SNDL - Earnings call transcript Q3 2024

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Operator

Good morning, and welcome to SNDL's Third Quarter 2024 Financial Results Conference Call. This morning, SNDL issued a press release announcing their financial results for the 2024 third quarter ended on September 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. SNDL has also posted a supplemental investor presentation.

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

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

like could to we discussed today's those differ constitute given materially call conference forward-looking I be Before answers may questions remind from in that start, or to that certain investors statements. matters would could Actual anticipated. results

that results affect and factors detailed made the company's SEDAR could reports EDGAR. filings Risk financial other public and in are are on available that

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

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

Zachary George

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

revenue and gross growth of a record-breaking free positive robust XXXX. Cannabis the report segments, our to third margins in flow pleased cash for quarter are We

segments Our an higher in by consecutive for in show gross revenue XXth achieving our within momentum, the segment. operating Liquor Cannabis significant and we for XX.X%, Cannabis of margin our margin operations. Liquor weaker high further continued gains achieved expansion substantial We growth to in the margins improvement and segment, Despite steady quarter. all-time income strong propelled demand retail year-over-year delivered

to cash or track meeting margin deliver operational this our year, positive and for Free flow cash XXXX We quarter, exceeding gross calendar on positive free ongoing gains guidance. efficient management. in was supported by remain working the even capital flow

launched sustainable expect drive long-term to days, This profitability. quarter we and SNDL in several strategic that we initiatives recent towards

realizing annualized overheads, corporate at $XX and restructuring savings million. efficiency a than include These aimed organizational reducing program of more enhancing

leader and of the privatize Nova acquisition emerge category. equity outstanding the as in us to the Indiva, acquisition the Additionally, Canadian the edibles closed minority yesterday infused of we moved just remaining enabling through to interest

potential expanding growth. are Together, and these foundation our for actions our future strengthening

share excited that to as investment Our of number additional and future initiatives periods. are leadership team we fruition is in working to opportunities they on a come

us to and a balance sheet as solid organic thoughtfully Our capital serves investments. allocate future enabling across opportunities, both beacon for inorganic

quarter, have from June third we debt. to million XX XXXX, continue X the In our million cash on outstanding $XXX September to and on increased XX, $XXX balances

the our We repurchase raised program shares since the XXXX, I through turn to have issuance the of active call subsequent Alberto. cash to of the not share over will and became end now quarter.

Alberto Paredero-Quiros

and Thank referred Certain Canadian you, in to stated. Zach. you I otherwise dollars, this today all want to amounts are amounts that remind non-IFRS unless measures. are non-GAAP on discussed call denominated

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

QX our the at Net margin, our Looking XXXX compared the continue growth. profit reached margin reaching $XXX.X gross financial segment, quarter $XX points posted $XX.X free flow. and into of with translates XX.X%. margin. retail in of in driven decline This by our of a year. year-over-year while prior to see XX% was marginal in profit, gross Liquor or improvements record gross third to XXXX another Cannabis cash we improvement combined million, a highlights, million XXX This significant basis Gross segment decline substantial a growth gross quarter million healthy a X% increase represents revenue

an negative the million and equity prior quarter compared in This adjustment accounted in continued $XX.X of Despite value adjusted operating fair revaluation same compared the from a $XX.X was the in $X.X quarter optimization income operating year. a margin mainly unfavorable improvements prior year. our the expenses, the significant to was to decrease of by million slight million, investees driven

million, operating income intangible to $XX It negative to deliver of the the to to calendar the million. $X.X third year-to-date was $X.X adjusted with our flow we flow which on or to created million in impairments, restructuring adjustment in the quarter free pace few flow We're year, a prior volatility were operating of is quarter phasing to exclude throughout for cash minutes. important million. in limited the same the cash adjust by year as were If for the restructuring cash year, that in line by have note income quarter value bringing of we $X.X and third positive at quarter a only Free in charge. of quarterly flow buildup fair compared in positive improvement guidance. cash prior XXXX we been the ahead accounted management driven to was Free will period lower the inventory of same in than equity retail year, discuss different the the would a investees, free charges

observe When financial market softness relatively in a clearly XXXX our is XXXX patterns. performance few as is segment strong quarterly growth by historical in being revenue examining larger compared in we flat the evolution, segment. offset Cannabis to Liquor Net the the

gross We profitability of adjusted income. profit also and see operating clear in a improvement, both trend

where cash compared same upward is flow, a years. there free trend The previous to noticeable to applies

capital observed effect, to a seasonality muted we working approach Additionally, to management. disciplined our more thanks

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

of the shows In a despite shortfall. decline terms million $X.X profit, gross larger revenue Retail of Liquor small

driving an of the our or adjusted profitability contributes an segment. by the growth in all aggregate $XX.X operations $XX most see operating million, growth up in by Investment adjustment while with adds the in gross step-up When of fair impressive of XX% value is operating income, the $X.X our can segments, to at we looking significant improvement. profit. driven million Cannabis The of Cannabis the segment to improvement million Retail clearly offset volatility

Corporate by savings. segment the of shows expenses, small unfavorable a phasing variance driven productivity different partly onetime by restructuring $X.X of inflation million, Our and offset

in is to at the this a inventory positive million same XXXX, is driven the the of of although it $X.X clearly flow more reduction next see reduction different quarter year, phasing the previous cash between is buildup Free the quarters. on page. quarter by compared this in a can third We

net As first the driven XXXX, free million third our we the fair primarily negative of by of value income, $XX.X Investment adjustment noticed the drivers flow quarter examine cash we in in in the segment.

Ascend to quarters A for third offset P&L, quarter this a was saw benefit Since in item this previous is it by the higher quarter which majority net of the add-backs, interest the Investment we $XX.X collection of segment. million of related asset accrued a SunStream. X reason. This the compared to and P&L is the from our are in repayment previously loans noncash Jushi in interest noncash third value was part recorded the the in of of of as our

was free in interest on excluded we The was the flow. cash principal positive calculation. a cash repayment an balance reported X the collected, from free is impact cash associated as flow increase of see loans, these As while with

fluctuations the working The million positive in third small between is $X.X capital with quarters. other net relatively inventory slightly quarter in change of XXXX, and at

on significantly buildup. of less see inventory in Page volatility As have of chart seasonality right we the we in X, bar XXXX, terms can the in

result, years, we first was XXXX, reductions a much reduction previous had the And in as In in buildup the the second in increase the moderate smaller. quarter, the in of the second increase will In first also large second smaller. in a half half the and a be year. the half

X of or in this X.X% $X.X starting Liquor for a year. compared each the quarter at Net Retail. Let's decline now segment with operating to of the million look the million, segments, $XXX.X third XXXX of was prior revenue

what decline smaller than is the quarter-over-quarter and seen While by by is saw softness second the $X what across we still North in impacted revenue growing is America. the quarter million,

We continue this potential this to in of not is growth segment. a for long-term terms concern believe

reaching to points headwinds, quarter, improvement year. macro these in to the basis last expand we gross third margin, an compared of XX.X% XXX Despite continue

million efficiencies the this expansion operating same of quarter management margin operating this $X.X the of result of delivered XX.X% to As income and of or XXXX. a segment's significant growth in expenses, compared

Cannabis year XX.X% growth due pricing acquired XXXX of to driven of to Love X.X%, in the $XX.X store Dutch new QX to last Retail. strategic mainly This gross and stores QX growth same from of saw store earlier in million, increase openings compared X.X% year. represented the a several was the at compared basis of of revenue revenue XXXX. traffic. incremental Moving a period into our net points of increasing aimed decisions XXX by The We margin reduction same-store sales

improvement. prior or million XX.X% Adjusted by operating income increased the profit compared year, the driven by gross to $X

In once growth Operations growth of profitability. $XX Cannabis year-over-year, showing terms both of in our million. revenue Finally, reaching segment largest net the third is the this XXXX, again of XX% quarter improvement, segment delivered and

All is board and of distribution. provincial increased this driven and growth BXB by organic

margin to significant in Adjusted year year. a same By improvement $X.X last last translated $X.X million This quarters. step-up close of income improvements profit. operating million the of period negative gross compared segment marking million, to was new to through productivity record XX.X%, an reached several a accelerating and $XX is initiatives, gross to compared the previous

more important marking free pace and call is driving a strong In would profitability Zach few summary, to in quarter. Cannabis growth, We're in of an contributing full generation. and realize step the to positive to business pass potential. our I now our year, flow back cash for bar for to raise like full the and on we're experiencing the guidance deliver improvements our the significant flow share highlights operational cash to

Zachary George

you, Thank Alberto.

are the would growth, growth, quality highlight Starting an stabilization people profitability point increase basis revenue and Beyond with Cannabis store priorities: our XXXX Columbia. and Key impressive performance, drivers segments fundamental in our have British into gain and QX success. core to X.X% XX of retail. to include net I Canadian like recent execution, led with from as expansion openings in our our also year-over-year a each financial combined long-term share

of and distribution Operations quality year-to-date. XXX Cannabis with this XX%, dynamic Our innovation XX by added segment quarter points showed growth driven and

M&A, retail, margin our profitability. year's acquisitions, fully for demand segment Nova, our we quality growing privatization benefit making us to from affordability to Liquor Shifting private Indiva, allowing Through retail shareholders driving contraction, recent accretion. and in are offerings X the market and strengthened SNDL consumer to of meet In very with leader this despite while label growth. portfolio Canadian edibles a

the momentum, and We leading strong in to record continued are margin gross pleased of flow positive quarter. to million see cash free the $X

Retail cash not $XX totaled improvements noncash million improvements and and adjustment free positive flow was Liquor segments impacted value quarter, QX, largely from $X our efficiencies. portfolio. cultivation by second manufacturing in interest Cannabis the income fair by million Operations Productivity segment investment licensing the this reached of from procurement, and increase quarter. and our Our enabled efficiency through X% in Data our a Cannabis

$X than actions million efficiency in well all by more growth We as and July. in driven also inflation offsetting investments segments savings, achieved restructuring gains as overhead across initiated

program page, target. this can in $X see to summarizing you restructuring quarter, delivered on or annualized As in XX% progress, of more planned program the million equivalent than the $XX an our run the following savings about rate of million

Finally, review as committed quarter, succession to people top a plans. development a talent identify our strategic and priority. as we roles key the we launched as strategic well In remain to second

rolled engagement celebrating initiatives, program also participate team contributions the out sessions XX being in recognition members awards possibility organization, our presented our amazing members. around our several of over mental to deploying across all the from community with team employee an and well-being continued physical We and offering

individual continue My conviction company Last and a but least, aligns team development and reward our that that structure not setting each are the philosophy of compensation at new highs. confidence with records performance. our quarter in both all-time with total we is

I'd to unlock Q&A. potential. I Our analyst you. have their to team the our entire will like for thank drive for now expertise for continued contributions the and dedicated their call operator to the leaders and shareholders SNDL's back trust. Thank our pass significant

Operator

Markets. Capital question the Instructions] line first of from [Operator The Gomes comes Frederico ATB from

Frederico Yokota Gomes

fully talk on And I stake? as remaining to question owning of decided about, to do Nova that stake? Could mean, see in I acquire acquisition. Nova you advantages opposed the just what why First -- you you a owning sort guess, majority strategically,

Zachary George

question. Frederico, much the for thank you very

competitive is So margins. with excess as and you very this reasonably a know, low taxation space

full that benefit of acquisition going shareholders cash the So flow of Nova that the can SNDL is stake retail that ensure the business. in potential earnings get to minority of and

Frederico Yokota Gomes

your that to Cannabis margin continue the expanding? your you expectations in a On so, terms going improvement behind And expect is you quite little where Can margins come see improvement? from? if operations, talk that in significant forward, going there. of to drivers And bit key a to margin about do

Alberto Paredero-Quiros

is this Yes. Fred, Alberto.

So management end-to-end improvements has the the year. the program in of yes, driven productivity team of last all actually, an holistic the of segment since -- place already most are by or put end that the of

as in gross segment fourth of couple remember, of Since facilities we margin the driving and of we and quarter to exit in you the our in quarters. first then, been profitability in manufacturing in the a bump or well. close our have facilities. in created labor a seeing that Olds the the As automation decided XXXX, cultivation assets already the We're efficiencies ramp-up

be anticipating XX% already previous by were over of the we as So the year. expecting were we to end this in quarters,

we in additional long happening the seen business that capacity additional margin have up. And push and -- So we're that the including quarter. the efficiency the initiatives, improvements and the that that second growth has happy already third utilization will of more gross automation to a in continue list to see from further

Zachary George

several been ago, Frederico, our that power Yes. exposure Olds well really with you've was its story earlier in to days time, years competitiveness. jurisdiction and challenged quite aware a you're some for that the sitting following

leaned as to eliminate would the so impair more have we procurement exposure And high-cost really which manufacturing business, COGS. we've capabilities, biomass, broadened able been and out to our built into

number a President that leading showing managing the of today's mix, that's in Tyler so And a SKU are through impactful up including has the meaningful Cannabis, initiatives was that step being in been first year. been And creep, for Robson, very automation. last our environment, of numbers

we're number And being of and a against actually action in team there's that are economic very the And in position where so efficiencies the still the we're drivers that they outcomes confident play. a can understand in seeking. here

absolutely. take we a So handle, answer expansion, can that the room do they think when margins gross for about where we is we X to zone think a have

a So lot come more here. to

Frederico Yokota Gomes

of recently. just then you and options the to In And to Canada, at, that growth other guess, also in me. investments know one but the your And are different U.S. regards how you the geographies of this, more some or bit obviously question allocation, a for Perfect. in I second looking regards internationally? capital buyback, you I mentioned shares part repurchased

in continue that it it tap you you can bought intend valuation comment something terms here, on Is the of those So at $X.XX. you that do repurchases? to to buyback? And

you how over your right So do valuation view at now $X.XX?

Zachary George

few a there's So questions in there.

to we quarter, Just what starting a with similar be with capital very consistent allocation. last about Frederico. It's spoke going answer

that advantage repurchase are you part levels think we absolutely of valuation. multiyear core at of So when two assets be continued a plan. our the we And about investment to investment Both in reflect in to in potential in real pillars -- of think and going key of those Canadian in retail also U.S. want growth take priorities strategic repurchasing shares, are terms capital allocation discounted the shares of

which blackout scale in something you reviewed were execute transactions a through be this is will part and which period. to of And were to plan, able The terms nondiscretionary purchase. regularly of trading a we levels our by referenced Board that at that

we in a to So shares ongoing be expect acquire on to position basis. an

will we there's just security. to a think somehow reflecting holders ultimately plan really a cash is and net long-term really for into And that's free a share of It's we're up never something out that used benefit I prop income. flow strongly the there best positive repurchase as misconception do.

Operator

Yewon comes from the from Kang question Genuity. of next Canaccord Our line

Yewon Kang

the has a Indiva in SNDL my including regarding that the understanding question obtained completed edibles-focused my now is London. first company is facility in facility, X Kelowna. facility So LYF And that transaction, Through recently acquisition. the

from ask if the channel? you're a you to in the wanted been but upside since the you closed, a I future. Indiva seeing integrating on plans give any your weeks Just consolidate us know And distribution could guys onto brands about have to these guys few color only facilities it's acquisition

Zachary George

planning. we're few And a product talk of team let a question. actually great about about to yesterday, Indiva addition well And little inside of mix weeks. business. and bit closed Alberto the so It's broader The our the a excited I'll very acquisition our broader

an edibles impact And performance given in we the there. X see that You margin available worth in from see of margin upstream category, profile that's will QX almost being acquisition our months' the to this manufacturing portfolio. accretive

capital more we estate number So for a we're would and of into prudent able available further real on broadly. on I balances There going estate result it's to thoughtful Indiva, opportunities. more with provide be question bolster for in the noncore the something to enable be and longer-term recycle months. very real opportunities integration monetization, coming excited and working that consolidation accretive have plan facility that being which details in a cash will to us are should on We're we'll about. answer

Alberto Paredero-Quiros

Yes.

ideas Just decisions. to do and in make and to are the revenue, We'll of and of operating have opportunities We joining both different add from sure where teams, existing certainly, synergies. we several are those do family, the the being -- the next of complete we our SNDL be choices and collaborating that share able team now that see we have chain exploring Indiva opportunities a synergy the the weeks. already make analysis long to expenses. are the a supply we they across the list right lot as But analyzed right our

Yewon Kang

dispensaries. question retail on for the environment a just second Cannabis And

So of they're illicit a in out the all pressures popping have province. the to couple seeing the Ontario, relation in stores that specifically called of your some around peers up

on result in coming of in again as and the thoughts pressures similar seeing market that's your been your a have going provincial regulators these you what this illicit to if up terms regulate ask are illegal stores? forward of retail to popping wanted Just stores

Zachary George

do It's Canadian constant. -- great has most difficult different wouldn't been of of some stamp the forms some willingness seen It's market. been of impact there incidents know illicit and illicit terms to in that very Canadian enforcement the What question. there's degree landscape are market new provincial also I is the government's of our in that They've provinces. in and a the The headwinds. is there we a encouraging emergence question. we've out within happening, in say that pockets

support in that. change on small rational us you're material one's come We the to from help as on illicit see Even something here. XXXX. save coming still would to impact need through as that believe changing a broader regulatory And have we going reform additional milligrams to XX Again, edibles to no trade. limits market XXX

So is the competitive and we're with a day, that the to do what able end of at that very selection convenience are delighting winning offer is consumer we know value the and consumers.

market. And going competitors being on we're to so legal in focus continue to the strong

Operator

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

Zachary George

thank and months. updating great the to call. operator, to look forward a the Have day. coming everyone for you, you you We for us Thank joining in

Operator

conference today's call. concludes This

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

SNDL (SNDL) 5 Nov 242024 Q3 Earnings call transcript