SNDL Inc. Financial Results Q3 2024

Date: November 10, 2024

SNDL Inc. (ticker: SNDL) announced its financial results for the third quarter of 2024, showcasing ongoing growth in its Cannabis operations and record gross margins, despite challenges in the Liquor segment. The overall net revenue experienced a slight decline to $236.9 million year-over-year, mainly impacted by Liquor's performance. However, the Cannabis segment saw an 8% revenue increase and a record gross margin of 26.6%. The company reported a positive free cash flow of $9.2 million and improved cash balance with no outstanding debt.

Key Takeaways

• Sustained Growth: Cannabis segment achieved an 11th consecutive quarter of revenue gains, marking a 19% year-over-year growth to reach $25 million.
• Gross Margin Performance: Cannabis gross margin improved further to 21.2%, contributing to a 30% increase in gross profit totaling $63 million.
• Overall Operating Income: Despite the decline in net revenue, operating income and cash balances improved continuously.
• Acquisitions: SNDL completed acquisitions of Indiva and Nova, enhancing its position in the Canadian edibles and retail market.
• Future Outlook: Projected positive free cash flow for 2024, driven by operational improvements and restructuring initiatives.

Company Outlook

• Strategic Growth Plans: Focus on expanding in the Canadian retail market and exploring US investments.
• Capital Allocation: Ongoing evaluation of share repurchasing as part of capital strategy.
• Restructuring Program: Initiatives aim to achieve annual savings exceeding $20 million.
• Employee Engagement: Commitment to enhancing employee involvement and operational efficiencies.

Bearish Highlights

• Liquidity Segment Weakness: Liquor segment decline contributed to slight overall revenue drop year over year.
• Market Challenges: The company experiences some challenges in the liquor retail market.

Bullish Highlights

• Cannabis Segment Strength: Cannabis revenue growth and margins highlight strong performance and market share expansion.
• Acquisitions Strengthening Market Position: Recent acquisitions expected to reinforce SNDL's market share in edibles and retail.
• Operational Improvements: Enhanced productivity and savings bolstered the financial health of the company.

Misses

• Liquor Segment Decline: While cannabis revenue grew, the overall liquid segment decline posed challenges for diversification.

Q&A Highlights

• Acquisition Impact: Indiva’s acquisition expected to contribute positively to Q4 results, enhancing margins.
• Real Estate Consolidation: Plans to monetize noncore properties for future investments.
• Illicit Market Concerns: Challenges faced from the illicit cannabis market in Canada, emphasizing need for regulatory changes.

SNDL’s Q3 earnings reflected its adaptability amid market dynamics. A focus on growth and restructuring initiatives set the stage for a promising future in the evolving cannabis sector. Investors are advised to anticipate continued success and developments.

InvestingPro Insights

Recent financial results align with key insights, indicating SNDL’s robust operation in the cannabis market.

Financial Stability

• Positive cash position with no debt, and liquidity exceeding short-term obligations.
• Market Capitalization: Stands at $539.63 million with a low Price to Book ratio, suggesting potential undervaluation.
• Analyst Predictions: Despite no profitability over the last twelve months, expectations for profitability within this year remain positive.

Full Transcript – SNDL Inc (SNDL) Q3 2024

Operator: Good morning and welcome to SNDL's Q3 2024 Financial Results Conference Call.

Zachary George, CEO: We are pleased to share our positive results, focusing on growth in Cannabis operations, our goal for positive cash flow, and recent strategic actions.

Alberto Paredero, CFO: Key financial highlights include an increase in gross profits and margins despite some declines in net revenue driven by the Liquor segment.

Zachary George: Our focus remains on growth, profitability, and employee well-being. Thank you for your continued support.

Operator: This concludes today's call. Thank you for participating.