TerrAscend Reports 2020 Financial Results and Raises Full Year 2021 Guidance

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  • Net Sales of $65 million compared to $51 million in Q3 2020, an increase of 28%.
  • Adjusted Gross Margin2 increased to 60% compared to 59% in Q3 2020.
  • Adjusted EBITDA1 increased to $26 million compared to $18 million in Q3 2020.
  • Adjusted EBITDAMargin increased to 40% compared to 35% in Q3 2020.
  • Cash Flow From Operations of $24 million compared to $0 in Q3 2020.

Full Year 2020 Financial Highlights
(Unless otherwise stated, results are in Canadian dollars)

  • Net Sales increased 134% to $198 million compared to $85 million in 2019.
  • Adjusted Gross Margin2 increased to 56% from 4% in 2019.
  • Adjusted EBITDA1 of $60 million compared to a loss of $27 million in 2019.
  • Adjusted EBITDAMargin of 30% compared to negative 31% in 2019.
  • Cash Flow From Operations of $33 million compared to a loss of $48 million in 2019.

Management Commentary

“In Q4, we drove strong revenue growth, margin expansion and cash generation by focusing on operational excellence, disciplined cost control and effective allocation of capital,” said Jason Wild, Executive Chairman of TerrAscend. “I’m pleased to see how our team has executed in the quarter.”

Mr. Wild added, “Looking at our growth plans for 2021, we are well positioned to continue our momentum.  The business is firing on all cylinders and we are only now just beginning to realize the benefits of our recently completed investments.  Sales from facility expansions in PennsylvaniaNew Jersey, and California are just starting to come to market, our acquisition in Maryland is expected to close imminently, and two additional retail stores are set to open in New Jersey.”

Fourth Quarter 2020 Operational Highlights

Subsequent Events

 Financial Summary of Q4 2020 and Comparative Periods

(In millions of Canadian Dollars)

Q4 2020

Q3 2020

Q4 2019

FY 2020

FY 2019

Net Sales

65.3

51.0

25.9

198.3

84.9

QoQ increase

28%

8%

-3%

NMF

NMF

YoY increase

152%

90%

414%

134%

1143%

Gross profit before gain on fair value of biological
assets

36.2

30.1

(4.2)

108.2

3.6

Adjusted Gross profit1,2

39.2

30.1

(4.2)

111.3

3.6

% of Net Sales

60%

59%

-16%

56%

4%

General & Administrative Expense

15.1

13.7

18.5

59.1

50.1

% of Net Sales

23%

27%

71%

30%

59%

Adjusted EBITDA1

25.9

17.8

(5.7)

60.1

(26.6)

Adjusted EBITDA % of Net Sales

40%

35%

-22%

30%

-31%

Net income / (loss)

(109.3)

(17.6)

(171.8)

(154.3)

(219.0)

Adjusted Net Income1,3

19.9

12.7

NR

16.9

NR

Cash Flow from Operations

24.3

(0.4)

(3.6)

33.0

(47.9)

1.

Adjusted Gross Profit, Adjusted EBITDA, and Adjusted Net Income are Non-IFRS measures. Please see discussion and reconciliation of Non-IFRS measures below. 

2.

Adjusted Gross profit and margin exclude $3 million of one-time non-cash inventory impairment in our Canadian operations.

3.

Q4 and FY2020 Adjusted net income is equal to Net income / (loss), excluding two non-cash and non-recurring items which include the impact of net increase in fair value of warrant and derivative liability of $124 million and the revaluation of contingent consideration of $5 million, predominantly attributable to the Ilera acquisition. Q3 2020 Adjusted Net Income is equal to Net income / (loss), excluding two non-cash and non-recurring items which include the impact of net increase in fair value of warrant and derivative liability of $22 million and the revaluation of contingent consideration of $8 million, predominantly attributable to the Ilera acquisition. Adjusted Net Income was Not Reported (NR) in Q4 and FY 2019.

4.

Beginning in Q1 2021 the Company anticipates reporting financial results in US dollars. Conversion of previous guidance in Canadian dollars uses November 19th, 2020 CAD/USD FX rate of 1.3082 (prevailing rate at the time guidance was introduced) and corresponds to previous guidance of C$360-380 million in Net Sales and C$140-160 million of Adjusted EBITDA.

Net Sales increased 152% to $65 million in the fourth quarter of 2020, as compared to $26 million in the fourth quarter of 2019. Net Sales increased 28% sequentially. The Company continued to expand organically through an increase in cultivation capacity in Pennsylvania and California, the first sales into the New Jersey market, the continued growth and ramp-up at its three retail stores in Pennsylvania as well as two new store locations in California.

Gross margin, before gain on fair value of biological assets, was 55% in the fourth quarter of 2020. Adjusted gross margin, excluding inventory impairment in Canada, a one-time non-cash item, was 60% in the fourth quarter of 2020 compared to 59% in the third quarter of 2020. The sequential improvement in adjusted gross margin is the result of higher mix as well as improved yields and lower cost per pound from the Pennsylvania operations.

G&A expense was $15 million, representing 23% of Net Sales in the fourth quarter of 2020, a reduction from 27% of Net Sales in the third quarter of 2020. This strong leverage is a result of tight control of costs combined with continued robust revenue growth.

Adjusted EBITDA1 was $26 million in the fourth quarter of 2020, compared to $18 million in the third quarter of 2020. Adjusted EBITDA margins expanded sequentially to 40% in the fourth quarter of 2020 from 35% in the third quarter of 2020 driven by improvements in both gross margin and G&A leverage.

Net loss for the fourth quarter of 2020 was $109 million, largely impacted by a net increase in fair value of warrant and derivative liability of $124 million and a revaluation of contingent consideration of $5 million.

Adjusted net income2 for the fourth quarter of 2020 was $20 million, a positive result for the second time in company history following the $13 million result in the third quarter of 2020.

Cash flow from operations was a positive $24 million in the fourth quarter of 2020 driven by continued ramp in U.S. operations partially offset by income taxes.  Resulting cash and cash equivalents were CAD $75 million as of December 31, 2020, compared to CAD $12 million as of December 31, 2019, and CAD $45 million as of September 30, 2020.  Also during the quarter, the Company closed on a US $120 million term loan secured by the Ilera Healthcare division and used part of the net proceeds to pay US $106 million towards the final earnout payment for the acquisition of Ilera.  The remaining earnout payment of US $30 million was deferred to June 30, 2021 per a separate agreement with the sellers.  Subsequent to quarter end, the Company completed an equity offering raising gross proceeds of CAD $224 million, further strengthening an already strong balance sheet.

As of March 23, 2021, total basic shares outstanding on an as converted basis were approximately 232 million. Fully diluted shares outstanding were 313 million, including approximately 178 million common shares, 15 million common share equivalent preferred shares, 39 million exchangeable non-voting shares, and 81 million warrants and options. The warrants and options had a weighted average strike price of $4.84.

2021 Outlook

TerrAscend is raising full year 2021 guidance to exceed the high end of previously communicated ranges.  Additionally, the Company is converting guidance into US dollars due to the anticipated change to USD reporting currency from CAD in the first quarter 2021. The Company expects full year 2021 Net Sales to exceed USD $290 million and Adjusted EBITDA to exceed USD $122 million.4

TerrAscend’s 2021 outlook is driven by the Company’s emphasis on organic growth through expansion in high-quality, limited license markets while continuing to maintain tight control on costs.

In Pennsylvania, sales and profits are expected to benefit from the annualization of multiple increases in cultivation capacity completed in 2020.

In New Jersey, sales from the Company’s 40,000 square foot greenhouse and 80,000 square foot indoor cultivation facilities are expected to ramp throughout 2021. TerrAscend’s Phillipsburg, New Jersey dispensary will achieve its first full quarter of sales in the first quarter of 2021 and the Company plans to open two additional dispensaries in the state in the second quarter and third quarter of 2021.

In California, the Company completed an expansion of its State Flower cultivation facility in late 2020 which is expected to increase annual production capacity of super-premium craft flower by 500%. The Company’s California retail footprint continued to expand with the opening of two new Apothecarium locations in Berkeley and Capitola in the second half of 2020. Both locations continue to scale, and the overall business continues to recover from the easing of COVID restrictions in the state.

In Canada, with a newly streamlined and targeted product portfolio and an optimized cost structure, TerrAscend expects to see positive contributions to sales and profit growth in 2021.

Lastly, the Company anticipates becoming a U.S. filer with the United States Securities and Exchange Commission by the end of 2021. Furthermore, the Company is preparing to meet the requirements necessary for its securities to be traded on a national U.S. exchange should such an event become permissible by U.S. law.

Conference Call

TerrAscend will host a conference call today, March 23, 2021, to discuss these results. Jason Wild, Executive Chairman, Keith Stauffer, Chief Financial Officer and Greg Rochlin, Chief Executive Officer of Northeast operations will host the call starting at 8:30 a.m. Eastern time. A question and answer session will follow management’s presentation.

CONFERENCE CALL DETAILS

DATE:

Tuesday, March 23rd, 2021

TIME:

8:30 a.m. Eastern Time

WEBCAST:

Click to Access

DIAL-IN NUMBER:

1-888-664-6392

CONFERENCE ID:

53793717

REPLAY:

(416) 764-8677 or (888) 390-0541
Available until 12:00 midnight Eastern Time Tuesday, April 6th, 2021

Replay Code: 793717

Financial results and analyses are available on the Company’s website (www.terrascend.com) and SEDAR (www.sedar.com).

The Canadian Securities Exchange (“CSE”) has neither approved nor disapproved the contents of this news release. Neither the CSE nor its Market Regulator (as that term is defined in the policies of the CSE) accepts responsibility for the adequacy or accuracy of this release.

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