SNDL Reports First Quarter 2025 Financial and Operational Results

Published: 2025-05-01 07:01:48 ET SNDL

Published on 05/01/2025 at 07:01

The Company Delivers Record Gross Margin and Positive Cash Flow; Announces Strategic Review of U.S. Platform and Listing Structure

EDMONTON, AB, May 1, 2025 /CNW/ - SNDL Inc. (NASDAQ: SNDL) (CSE: SNDL) ("SNDL" or the "Company") reported its financial and operational results for the first quarter ended March 31, 2025. All financial information in this press release is reported in millions of Canadian dollars unless otherwise indicated.

SNDL has also posted a supplemental investor presentation on its website, found at https://sndl.com.

The Company will hold a conference call and webcast presentation at 10:00 a.m. EDT (8:00 a.m. MDT) on Thursday, May 1, 2025. The conference call details can be found below.

MANAGEMENT HIGHLIGHTS

"In the first quarter of 2025, we saw robust growth in our Cannabis segments and record aggregate Gross Margin. Our improvements in Free Cash Flow generation helped us nearly break even despite seasonal impacts and our unrestricted cash balances increased versus year end." said Zach George, Chief Executive Officer of SNDL.

"During the first quarter of 2025, we advanced several strategic initiatives to drive long-term value creation and strengthen our platform:

Subsequent to the first quarter of 2025, on April 9, 2025, we announced that we had entered into an arrangement agreement to acquire 32 cannabis retail stores from 1CM Inc. ("1CM") for a total cash consideration of $32.2 million. We have also announced on April 22, 2025, the launch of our highly anticipated Rise Rewards loyalty program, designed to help Value Buds customers save more, earn more, and get even more from every visit. SNDL intends to expand the program across its retail banners in the future.

SNDL's Board of Directors has approved an amendment to the Company's share repurchase program (the "Share Repurchase Program"), as described in further detail below

Finally, our Board of Directors has initiated a formal strategic review to evaluate SNDL's exposure to U.S. multi-state licensed cannabis enterprises and its current exchange listing status, as outlined later in this document.

Our track record of operational execution, diversified asset base, and strong balance sheet - including $220.9 million of unrestricted cash as of March 31, 2025 - gives us with the flexibility to pursue both organic and inorganic opportunities with compelling returns. This review supports our long-term goal of establishing SNDL as a global cannabis leader and delivering sustainable shareholder value." concluded Zach George.

TOTAL COMPANY HIGHLIGHTS

Three months ended March 31

($000s)

2025

2024

% Change

IFRS Financial Measures

Net revenue

204,914

197,750

3.6 %

Gross profit

56,641

50,400

12.4 %

Operating loss

(12,053)

(4,377)

-175.4 %

Change in cash and cash equivalents

2,508

(6,087)

141 %

Non-IFRS Financial Measures (1)

Gross margin

27.6 %

25.5 %

2.2pp

Adjusted operating loss

(9,031)

(4,466)

-102 %

Free cash flow

(1,090)

(6,388)

-83 %

(1)

Gross Margin is a supplementary financial measure calculated by dividing Gross Profit by Net Revenue. Adjusted operating income (loss) and Free Cash Flow are specified financial measures that do not have a standardized meanings prescribed by IFRS and therefore may not be comparable to similar measures reported by other companies. See "Non-IFRS Measures" section below for further information.

BUSINESS SEGMENT HIGHLIGHTS

SNDL operates and reports its business through four segments: Liquor Retail, Cannabis Retail, Cannabis Operations, and Investments. Additionally, a consolidated total for Cannabis is presented, encompassing the combined results of the two Cannabis segments, along with the revenue elimination associated with the Cannabis Operations sales to the provincial boards that are expected to be subsequently repurchased by the Company's licensed retail subsidiaries for resale. Corporate and Shared Service expenses are reported as "Corporate".

Three months ended March 31

($000s)

2025

2024

% Change

Net Revenue

Liquor Retail

109,472

116,054

-5.7 %

Cannabis Retail

77,540

71,306

8.7 %

Cannabis Operations

34,319

22,395

53.2 %

Intersegment Eliminations

(16,417)

(12,005)

-36.8 %

Total Cannabis

95,442

81,696

16.8 %

Investments

—

0 %

Total

204,914

197,750

3.6 %

Operating Income

Liquor Retail

1,980

2,180

-9.2 %

Cannabis Retail

5,162

(1,042)

595.4 %

Cannabis Operations

(486)

891

-154.5 %

Total Cannabis

4,676

(151)

>1,000%

Investments

(1,601)

13,079

-112.2 %

Corporate

(17,108)

(19,485)

12.2 %

Total

(12,053)

(4,377)

-175.4 %

Adjusted Operating Income

Liquor Retail

1,980

2,180

-9.2 %

Cannabis Retail

5,162

(1,042)

595.4 %

Cannabis Operations

2,409

1,146

110.2 %

Total Cannabis

7,571

104

>1,000%

Investments

(1,601)

13,079

-112.2 %

Corporate

(16,981)

(19,829)

14.4 %

Total

(9,031)

(4,466)

-102.2 %

Liquor Retail

SNDL is Canada's largest private sector liquor retailer, operating at April 30, 2025 in 165 locations, predominantly in Alberta, under its three retail banners: "Wine and Beyond" (13), "Liquor Depot" (19), and "Ace Liquor" (133).

Three months ended March 31

($000s)

2025

2024

% Change

Net revenue

109,472

116,054

-5.7 %

Gross profit

27,803

28,806

-3.5 %

Gross margin

25.4 %

24.8 %

0.6pp

Operating income

1,980

2,180

-9.2 %

Adjusted operating income

1,980

2,180

-9.2 %

(2)

Same store sales are specified financial measures that do not have standardized meanings prescribed by IFRS Accounting Standards and therefore may not be comparable to similar measures used by other companies. Refer to the "Non-IFRS Financial Measures and Other Measures" section of this MD&A for further information.

Cannabis Retail

SNDL is one of Canada's largest private-sector cannabis retailer, operating at April 30, 2025 in 186 locations under its three retail banners: "Value Buds" (121), and "Spiritleaf" (65, of which 7 are corporate stores and 58 are franchise stores). The Company's Cannabis Retail strategy is based on several pillars, including the quality of its store locations, its range of products, and the unique experiences provided to customers. Using data and insights from a large volume of monthly transactions enables SNDL to leverage technology and analytics to inform and improve its retail strategy.

Three months ended March 31

($000s)

2025

2024

% Change

Net revenue

77,540

71,306

8.7 %

Gross profit

19,627

18,359

6.9 %

Gross margin

25.3 %

25.7 %

-0.4pp

Operating income

5,162

(1,042)

595.4 %

Adjusted operating income

5,162

(1,042)

595.4 %

Cannabis Operations

SNDL has a diverse brand portfolio from value to premium, emphasizing premium inhalable formats and a full suite of 2.0 products. With enhanced procurement capabilities and plans to continue evolving toward a cost-effective cultivation and manufacturing operation, the Cannabis Operations segment is a key enabler of SNDL's vertical integration strategy.

Three months ended March 31

($000s)

2025

2024

% Change

Net revenue

34,319

22,395

53.2 %

Gross profit

9,211

3,235

184.7 %

Gross margin

26.8 %

14.4 %

12.4pp

Operating income

(486)

891

-154.5 %

Adjusted operating income

2,409

1,146

110.2 %

Investments

Equity Position

This press release is intended to be read in conjunction with the Company's condensed consolidated interim financial statements and the notes thereto for the three months ended March 31, 2025, and the accompanying Management's Discussion and Analysis. These documents are available under the Company's profile on SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov/edgar.shtml.

Strategic Review

In anticipation of the upcoming completion of the court-supervised restructurings of Parallel and Skymint, SNDL's Board of Directors has initiated a formal strategic review process to evaluate the Company's exposure to U.S. multi-state licensed cannabis enterprises and its current exchange listing status. The review aims to ensure alignment between SNDL's long-term growth strategy and its public market platform, with the overarching objective of maximizing shareholder value.

In recent months, SNDL has received inbound interest from multiple cannabis operators in both Canada and the United States that have expressed interest in being acquired or pursuing asset-level or corporate transactions. This engagement underscores SNDL's balance sheet and management strength, as well as its emerging reputation as a disciplined, retail-forward cannabis operator with international scale. As the North American cannabis industry continues to rationalize, well-capitalized consolidators like SNDL are uniquely positioned to realize synergies, drive operating leverage, and deliver sustained profitability.

To fully evaluate these opportunities and preserve strategic flexibility, the Board is assessing whether to maintain the Company's current equity market listings, or transition to an alternative structure - similar to leading U.S multi-state operators who operate outside of NYSE and Nasdaq exchange frameworks. Such a move would provide SNDL with the regulatory latitude to actively manage a broader North American cannabis platform, potentially consolidating licensed cannabis businesses across multiple U.S. states.

There is no assurance that any transaction or listing change will result from this strategic review. The Company does not intend to provide additional updates unless or until the Board has approved a specific course of action or determines that further disclosure is appropriate.

CONFERENCE CALL

The Company will hold a conference call and webcast presentation at 10:00 a.m. EDT (8:00 a.m. MDT) on Thursday, May 1, 2025.

WEBCAST ACCESSTo access the live webcast of the call, please visit the following link:

https://edge.media-server.com/mmc/p/4ikuz377

REPLAY

A replay of the webcast will be available at https://sndl.com/financials/quarterly-results/default.aspx

ABOUT SNDL INC.

SNDL Inc. (NASDAQ: SNDL, CSE: SNDL), through its wholly owned subsidiaries, is one of the largest vertically integrated cannabis companies and the largest private-sector liquor and cannabis retailer in Canada, with retail banners that include Ace Liquor, Wine and Beyond, Liquor Depot, Value Buds and Spiritleaf. With products available in licensed cannabis retail locations nationally, SNDL's consumer-facing cannabis brands include Top Leaf, Contraband, Palmetto, Bon Jak, La Plogue, Versus, Value Buds, Grasslands, Vacay, Pearls by Grön, No Future and Bhang Chocolate. SNDL's investment portfolio seeks to deploy strategic capital through direct and indirect investments and partnerships throughout the North American cannabis industry. For more information, please visit www.sndl.com

Forward-Looking Information Cautionary Statement This news release includes statements containing certain "forward-looking information" within the meaning of applicable securities law ("forward-looking statements"), including, but not limited to, statements regarding the Company's operational goals and plans, the anticipated impact of the Company's strategic steps on long-term success and shareholder value, the anticipated impact of the Company's intentions and strategy with respect to the Rise Rewards loyalty program and retail operations, SNDL's plan to expand the program to additional retail banners, the anticipated benefit of the Company's strong balance sheet, the Company's strategy with respect to its operating segments, expectations with respect to the Parallel restructuring process, expectations with respect to the Board's strategic review process, the Company's margin improvement initiatives, the Company's ability to achieve long-term, sustainable profitability, growth and efficiencies, the Company's long-term strategic plan, the benefits of the Company's Investment Segment portfolio, the Company's retail strategy, expectations with respect to the Company's Cannabis Operations segment, , performance of the Company's investments, including through the SunStream joint venture, the timing and completion of the restructurings of with Parallel and Skymint, the timing and closing of the transaction to acquire assets from 1CM, repurchases under the Share Repurchase Program and the anticipated benefits thereof, and any other potential forms of shareholder value creation. Forward-looking statements are frequently characterized by words such as "aim", "anticipate", "assume", "believe", "contemplate", "continue", "could", "due", "estimate", "expect", "goal", "intend", "may", "objective", "plan", "predict", "potential", "positioned", "pioneer", "seek", "should", "target", "will", "would", and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the Company's business and the industry in which it operates and management's beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond its control. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Please see "Risk Factors" in the Company's Annual Information Form dated March 18, 2025, and the risk factors included in our other public disclosure documents for a discussion of the material risk factors that could cause actual results to differ materially from the forward-looking information. The Company is under no obligation, and expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.

Condensed Consolidated Interim Statement of Loss and Comprehensive Loss(Expressed in thousands of Canadian dollars, except per share amounts)

Three months endedMarch 31

2025

2024

Net revenue

204,914

197,750

Cost of sales

148,273

147,350

Gross profit

56,641

50,400

Investment income

2,856

4,036

Share of (loss) profit of equity-accounted investees

(4,457)

9,148

General and administrative

46,359

44,695

Sales and marketing

3,767

2,598

Research and development

100

Depreciation and amortization

13,228

14,143

Share-based compensation

1,388

4,843

Restructuring costs (recovery)

326

(89)

Asset impairment, net

1,984

1,656

(Gain) loss on disposition of assets

(59)

Operating loss

(12,053)

(4,377)

Other expenses, net

(2,654)

(3,272)

Loss before income tax

(14,707)

(7,649)

Income tax recovery

—

2,997

Net loss

(14,707)

(4,652)

Equity-accounted investees - share of other comprehensive (loss) income

(348)

10,034

Investments at FVOCI - change in fair value

(5,230)

—

Comprehensive (loss) income

(20,285)

5,382

Net loss attributable to:

Owners of the Company

(14,707)

(2,554)

Non-controlling interest

—

(2,098)

(14,707)

(4,652)

Comprehensive (loss) income attributable to:

Owners of the Company

(20,285)

7,480

Non-controlling interest

—

(2,098)

(20,285)

5,382

Condensed Consolidated Interim Statement of Financial Position(Expressed in thousands of Canadian dollars)

As at

March 31, 2025

December 31, 2024

Assets

Current assets

Cash and cash equivalents

220,867

218,359

Restricted cash

19,792

19,815

Marketable securities

139

Accounts receivable

29,782

28,118

Biological assets

3,049

1,187

Inventory

132,899

127,919

Prepaid expenses and deposits

10,642

16,860

Investments

614

27,560

Assets held for sale

251

19,051

Net investment in subleases

2,719

2,832

420,754

461,840

Non-current assets

Long-term deposits and receivables

3,918

3,679

Right of use assets

111,239

115,435

Property, plant and equipment

158,129

145,810

Net investment in subleases

13,679

15,354

Intangible assets

60,628

61,325

Investments

12,078

8,427

Equity-accounted investees

407,600

413,124

Goodwill

124,248

Total assets

1,312,273

1,349,242

Liabilities

Current liabilities

Accounts payable and accrued liabilities

57,887

56,275

Lease liabilities

33,254

34,256

Derivative warrants

91,155

90,557

Non-current liabilities

Lease liabilities

114,692

118,017

Other liabilities

6,227

7,312

Total liabilities

212,074

215,886

Shareholders' equity

Share capital

2,295,107

2,346,728

Warrants

667

Contributed surplus

59,522

57,156

Accumulated deficit

(1,302,289)

(1,323,965)

Accumulated other comprehensive income

47,192

52,770

Total shareholders' equity

1,100,199

1,133,356

Total liabilities and shareholders' equity

1,312,273

1,349,242

Condensed Consolidated Interim Statement of Cash Flows(Expressed in thousands of Canadian dollars)

Three months endedMarch 31

2025

2024

Cash provided by (used in):

Operating activities

Net loss for the period

(14,707)

(4,652)

Adjustments for:

Income tax recovery

—

(2,997)

Interest and fee income

(2,856)

(4,091)

Change in fair value of biological assets

(1,111)

(232)

Share-based compensation

1,388

4,843

Depreciation and amortization

14,187

14,570

(Gain) loss on disposition of assets

(59)

Inventory impairment and obsolescence

591

1,913

Finance costs, net

1,690

1,625

Change in estimate of fair value of derivative warrants

(12)

1,300

Unrealized foreign exchange loss

104

Transaction costs

—

164

Asset impairment, net

1,984

1,656

Share of loss (profit) of equity-accounted investees

4,457

(9,148)

Unrealized loss on marketable securities

—

Interest received

2,936

3,172

Change in non-cash working capital

(713)

(5,059)

Net cash provided by (used in) operating activities

7,788

3,301

Investing activities

Additions to property, plant and equipment

(1,588)

(2,410)

Changes to investments

17,910

133

Capital refunds from equity-accounted investees

—

168

Capital distributions from equity-accounted investees

719

—

Proceeds from disposal of property, plant and equipment

113

(62)

Change in non-cash working capital

495

Net cash provided by (used in) investing activities

17,172

(1,676)

Financing activities

Change in restricted cash

—

(231)

Payments on lease liabilities, net

(7,512)

(7,516)

Repurchase of common shares

(15,031)

—

Change in non-cash working capital

Net cash used in financing activities

(22,452)

(7,712)

Change in cash and cash equivalents

2,508

(6,087)

Cash and cash equivalents, beginning of period

218,359

195,041

Cash and cash equivalents, end of period

220,867

188,954

NON-IFRS MEASURES

Certain specified financial measures in this news release are non-IFRS measures. These terms are not defined by IFRS and, therefore, may not be comparable to similar measures reported by other companies. These non-IFRS financial measures should not be considered in isolation or as an alternative for or superior to measures of performance prepared in accordance with IFRS. These measures are presented and described in order to provide shareholders and potential investors with additional measures in understanding the Company's operating results in the same manner as the management team.

ADJUSTED OPERATING INCOME (LOSS)Adjusted operating income (loss) is a non-IFRS financial measure which the Company uses to evaluate its operating performance in a similar manner to its management team. The Company defines adjusted operating income (loss) as operating income (loss) less restructuring costs (recovery), goodwill and intangible asset impairments and asset impairments triggered by restructuring activities.

The following tables reconcile adjusted to un-adjusted operating income (loss) for the periods noted.

($000s)

CannabisRetail

CannabisOperations

CannabisTotal

LiquorRetail

Investments

Corporate

Total

Three months ended March 31, 2025

Operating income (loss)

5,162

(486)

4,676

1,980

(1,601)

(17,108)

(12,053)

Adjustments:

Restructuring costs

—

199

—

127

326

Impairments triggered by restructuring

—

2,696

—

2,696

Adjusted operating income (loss)

5,162

2,409

7,571

1,980

(1,601)

(16,981)

(9,031)

($000s)

CannabisRetail

CannabisOperations

CannabisTotal

LiquorRetail

Investments

Corporate

Total

Three months ended March 31, 2024

Operating income (loss)

(1,042)

891

(151)

2,180

13,079

(19,485)

(4,377)

Adjustments:

Restructuring costs (recovery)

—

255

—

(344)

(89)

Adjusted operating income (loss)

(1,042)

1,146

104

2,180

13,079

(19,829)

(4,466)

GROSS MARGINGross margin is a supplementary financial measure calculated by dividing gross profit by net revenue for the periods noted.

FREE CASH FLOW Free cash flow is a non-IFRS financial measure which the Company uses to evaluate its financial performance, providing information which management believes to be useful in understanding and evaluating the Company's ability to generate positive cash flows as it removes cash used for non-operational items. The Company defines free cash flow as the total change in cash and cash equivalents less cash used for common share repurchases, dividends (if any), changes to debt instruments, changes to long-term investments, net cash used for acquisitions plus cash provided by dispositions (if any).

The following table reconciles free cash flow to change in cash and cash equivalents for the periods noted.

Three months endedMarch 31

($000s)

2025

2024

Change in cash and cash equivalents

2,508

(6,087)

Adjustments

Repurchase of common shares

15,031

—

Changes to long-term investments

(18,629)

(301)

Free cash flow

(1,090)

(6,388)

SAME STORE SALESSame store sales is a non-IFRS financial measure which the Company uses to evaluate its financial performance in its retail segments. Same store sales provides information which management believes to be useful to investors, analysts and others in understanding and evaluating the Company's sales trends excluding the effect of the opening and closure of stores.

Same store sales refers to the revenue generated by the Company's existing retail locations during the current and prior comparison periods.

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SOURCE SNDL Inc.