SNDL reported financial results for the first quarter of 2023, the company’s first results since its acquisition of The Valens Company (TSX:VLNS, OTCQX:VLNCF) in January.
Net revenue in the period was $202.5 million, a huge surge from $17.6 million in the first quarter of 2022, representing a 1,050% increase year-over-year. Quarter-over-quarter revenue was down from $240.4 million.
The major increase was thanks to the acquisitions of Alcanna, Valens and Zenabis (TSX:ZENA), while the quarterly decline was due to seasonal factors in the company’s liquor retail segment, according to a statement.
In the quarter, liquor retail revenue was $115.9 million, cannabis retail was $67.4 million cannabis operations revenue was $19.1 million. Its net loss was $36.1 million in the period, compared to losses of $38 million a year earlier and $161.6 million in the previous quarter.
"We are pleased to report progress towards key milestones in all of our operative segments against the backdrop of expected seasonally moderate sales in our retail networks," CEO Zach George said in a statement.
"The integration of Valens is proceeding with pace, and we are actively identifying new revenue streams and cost reduction opportunities.”
The acquisition of Valens is a potential game-changer for the remainder of 2023. Since the acquisition, SNDL has achieved more than $13 million in annual cost savings and identified $5 million in additional annual cost savings to be achieved in 2023, exceeding management's original $10 million total target.
Run-rate synergies are expected to exceed $30 million annually by 2024, and proceeds from asset sales are expected to total $9 million.
The combined company is among the largest adult-use cannabis manufacturers and retailers in Canada, boasting a 197-store multi-banner cannabis retail network, low-cost biomass sourcing, premium indoor cultivation and low-cost manufacturing facilities.
“We expect additional restructuring charges to impact the second quarter and the results of our team's hard work to become clear in late 2023,” George said.
“We are focused on improving all aspects of our business with the objective of generating strong free cash flow. The relocation of all cannabis processing activities to our Kelowna complex will drive improved capacity utilization, and we are aggressively reducing our exposure to higher-cost cultivation as we seek low-cost producer status in all relevant product categories.”
Shares of SNDL fell 3% Monday morning to $1.64.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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