SNDL Inc. (US:SNDL), the vertically integrated cannabis company and liquor retailer, delivered record net revenue in its April 24 report fourth-quarter and full-year results on April 24.
Q4 revenue was $240.4 million, 4% higher than in the previous quarter and more than 10x its Q4 2021 sales. For the full year, it generated $712.2 million in revenue, 1,170% higher than in 2021.
Still, on the bottom line, it had a net loss of $372.4 million, 64.2% higher than its $226.8 million loss in 2021. However, its adjusted EBITDA loss for the year was 48% lower than in 2021 at $15.8 million.
SNDL’s transformation remains on track despite its slumping stock. SNDL is down 30.4% year-to-date and 72.9% over the past 12 months.
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CEO Zach George told SNDL stock holders in the company’s 2023 shareholder letter that “We are on the verge of joining a select group of approximately 150 publicly listed Canadian companies that generate more than $1 billion in annual revenue.”
Digging deeper, he noted that the company “started 2022 with first-quarter revenue of $17 million and negative cash flow from operating activities of $26 million and exited the year achieving record net revenue of $240 million and net cash from operations of $29 million in the fourth quarter.”
Clearly, 2022 was a year of immense change for SNDL, both financially and operationally, and strategically. It is no longer merely a small vertically integrated cannabis company but also the largest private operator of liquor stores in the country through its acquisition of Alcanna in March 2022.
As a result of the acquisition, SNDL has four operating segments: Liquor retail (169 stores in Alberta and British Columbia), cannabis retail (197 stores), cannabis cultivation (114 individually controlled small-batch grow rooms), and investments (SunStream Bancorp).
The acquisition of Alcanna stabilized the company’s financials by delivering consistent revenue and profitability. In the fourth quarter, its liquor retail had $159.7 million in revenue with $17.5 million in adjusted EBITDA. In addition, the average store generated annualized revenue of $3.8 million in the final quarter of 2022 from 3.6 million transactions in Q4 2022.
In 2023, SNDL plans to expand its Wine and Beyond brand from its current dozen or so locations. In March, it obtained two licenses to open outlets in Saskatchewan. It expects those locations — one in Regina and one in Saskatoon — to deliver attractive growth.
It also is working with regulators to obtain approval in the future to sell THC-infused beverages through its liquor store network.
As for cannabis retail, it wants to create a well-capitalized Canadian cannabis retail platform. Therefore, it is contributing its 26 Spiritleaf and Superette stores in Ontario and Alberta into a strategic partnership with Nova Cannabis (CA:NOVC), which will see SNDL reduce its ownership position in Nova from 63% to less than 20% through the distribution of Nova shares to SNDL shareholders.
The move allows SNDL investors to own a pure-play cannabis retailer without the compliance issues that come from SNDL holding a majority of Nova’s shares.
Vital Acquisition
In January, SNDL completed its acquisition of The Valens Company for $138 million in stock and the assumption of $60 million in debt. As a result, it increases the company’s overall cannabis market share to 3.8% from 1.0% before the transaction. Together, SNDL, and Valens generate more than $1 billion in annual pro forma revenue.
“Our company is now positioned as an ideal thirdparty partner for contract manufacturing within the cannabis industry. Our unique advantage lies in our ability to not only manufacture high-quality products but also provide distribution solutions to ensure that these products reach consumers effectively,” George stated in his shareholder letter.
The company’s vertical integration strategy was made much stronger with the acquisition of Valens. As a result, the business strategy will continue to gain traction with investors in 2023.
Lastly, the company’s 50% interest in SunStream Bancorp, a joint venture with Calgary-based alternative credit investor SAF Group, exposes the company to U.S. multi-state operators (MSOs) through six SunStream credit portfolio investments valued at $519 million.
With the failure of Silicon Valley Bank, funding cannabis operations in the U.S. will likely become even more difficult as smaller cannabis-friendly banks tighten their lending criteria. However, that provides SunStream with significant opportunities.
SNDL trades at less than half the net asset value of its cash, strategic Canadian investments, and the SunStream and its other credit investments.
Aggressive investors can now buy SNDL stock at its lowest share price in the past year. One more year like 2022 and SNDL may no longer be a penny stock.
This article originally appeared on Fintel
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