sndl q3 earnings

Sundial Growers (NYSE: SNDL) stock is trading higher in US premarkets today. The cannabis company reported record revenues and operating cash flows in the quarter.

Sundial Growers reported net revenues of Canadian dollars (or CAD) 230.5 million in the third quarter. To put that in perspective, it generated revenues of CAD 223.7 million in the second quarter of 2022 and CAD 14.4 million in the third quarter of 2021. Its revenues rose over 1,500% YoY and hit a new record in the quarter.

SNDL has been growing its business through strategic investments. The company was on a capital raising spree in 2021 and raised ample cash to not only repay its debt but also for future investments.

SNDL reported an adjusted EBITDA of CAD 18.3 million in the quarter which was 74% higher YoY. Its gross profit margin rose to CAD 50.3 million in the quarter which was a new record for the company.

However, it posted a net loss of CAD 98.8 million in the quarter. It attributed the losses to “non-cash charges for impairments of CAD 86.5 million and changes in estimate of fair value of derivative warrants of CAD 8.5 million.”

SNDL generated operating cash flows of $8.6 million in the quarter which was again a record for the company. The cannabis industry is burning cash amid higher industry competition and lower prices.

SNDL Stock Rises After Q3 Earnings Release

SNDL has a strong balance sheet and held CAD 988 million in cash, cash equivalents, and long-term investments on its balance sheet at the end of September. It capitalized on the meme stock mania and raised cash by selling shares. However, since June 2021, it hasn’t sold any new shares to issue cash.

SNDL has been on an acquisition spree and the cash-rich company has acquired several small players. During the earnings release, it said that it has entered into an agreement to acquire The Valens Company Inc and expects to close the transaction in the first quarter of 2023.

It has also agreed to acquire nearly all the business of Superette. It said that the acquisition “can further leverage SNDL’s position as a multi-banner cannabis retail operator by enhancing the Company’s market share and its exposure to a broader consumer base.”

In his prepared remarks, Zach George, SNDL’s CEO said, “Our regulated products platform has shown resiliency in the face of stiff industry and macroeconomic headwinds, and our vertically integrated cannabis business is in the early stages of providing the scale and results that we believe are required for SNDL to be a strong member of a future oligopoly in Canada.”

Cannabis Stocks Have Whipsawed in 2022

Cannabis stocks have whipsawed this year amid the uncertainty over cannabis legalization in the US. Marijuana stocks soared after Joe Biden’s election in 2020 but soon pared gains.

Cannabis legalization would be a key driver for cannabis stocks as it would help lower illegal sales while leading to higher sales for regulated players. We have a guide on how investors can buy cannabis stocks.

Coming back to SNDL, it has been transforming its business and now has four business segments, Liquor Retail, Cannabis Operations, Cannabis Retail, and Investments. With 169 locations, it is the largest private-sector liquor retailer in Canada. It is also the largest cannabis retailer in Canada with 183 locations.

SNDL stock is down sharply from its highs amid the sell-off in the cannabis company. The stock meanwhile is higher today as markets give a thumbs up to its Q3 earnings.

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