SNDL - Earnings call transcript Q2 2024

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Operator

Good morning, and welcome to SNDL's Second Quarter 2024 Financial Results Conference Call. This morning, SNDL issued a press release announcing their financial results for the 2024, second quarter ended on June 30, 2024. This press release is available on the company's website at sndl.com. And filed on EDGAR and SEDAR as well.

The webcast replay of the conference call will also be available on the sndl.com website. posted investor also has a presentation. supplemental SNDL

call will website. be addition to today we conference the sndl.com In reviewing presentation, on its

Presenting Chief we Officer; on call, George, this Executive Chief have and Officer. Financial Zach Paredero, Alberto morning's

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

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

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

Zachary George

Welcome Conference Results Financial Call. and to Operational QX SNDL's XXXX

pleased We in continuous in in segments, that the the reported quarter second we consistent our on are path profitability quarters. XX progress last quarter over to increased improvement strong revenue momentum see material reporting We maintained our first confirms the Cannabis cannabis the and improvement. of

dollars and greater our from While we a posted segment, in gross battle through margins to on disposal we basis, profit we and revenue our year-over-year have still additional greater at noticed slowdown a liquor tools volatility. this

compared gross growth margin with all XX.X%, margin of the segments of to gross gross We record pleased to profit all-time are and an report same contributing XXXX. to quarter

not a basis by all margin income second strong by in achieved segments, operations improvements supported a segment the on growth discipline row. Cannabis SG&A Operating consolidated improvement, showcased significant driven positive in also management. quarter also cost in gross gross for profit and but a Our only

driving in to long-term announced in to reduce steadfast which QX. SNDL expect plan Importantly, benefit remains none overhead the than more million, these the corporate we its to to $XX impact begin by results recently profitable of commitment growth. include of results

involved different to towards our processes may X other the on in accretive some X are retail significant M&A or that and substantial grow of continue platform of making event. restructuring liquidity border, strides in result side We are manufacturing excellence type each

our can under efforts with exposures investor an of to website. to the capital industry I to of approximately update delay of of and found across credit that some quarter, restructuring U.S. regulatory $XXX local U.S. year presentation is clear half approach our having result on context also our provide face received closing $XX this It and from the weeks from for material Ascend and We unique that in the to This the the and have also regulators Canada the available in this transparency dealings the noting information obstacles, on continues in is It about and currently likely cash. million last significant the occur provided in also second both is be been Our million Sunstream. Canada to credit repatriation principal our repayments inefficiency. that in in worth bureaucracy want in deployment with X expect the Jushi. many U.S. we

challenges. At professional our regulatory parts for submitted bodies. more There documentation of parallel of of state SNDL of penalizes the efficient to the months taxes information multiple unable which overcome the regulators pay provincial in locate skill, selective resources ago. all have who to officials participants obligations excise confidential enforcement determination we and reorganization of the competitors, Canada, examples recently and leaking all to Florida being delaying From were inconsistent are to need that effectively excise regulatory these their or

and improving partnering in agenda continue advancing efforts, persevere regulatory this with authorities our to will regulatory framework. We the

our on restructuring updates if to XX U.S. clarity. and have the expect or provide next when in further sooner we days We

now call dive QX results. Alberto our into the financial I a pass deeper for to will

Alberto Paredero-Quiros

remind you, stated. Thank all amount also denominated in I'd dollars, Canadian Zach. that are you discussed unless otherwise today

referred measures. call non-IFRS are to and this on amounts non-GAAP Certain

of management discussion please SNDL's and measures, refer definitions analysis For to these documents.

QX Looking XXXX at financial our highlights.

to operating of and or driven second in Retail in Liquor X.X% quarter. year-on-year. see segment. reached continue segment. $X.X This million as million, impacting XXXX decline by the was the cash our free We flow, significant first Net in revenue improvements Despite liter headwinds revenue a $XXX.X the income decline our quarter

As healthy our a Cannabis X.X% growth. combined business posted

year-on-year. of This points from $XX.X translates margin profit material improvement basis another XX.X%. gross And of margin reaching a with gross Gross represents XXX million positive quarter increase into growth of a XX% contributions segments. or million $X.X record all

yet second the investment the contributions quarter. quarter, breakeven again free first year-on-year the Of metrics cash in of from gross led quarter income X were to adjusted margin overhead in management segment to XX%, respectively. significant in corporate increased, and These and As close flow. disciplined operating and improvements income XX% our

last adjust mentioned for write-offs only As income quarter, and impairments. operating asset intangible we restructuring-related

the $X.X Specifically, ] removing income related operating in million second expenses adjusted to of we by restructuring [ XXXX, quarter charges.

precise, same to quarter both the profit, growth years second XXXX. gross although increase declining to be improvements KPIs, seeing in and previous quarter same represents improvement of revenue. XXXX compared a to net quarter A of growth ] XXXX, to noticed the quarter we're there of quarter-on-quarter a to an was a quarter-on-quarter $X adjustment million significant and the the [ the the looking quarter historical restructuring of second quarter-on-quarter where of XX% the is main We're compared compared first remove XXXX. traction still XX% the in same quarterly we XX% at Where in and between financial expense. While the

second and first quarter previous very of posted a the And flow free improvement same when cash significant very is in quarter. previous the in compared close adjusted first the operating income improvement the the represents quarter compared At Clearly, breakeven. of confirmation Both levels to of we to XXXX profitability the half half XXXX. years. to the are similar

million at the the the retail, $X despite results As contributions segment had operations each Cannabis net we a small elimination revenue come Liquor $X.X from of see to the Cannabis in total we Cannabis good can revenue growth own from $X.X to and performance how in we consolidated segment, related the sales net we corporate the our retail, overall the growth million negative the is from Cannabis. of X.X% million revenue When decline $X.X the in operation Canada. a look million or from into impacting

Retail growth. the terms a segment In of profit, revenue the Liquor Even shows gross profit in Cannabis operations showing in gross $X.X are million contributing and quarter improvement. to despite strong is positive segments softness all the

As profit. to initiatives. a XX% Altogether or in result gross adding of up growth million our productivity $X.X

page, from our XXXX a a million our second seeing The $X.X operating in in valuation investment compared in in asset On Cannabis XXXX, significant of in same portfolio of to is also contribution we're losses adjusted the million as cash driven a improvement of income XXXX. segment by $XX income million in QX operations quarter from improvement the $X.X period versus of the flow the as saw material combination $X.X SunStream XXXX. period next Investment improvement Free same segment. our investment well of million a and

related profitability, divestments. partly the cash offset second result asset XXXX proceeds a more by improvement management, but approach in in capital our also lapping of quarter to a of working onetime As disciplined to

are, flow As share actual the however, both of are we into a we free terms insights composition in add-backs the the free were did QX to million of some in There the small cash with The differences would and some reported QX. payments in negative quarter, Both in quarter. differences working similar from last of in these very income, $X.X numbers. capital like quarters and to are quarters. components. cash Net $X.X flow these negative improvement million CapEx in drivers in noncash second similar

reported the [ an first XXXX, we increase quarter of In ]. inventory million $X.X of

While seeing the X. as we million operational first with Page is right-hand in contrast other side progress of working second At optimizing our made increases the capital years we're ]. of in $X.X opposite in in of inventory a in historical evidence by previous the time, Clear the during changes. graph illustrated levels. the recorded same of inventory teams dynamic in semester material This the the quarter reduction [

That deliver were these free annual XXXX positive encouraged quarter account it the annual X second track to flow of quarter. by demonstrate These XXXX. as full cash payments presents. in for on quarter insurance and us of $XX to by the results year elements in the outflow the impacted ability incentive of our second We're in cash the second our for management keeps million

X the X Retail. each segments, Liquor of with into let's Turning start operating

million Liquor $XX compared year. XXXX, mostly was segment a in the due reaching to Despite the XXX quarter, the continue in last consumption between market quarter seeing as of the macro second margin, Net industry, you [indiscernible] $XXX.X points in by but short-term XX.X% decline revenue to this XXXX basis second and in challenges by to reported year. X% million, an was improvement to The this of we probably structural a the manufacturers when not indicative slowdown due April America. We being of for are North most believe is March prior compared decline expand driven timing to but dynamics. of to compared headwinds, the or gross

productivity a XX% and our margin-accretive sales growth monetization. through label, achieved including This data was private procurement multiple of initiatives,

a of segment's As low XXXX. result the this growth expansion, same the delivered single-digit versus gross profit quarter income operating margin of and

Mainly QX saw same-store operating factor compared of improvement sales X.X%, the which as the gross improvement. increased and by X% Moving sales openings. profit prior growth double-digit driven an Adjusted basis margin revenue propane XXXX XX points the as title to year, of growth Data by sales of X.X% well $XX.X are store Cannabis of growth million compared the XXXX. enabling a new data $X.X main is or XXXX. by gross our expansion Retail. We in profit segment, driven XX% to to QX of million, increase program to for supported QX contributed by versus gross the income net the

This Cannabis segment. net see million, both of segment operations XXXX, profitability. where and of second is improvements of quarter the more a $XX of our increase growth delivered we revenue terms at In year-over-year. the XX% looking largest in once Finally, the

business-to-business increases. by of growth And Board organic. All this and is driven distribution provision

improvement posted this driven profitability, $X.X biggest the of quarter, improvement positive first a the In XXXX. from the of XXXX, in to the segment gross reported compared program. quarter by of in is holistic million, second million an already productivity profit QX $X.X As segment

is improved a margin prior a mainly to driven compared a loss income the X.X% number positive As QX fixed related the was asset in the XXXX Adjusted to of $X.X XXXX. $XX $X.X legacy XX.X% a in Cannabis of to negative million The impairment result, a million by operating from QX segment by gross in slightly negative year. negative million facility.

And summary, flow solid and margin with profitability cash the improvement the gross year. line in in a quarter compared with to improvements record and the quarter. first previous In broadly reported a significant in free

million XX, their $XXX also $XXX an that investments Let's the in securities of mind our no at in members these had By unrestricted for to XXXX, marketable all and cash, keep thanking and SNDL outstanding pattern company contributions June results. million team debt. at additional

like pass operational share quarter. the more the Zach highlights a call back would I to to few to for

Zachary George

Thanks, Alberto.

progress these also each like profitability to fundamental financial highlights few our of growth, share of Beyond strategic would pillars to as priorities: our is I people our a see with our and only performance, market in Starting revenue growth, but segment as gain highlighted is growth it success. share. the to to net continue also great long-term Cannabis deliver financials, our towards not

of percentage In execution, X.X impressive the of reading an gain the our XXXX actually is with quarter, Buds launched Love latest Columbia transaction. into another quality the stores point retail fact, through recent banner Value during Dutch Columbia. This in point the expansion rebranding store acquired into share openings ramp-up as in British X we last and the Bruce second highlight shows the

of exposure our progress, rapidly confirming manufacturing our gaining excellence focus operations the segment Not but only is to Cannabis strength, noncompetitive Cannabis our retail cultivation. strong making elimination and segment is on

hit have on focus XX expansion I boards, approximately and continuous Anecdotally, June, about new available OCS LP this organic exceed product to excited XX% which market been became I SKUs month program. enabled first growth from provincial Our will SNDL this as quarter. am in of X through line, enabling as million today in $X of revenue our segment fall. branded quality in the the flow-through much the the innovation the never for second

dollar category seller year-over-year team launched the outpace on base Additionally, a also that X-in-X LP Ontario, top to basis in became in of OCS quickly in for QX the SKUs us. is SNDL period. a have only top The growth XX disposable still a and recently same reduced number the

market our quarter, quality increase the our us Finally, private affordable offering segment liquor at customers focus margins. despite impacted second products XX% contraction to enabled by label on sales during the our that liquor at prices to accretive

to profitability. on Moving

options of improve exploring operating through during and $X operations million cannabis margin, free cash efficiencies. continue to our cultivation productivity improvements delivered flow. To second segment we the procurement point, this We ultimately, income quarter, and in

quarter second the achieved Compared million In by revenue licensing reduced quarter, expenses $X our from XXXX, the we our SG&A million. of data segments. and second liquor over Cannabis in retail to were $X

restructuring XXXX. in realized in will savings a we restructuring going that program annualized third on Zooming which were quarter over start materially non-people immediately and ways of this of regard, as efficiency being reduce In to costs. overhead stated, announced the costs. recently announcement, focuses and us some impacting corporate both we look several $XX opportunities project As allow improve forward, the for spending on million deliver will in people this to identified

Starting and as as Through retail initiatives on review technology Tyler's strategic months operations cannabis we identified focus cannabis under a by the also and we opportunities and combining well to the few improve organization. markets, delayer plan initiated identified we with ago, leverage to automation organizational streamline better must-win the the our people, opportunity and process increase alignment leadership. segments

achieved reductions, nonpeople be While such efficient by and discretionary expenses, zero-based will coverage in office footprint approximately will rationalizing cost as spending. the people-related of our optimizing to rates million through be over adjusting insurance XX% policies XX% or $XX savings implementing delivered reduce budgeting

up of ongoing which of us several million We savings implementation to have ramping $XX next the And these will of in savings to achieving and started half second XXXX. initiatives December, by months July immediately the $X year. between of the million in with XXXX deliver absolute million $XX allow of annualized in over XX

but not is our people least, Last, priority.

call need We and company we are and convinced their team retain and second to talent quarter, member the review the talent the but to kicked best not alignment be creating is planning. performance a during point, structured focus full attract industry, through talent, culture this on To development, one-off we strategic capability to best and developing potential. a to that our each engagement process. we exercise off what building in the succession a This way

psychological also launched few. offering have initiatives, our a several the well-being possibility around community sessions all of mental We members and engagement name to team or to participate in safety, physical

We also the teams us and by across organization. work the to that a great allow lot of display a our done of entire started recognize development framework will recognition the

demonstrate thank like and day. competitive, shareholders every for also trust. transparent and to a entire our fair, they their focusing hard and our opportunity work approved for I our passion Finally, review we've aligned philosophy equitable, of on organization compensation ensuring compensation strategies the would take policies. their this to and

to call Q&A. I the for will operator back pass now the

Operator

first Yewon with Our Instructions] Kang comes from Genuity. [Operator Canaccord question

Yewon Kang

the you question. for Thank

my So segment. regarding the Cannabis here operations is first one

back Just the noticed income a adjusted the last that quarter. positive negative for dip after operating quarter into income territory generating

just So that? quarter on that could that of puts provide led some any and happened to you the throughout the color takes

Alberto Paredero-Quiros

of $X.X $X have of charges QX. specifically. assets million for didn't for the with to There million. fixed north placement we has assets. bad acquisition million collections the couple ago. specifically, debt second as find second factors, Two about sale, quarter, impacting Cannabis an decided in related them been the That was we benefit $X.X a Therefore, impairment we some of the that years to but quarter, onetime one in take our a impairment And held came a of good

Yewon Kang

from Got in And there's here. it. retail place leading any regarding environment Can year-over-year kind so here? the basis. seeing consumer And within It's segment liquor comment the a question is the that just the the of initiatives on guys in softness you softening that environment you're of revenues that have recorded the consumer spending softer the Obviously, on you this revenues on address to of second in trends some the retail any segment? to segment.

Alberto Paredero-Quiros

Absolutely.

is that manufacturers this having are even So businesses, or not in happening from the other specifically, some different a a bit It's most seeing Canada like be In really declining But markets. little global first sources, year data single-digit wine, in you starting input the may the certain something our of Obviously, that as beers answer overall, or more was is America pointing. read probably that this -- segments and phenomenon. there specifically few resilient North this is market months like different there but are we're are slowdown. everything across more declines.

It's market impacting in the highlight well important ourselves that to despite softness, revenue the that we obviously see as is that retailers. as

expand to gross dollars. absolute managing are We profit X% by

to believe us that have is for bottom the and this line believe strategy we long-term in potential in context So still there as we absolute the still deal we growing. that the this macroeconomic growth working type is segment is category. of with deployed And that

there market seeing that they significantly. that an we're was consumption growth in last X, today, significant driven XX% XXXX. had years Immediately, expansion and short-term X dynamic seeing inflation revenue over what have impact consumers. stores the COVID where last that the the over with home post-COVID as you consumer at the Actually, our to few time, by that if well when impact pandemic the in XXXX on income of bigger sentiment increase in we're Obviously, the is analyze in in a years, point a -- disposable certain operating driven we're There is impact information starting is by the the

X%. growing virtually XXXX, they were flat or In about just

correction additional already first than that 'XX we 'XX is XXXX, still levels, a to market seeing maintaining similar with decline the X% this saw flat, taking still the and was trend. X%, correction. levels. then in That of in X%, pre-COVID And the consumption were higher slightly So

is that's the but X% long-term COVID X% dynamics, remains element of we're as we're the on underlying around So that saying long-term We what is still outlook that concerned well an of correction. categories. believe Based growth. there to about not performance

continue increase main we the of to exploring is all believe driver the options traffic. slowdown. We Which

We that attractive our We And that label, categories. double-digit promotional of label back and are consumers softness very very do More portfolio to not activities, of environment. point a for you of multiple label well enough our saying we're driving with estate offering seeing in basis, the in but private leveraging positioned and in real our period broad breadth growth before, compete at getting uniquely I prices at with have come the across revenue attractive despite heard quality our on as concerned why, not type a opinion we're as it's long affordable in market time. that to That's run. we're private this said Obviously, to products traffic. this continue really tactics private resonates

Operator

Frederico Our Gomes ATB from next with question comes Capital Markets.

Frederico Yokota Gomes

First question allocation. is on capital

Just this principle as second curious mentioned, you plans, the that million, capital substantial. half to $XXX year, of the you're given expecting about repayments talk allocation your quite just in

U.S. of in color there? terms growth or money in investments plans in credit investments the Canada. any just with -- any Maybe additional investing So either that

Zachary George

question. the for you thank Federico,

are eyeing now. meaningfully valuation well. also as We looking number also still are U.S. our in acknowledging Canada discussed, right a undemanding as and And accretive growing we're while investments our of in priorities. is those retail cannabis that working at network the on

return well. opportunities shareholders other And as so are there capital to to

growth capital. maximizing to balance of use objectives accretive really trying with So our the

Frederico Yokota Gomes

questions And here. on operations, the a just Cannabis of then couple

certification to facilities in is have your second, vivo any in I'm line if of you are ongoing? X the additional there's there And process facilities there that you expect that? closing, consolidation that you Can now. just Canada pursue? right you for pursuing, that in in terms with the noticed First, footprint EU with time anticipate GMP that of terms curious of any I

Zachary George

Alberto, to than at a going this Frederico, Regardless, we're pass certain take maybe outcome the you're second Endiva don't mic have the I'll absolutely Yes, with point, but existing to not question looking their right. But make first, and speculate. we so our with real current form. even excess we'll footprint, better we use with monetize be estate, and to do and we returns much capital of that would in that some have have

story so of XXXX leases, for excess into plan path some estate terms in the efficiencies. drop our on capital have. noncore excess through we And or liabilities we will additional That whether to real another office of us monetize be

Alberto Paredero-Quiros

track as of still could we're result multiple Yes, potential that a synergies transaction. come that

through some months then as -- will ]. retaliation still It's anticipate we're we're would [ some in And if updates we we early of end before soon and to it, And this next a process. completed, obviously, too a transaction through more to yes, say, expecting as little certification, with So the this to but are year. your those go come few additional the bit few terms there's gets question, working we months answer of opportunities. seeing the where on actively it in

Operator

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

Zachary George

Thank progress future. to our you, Thank near you. call you updating We on look forward today. in our operator. joining the for all to Thanks

Operator

today's concludes This call. conference you. Thank

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

SNDL (SNDL) 2 Aug 242024 Q2 Earnings call transcript