Generated positive operational cash flow in Q4 FY2022 and Q1 FY2023, achieving two consecutive quarters of positive operational cash flow^1,2.

Adjusted gross profit¹ of $17.62 million (46% adjusted gross margin¹) in FY 2022, compared with $14.47 million adjusted gross profit (38% adjusted gross margin) in FY 2021, representing a 22% increase year-over-year.

Cash and cash equivalents of $11.9 million at December 31, 2022, and a clean balance sheet with well-structured debt requiring non-material payments.

In September 2022, obtained a recreational retail license in Vermont and opened the state’s first recreational cannabis store in Burlington, Vermont. Subsequently, SLANG’s sales in the state exceeded $5.38 million in Q4, significantly outpacing forecasted growth for the year, driving full year Vermont sales to $10.96 million.

THC free wholesale distribution introduced new higher margin sales in a key growth channel.

Toronto, Ontario–(Newsfile Corp. – April 27, 2023) – SLANG Worldwide Inc. (CNSX: SLNG) (OTCQB: SLGWF) (“SLANG” or the “Company“), a leading global cannabis consumer packaged goods (CPG) company with a diversified portfolio of popular brands, today released financial results for the three and twelve months ended December 31, 2022. All figures in this press release are stated in Canadian dollars unless otherwise noted.

Key Financial Highlights:

• Generated positive operational cash flow in Q4 FY2022 and again subsequent to the end of the year in Q1 FY2023, achieving two consecutive quarters of positive operational cash flow^1,2.
• Revenue from continuing operations for FY 2022 was $38.19 million, compared with $37.78 million in FY 2021, representing a 1% increase year-over-year. The primary driver of the increase was the recognition of a full year of revenue from High Fidelity, Inc. (“HiFi”) in Vermont, offset by a reduction in revenue resulting from shifting Oregon from a Core Market to an Emerging Market which was completed in Q4 2021, and a reduction in Emerging Market sales.
• Adjusted gross profit¹ of $17.62 million (46% adjusted gross margin¹) in FY 2022, compared with $14.47 million adjusted gross profit (38% adjusted gross margin) in FY 2021, representing a 22% increase year-over-year.
• Adjusted EBITDA¹ of ($3.65 million) in FY 2022, compared with ($5.63 million) in FY 2021. The improvement in Adjusted EBITDA is primarily attributable to a $3.16 million increase in Adjusted gross profit, offset by an increase in operating expenditures related to HiFi, which is not presented in the comparative period before August 11, 2021.
• EBITDA¹ of ($8.71 million) in FY 2022, compared with ($17.49 million) in FY 2021. The improvement in EBITDA is primarily attributable to a decrease in operating expenditures (excluding depreciation and amortization) of $7.41 million and an increase in gross profit of $1.32 million.
• $11.9 million in cash and restricted cash on December 31, 2022, compared to $20.83 million on December 31, 2021.

John Moynan, Chief Executive Officer of SLANG, commented, “2022 was a transformational year for SLANG, and the Company is demonstrating exceptional financial performance relative to its peer group. In Q4 FY2022, we achieved positive operational cash flow for the first time in the Company’s history, which we also generated subsequent to year end in Q1 FY2023, meaning we have now produced two consecutive quarters of positive operational cashflow. We continue to consolidate our supply chain and streamline our operations to drive financial results across our Core and Emerging markets. In the month of October 2022, we achieved cash flow positivity for the first time in the Company’s history. We demonstrated year-over-year adjusted gross margin growth for each quarter of 2022, and we believe this trend will continue as we drive revenue growth in our most profitable channels.”

Mr. Moynan added, “We continued to demonstrate success in our Core markets of Vermont and Colorado, with several key milestones achieved over the year. Our products maintain leading status in the country’s most competitive cannabis markets, with a portfolio of best-in-class brands – in particular, O.pen, which remains today’s top selling vape cartridge product in Colorado, a position it has maintained for the last 8 years³. O.pen sales remain strong, and this year the brand has outpaced the competition by a wide margin despite challenging market conditions. In 2023, SLANG is focused on expanding our market share through product sales channels, such as THC-free, to diversify our profitable revenue streams. We will further build upon our successful partnership model to enter new emerging markets in a capital-efficient manner, strategically positioning our brands at the forefront of the industry and SLANG for continued growth.”

Operational Highlights and Growth Drivers:

• On September 28, 2022, Vermont regulators issued an integrated marijuana license to the Company allowing the Company to open its CERES Collaborative dispensary on October 1, 2022, Vermont’s first recreational cannabis store.
• O.pen has been ranked the #1 Vape Brand in Colorado each year since 2015, and SLANG launched the 10 Years of O.pen program in October, with special incentives driving record sales for O.pen in Colorado with a 229% increase in sales from August to September. This success prompted a new strategic approach in 2023, focused on structured, brand-driven promotions during key sales periods throughout the year. In the first two O.pen promotions of Q1 2023, the Company has seen its top 5 highest volume accounts deliver a 30-66% year-over-year sales lift.
• New vertically integrated operations in Vermont generated $11 million in revenue in FY 2022, significantly outpacing the Company’s forecasts for the State.
• Successfully launched Alchemy Naturals Edibles in Colorado in July and e-commerce in September with an 8% growth in dollar sales from July to September.
• Expanded into new markets, launching operations in Michigan and Maryland in May 2022, and in West Virginia subsequent to year end in April 2023 through strategic partnerships with leading, high-quality premium cannabis brands and operators in those states.

Financial Year 2022 Corporate Updates

• In October, Mr. John Moynan was promoted to Chief Executive Officer of the Company and Ms. Ruth Chun, an independent director of the Company, was appointed Chair of the Board.
• Announced newly formulated M&A and Investment Committee chaired by independent board member Kevin Albert.

Fourth Quarter 2022 Financial Highlights

• Revenue from continuing operations for the three months ended December 31, 2022, was $11.78 million, compared with $8.84 million in the three months ended December 31, 2021, representing a 33% increase year-over-year. The primary drivers of the increase were an increase in our Core Market sales of $0.46 million in Colorado and $3.37 million in Vermont, offset by a decrease in our Emerging Market sales of $0.86 million.
• Gross profit of $4.70 million (40% gross margin) in Q4 2022, compared with $4.10 million (46% gross margin) in Q4 2021, representing a 6% decrease year-over-year. Gross profit before fair value of biological assets was $5.70 million (48% gross margin) in Q4 2022, compared with $3.34 million (38% gross margin) in Q4 2021, representing a 71% increase year-over-year.
• Adjusted EBITDA of ($.056 million) in Q4 2022, compared with ($2.90 million) in Q4 2021. The improvement in Adjusted EBITDA is primarily attributable to a $2.36 million increase in gross profit before fair value adjustments on biological assets, and decreases in consulting and subcontractor operating expenses.
• EBITDA of ($1.82 million) in Q4 2022, compared with ($4.87 million) in Q4 2021. The improvement in EBITDA is primarily attributable to an increase in gross profit of $0.60 million and decreases in operating expenditures consisting mainly of consulting and subcontractors, share based payments, and expected credit losses.

Full Year 2022 Financial Review

The consolidated financial statements were prepared in accordance with IFRS. The following is a selected presentation of the Income Statement for the three and twelve months ended December 31, 2022.

See the Company’s management’s discussion and analysis for the three and twelve months ended December 31, 2022 (the “Q4 2022 MD&A“) for a detailed reconciliation of EBITDA and Adjusted EBITDA to Operating Income / (Loss). SLANG’s financial statements and the Q4 2022 MD&A are available on SEDAR at www.sedar.com, and on the Company’s Investor Relations website at www.slangww.com.

Non-IFRS Measures

EBITDA, Adjusted EBITDA, adjusted gross profit, adjusted gross margin and operational cash flow are non-IFRS financial measures that the Company uses to assess its operating performance. EBITDA is defined as net earnings (loss) before net finance costs, income tax expense (benefit) and depreciation and amortization expense. Management defines Adjusted EBITDA as EBITDA adjusted for other non-cash items such as the impact of unrealized fair values, share based compensation expense, impairments, one-time gains and losses, and one-time revenues and expenses. Management defines adjusted gross profit as gross profit before fair value adjustment of biological assets. Management defines adjusted gross margin as gross margin before fair value adjustment of biological assets. Management defines operational cash flow as cash flow of the business excluding milestone payments made in connection with the Company’s acquisition of HiFi, pursuant to an Agreement and Plan of Merger dated June 25, 2021, as amended. This data is furnished to provide additional information and are non-IFRS measures and do not have any standardized meaning prescribed by IFRS. The Company uses these non-IFRS measures to provide shareholders and others with supplemental measures of its operating performance. The Company also believes that securities analysts, investors and other interested parties, frequently use these non-IFRS measures in the evaluation of companies, many of which present similar metrics when reporting their results. As other companies may calculate these non-IFRS measures differently than the Company, these metrics may not be comparable to similarly titled measures reported by other companies. We caution readers that Adjusted EBITDA should not be substituted for determining net loss as an indicator of operating results, or as a substitute for cash flows from operating and investing activities. During 2022 the Company updated its definition of Adjusted EBITDA to include the impact of fair value amounts included in inventory sold and unrealized gain on changes in fair value of biological assets. The comparative 2021 figures have been updated to conform to this current period presentation.

Conference Call Details

Management plans to host an investor conference call today, April 27, 2023, at 10:00am ET to discuss the results.

Timing: Thursday, April 27^th, 2023 at 10:00 am ET Dial In: 1(888) 440-5983 (US toll-free) or 1(646) 960-0202 (international)
Conference ID: 6291438
Webcast: A live webcast can be accessed via the Company’s website at www.slangww.com or https://events.q4inc.com/attendee/442824694

About SLANG Worldwide

SLANG Worldwide Inc. is the industry leader in branded cannabis consumer packaged goods, with a diversified portfolio of five distinct brands and products distributed across the U.S. Operating in 13 legal cannabis markets nationwide, SLANG specializes in acquiring and developing market-proven regional brands, as well as launching innovative new brands to seize global market opportunities and match evolving consumer tastes. The Company has over a decade of experience operating in the nascent and highly regulated cannabis sector, and its partners enjoy the benefits of that experience, with access to the SLANG playbook for successful operations, sales and marketing. Its strong product pipeline from uniquely positioned and scalable brands like O.pen, Alchemy Naturals, Ceres, Firefly, and partnerships with brands like Greenhouse Seed Company have a proven track record of success with the brands consistently ranking among the top performers in the states where SLANG operates. Learn more at slangww.com.

Forward-Looking Statements

This news release contains statements that constitute “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements, or developments in the industry to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words “expects”, “plans”, “anticipates”, “believes”, “intends”, “estimates”, “projects”, “potential” and similar expressions, or that events or conditions “will”, “would”, “may”, “could” or “should” occur.

Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management of SLANG at this time, are inherently subject to significant business, economic and competitive risks, uncertainties and contingencies that could cause actual results to differ materially from those expressed or implied in such statements. Investors are cautioned not to put undue reliance on forward-looking statements. Applicable risks and uncertainties include, but are not limited to regulatory risks, risks related to the COVID-19 global pandemic, changes in laws, resolutions and guidelines, market risks, concentration risks, operating history, competition, the risks associated with international and foreign operations and the other risks identified under the headings “Risk Factors” in the Q3 2022 MD&A and other disclosure documents available on the Company’s profile on SEDAR at www.sedar.com. SLANG is not under any obligation, and expressly disclaims any intention or obligation, to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.

Financial Outlook

This news release contains a financial outlook within the meaning of applicable Canadian securities laws. The financial outlook has been prepared by management of the Company to provide an outlook for the Company’s operational cash flow for the three months ended March 31, 2023 and may not be appropriate for any other purpose. The financial outlook has been prepared based on a number of assumptions including the assumptions discussed under the heading “Forward-Looking Statements”. The actual results of the Company’s operations for any period will likely vary from the amounts set forth in these projections and such variations may be material. The Company and its management believe that the financial outlook has been prepared on a reasonable basis. However, because this information is highly subjective and subject to numerous risks, including the risks discussed under the heading “Forward-Looking Statements”, it should not be relied on as necessarily indicative of future results.

Third Party Information

This press release includes market and industry data that has been obtained from third party sources, including industry publications. The Company believes that the industry data is accurate and that its estimates and assumptions are reasonable, but there is no assurance as to the accuracy or completeness of this data. Third party sources generally state that the information contained therein has been obtained from sources believed to be reliable, but there is no assurance as to the accuracy or completeness of included information. Although the data is believed to be reliable, the Company has not independently verified any of the data from third party sources referred to in this press release or ascertained the underlying economic assumptions relied upon by such sources.

Company Contact
Mikel Rutherford, CFO
833-752-6499

Media and Investor Inquiries
[email protected]

KCSA Strategic Communications
Phil Carlson
[email protected]

¹ See “Non-IFRS Measures”.
² Preliminary and unaudited financial results are subject to customary financial statement procedures by the Company and its auditors. Actual results could be affected by subsequent events or determinations. While the Company believes there is a reasonable basis for these preliminary financial results, the results involve known and unknown risks and uncertainties that may cause actual results to differ materially. These preliminary fiscal results represent forward-looking information. See “Forward-Looking Statements” and “Financial Outlook”.
³ According to BDSA data.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/163891