, retail our is and not revenue vertical XXXX. that revenue positively Ontario. early our to this Canada service factor, reflects integration Western by

against, strong We execute key have plan X underpinned the initiatives a our continues that at by team announced update. our to year-end

walk initiatives through some each. provide and let Now me context additional these you against

with yield in first results Sundial's of XX average has THC. cultivation This square represents per XX.X% March continue record foot. our previous Sundial the from quarter. consistency with cultivation new XXXX XXXX, for a the square to Further, Sundial's make a grams We with achieved per in weighted an a contributed broke average foot weighted X.X% excellence increase progress focus. at This yield improvement in average in weighted potency to quarter highest coming of our

an effectively where retailers largest rate a Western partner and company's distribution priority listings XXXX, cultivation by with year-to-date to we have costs on continue In rate XXX company reporting. strike has synergy optimizing SKUs, on XX% is and represents measured innovation CRM product From year-to-date. inhalable made pre-roll and enhanced operational versus SKUs SKUs. securing with as rationalize points processes. continue pipeline, represents SQDC This packaging material new the industry XXX standpoint, Further, in progress we which significant we XX to nationally provinces new X,XXX and internal plan identify on to cost SKU with Canada we As contributing continue QX success an scrutinize and The focus provincial significant to portfolio to nationally followed increased gain OCS Atlantic made cost, its the SKUs with SKUs. nationally. XX savings innovation beyond initiatives. by listings improvements by in Canada X distribution with board continue product our an in of

strategy we to fruitful, quarters. integration proving results coming vertical is see in the better and Our expect

brand Some quarter, the its momentum first brands XXXX. of penetration to through sold quarter continue see in increases locations see and product share for the health we continue now Spiritleaf second to in

of now With is XXX Canadian Finally, healthier insights shopper forward deployed these a and our are players like and approach look customers cannabis. division. industry all daily license the of our and focused insights our at fifth capability as partners, have advanced as a of franchise in through vertically for one we some month. summary, retail stakeholders. insights. dynamic important initiative we In integrated take remain retail over for event analytics and we building analytics locations accountability Circle with in cannabis our thousands shopper The unique upcoming We initiatives our transactions, advantage sharing nationally next consistent our to being to and with producers our of operations other largest

the believe differentiated of strategy remarks. beginning to is moving forward. target and continues to for While I closing points industry the to back progress Zach proof call sustainable show evolve, our we now will on turn

Zach George

Thank you, Andrew.

are shareholders and we contrarian sustainable through executing Our to strategy By is our of success. returns relative setting on Sundial to fundamentals a for deliver XXXX and in and goal profits up focusing the believe to beyond. that process we peers,

pass operator a the to is focus delight and . on the Sundial analysts' have and of I'll Through model questions. Canadian We is the creation now and reach our value. unapologetic line. market differentiated be the call integrated a work for consumer path vertically straight forward ahead goals, significant an shareholder towards to a path unlikely to the on

Operator

Frederico is from [Operator Instructions] Markets. with Capital Gomes question ATB The first

Frederico Gomes

selling own to a at? the that book your book buyback that against we tangible should your buy is I Is Is based looking looking on stock? guess metrics value? you're net of my one stock. that, matches plan share value to like per first other be going puts back metric or and program Or on be some it there at or

Zach George

It's Zach. specific we're to Yes, Thanks, Frederico. the not out back. going give on metrics

have any in transparency will purchases or line securities require significant regulations. transactions We with as filing,

time. be into will are. where get to of well be on -- aware this transactions call So there public they will and the But want at don't a strategies the trading market

Frederico Gomes

Understood. Okay.

investments how looking the second The your you Valens, those and prices? in now, looking example, stocks Village is, are right year. you for stake at investments just Valens, at last at question Farms just look in your in stock here the decline Canada, given down of the XX% If

for just the stake So how the some curious seems It I'm looking you potentially market your investments could right those you're the is now. price now? -- prices right of at there. amount So pay now is like that company market great offering the on

forward? going strategy your just So

Zach George

Sure.

mark-to-market creates thinking you space, as at certainly, So in painful the industry with been But if decline these companies were it you securities impact the targets, of looking the being those consolidation an All has about potential or across especially welcome but opportunity, else if equal, you're late. M&A. potential specifically, acquisition X also prices. would as

has processing attractive is see in cultivation cultivator, unique products. So well-run cash X.X cost upstream with specifically, extremely operation. Village in a both And capabilities interesting Village and their capabilities some and -- a Columbia-based Valens. very of very is Farms of we Valens terms with unique British manufacturing very

the last expect the can going or further think we reasons in there's in. to space get acquisition further industry. plan you're transactions and Sundial done. transaction necessarily engages see that stumble timing sometimes But think is do M&A to is the don't we not otherwise Alcanna The many good that consolidation the a So again, why and in that difficult

Frederico Gomes

rate I squeeze it's And interest That's real potential that that one On on really of rates. you on just you your rates? question mostly maybe just sense helpful. your of fixed average the could weighted portfolio, inflation here. portfolio? Can us to And risk could comment given fixed a return SunStream more and the rising rate there, mentioned you give

Zach George

on comment to want investment in the yields you average portfolio? do Jim, Sure.

Jim Keough

average little $X weighted impact the return the rate release And in XX%. Sure. on think was Thanks, a QX. of Zach. Yes, in changes portfolio I over million we around disclosed that the the is press our fixed

Operator

from [Operator The Pablo Cantor with Zuanic question Instructions] next Fitzgerald. is

Matthew Baker

the We can Matthew is Baker Can us on Pablo. have Hi. capital there's taking yields SunStream remind has down. that, describe also our you This more Bancorp? environment changed competitive come supply And you plans related for you. the for Thank Thank SunStream? for for you also of think and growth how questions. to

Zach George

Sure.

of the cottage in of the terms industry that's U.S. been competitive there in a has environment, formats. a popped bit up So various

that building companies the these are or the partner in individual to work You announced taken consolidation of. business listed I mortgage margin as commitment that publicly markets, them many strong And have the and capital to go actually previously have go. no through degree the that be most or of our the I increase structure property the That there's quite you're pleased part the states there. working SunStream Partnership previous a and REIT of and on cycles. efforts are own to, to and other at still models the well or strategy, Board And and have through on that form they would for we've of existing fund oversupply at point that entities BDC that update improvement made portfolio out think are help impact there aware intention starting saturation Limited their these pressures and for we're the and some senior has allocation. pricing to time, said, out being this say

Matthew Baker

cannabis-tech the has a a fintech for but then realized the large you verticals, follow-up question. company way? consider would that in And space and/or We now entering X

Zach George

focus now transformational integration Alcanna of transaction. really this sole is the right Our

the our our the our in in on investors benefits lines. segments stabilized up of to as of feet to So business other and And on of rate integrated knitting to vertically stay underneath able really get heads market But potential X other trying us number we're focused now right really we really about model. working get do opportunities, we see profitability, and opportunities looking and to of integration the we'll more this think getting of showing not our we're terms lift a currently. proper but and a be outside thereafter,

Operator

to This over Zach the for Instructions] like question-and-answer back the conference would to turn closing George [Operator concludes any session. I remarks.

Zach George

you, all in your forward and our Thank Have thanks near to for joining day. look updating to on We progress call. a support you our great the in future.

Operator

call. conference today's concludes This

for You may and Thank your disconnect lines. participating, you have a pleasant day.

SNDL (SNDL) 17 May 222022 Q1 Earnings call transcript