The Company achieves record annual revenue and
Adjusted EBITDA, and delivers positive net earnings with sustained
gross profit growth
This news release constitutes a "designated news release" for
the purposes of the prospectus supplement of Nova Cannabis Inc.
dated July 22, 2022, to its short
form base shelf prospectus dated June 27,
2022.
EDMONTON, AB, March 25,
2024 /CNW/ - Nova Cannabis Inc. (the "Company"
or "Nova") (TSX: NOVC) today released its annual
consolidated financial statements (the "financial
statements") and management's discussion and analysis
("MD&A") for the year ended December 31, 2023. All financial information in
this press release is reported in millions of Canadian dollars and
represents results from continuing operations, unless otherwise
indicated.
"Nova has achieved significant milestones this year, marked by
sequential gross profit growth and positive net earnings for three
consecutive quarters," said Marcie
Kiziak, CEO of Nova. "Our success in the current market is a
direct result of our sharp focus on inventory management and the
strategic enhancement of our proprietary data agreements, which has
contributed to our positive cash flow position this past year.
Amidst a competitive and fluctuating market, our expansion will
continue to be measured, focusing on tactical opportunities in the
key markets of British Columbia
and Ontario in 2024. Our
achievements through 2023 further highlight the success of the
Value Buds banner, which has proven adaptable and well-positioned
to endure success in Canada's
dynamic cannabis retail sector."
FOURTH QUARTER FINANCIAL AND OPERATING HIGHLIGHTS
- Revenue of $67.4 million for the
fourth quarter of 2023, which was consistent with the third quarter
of 2023 and a 10% increase from the fourth quarter of 2022.
- For locations operational throughout the fourth fiscal quarter
of 2023 and 2022, same-store sales increased 2% year-over-year.
- Gross profit of $17.1 million
(25% of revenue), a 34% increase from the fourth quarter of 2022 of
$12.8 million (21% of revenue). Gross
profit improvement was driven by price stabilization in the
Alberta market, the Company's
development of private label initiatives, and an increased number
of proprietary data licensing agreements being entered into by the
Company. These factors have contributed to nine consecutive
quarters of gross profit improvement.
- Net earnings of $0.4 million
($0.01 earnings per share) in the
fourth quarter of 2023 compared to a net loss of $4.8 million ($0.08
loss per share) in the fourth quarter of 2022. Net earnings
increased by $5.2 million or 109%
from the fourth quarter of 2022.
- Adjusted EBITDA for the fourth quarter of 2023 of
$6.4 million (9% of revenue) compared
to $3.2 million for the fourth
quarter of 2022, an improvement of 100%.
- The data licensing program generated revenue of $4.2 million for the fourth quarter of 2023,
compared to $1.6 million in the
fourth quarter of 2022, representing growth of $2.6 million, or 163%.
- 96 stores operating as of March 25,
2024, an increase of 8 stores since the beginning of
2023.
- Nova's management team ("Management") estimates that its
market share was approximately 19% in Alberta and 4% in Ontario for the fourth quarter of 2023, based
on available industry data from Statistics
Canada1.
- Cash provided by operating activities in the fourth quarter of
2023 of $5.0 million, a $2.2 million increase from the $2.8 million cash provided by operating
activities in the fourth quarter of 2022.
- Cash and cash equivalents of $13.8
million as at December 31,
2023.
FISCAL YEAR 2023 FINANCIAL AND OPERATING HIGHLIGHTS
- Record revenue of $259.3 million,
an increase of $32.9 million or 15%,
from $226.4 million in 2022.
- Record gross profit of $61.6
million, or 24% of sales, a 40% increase from $43.9 million, or 19% of sales, in 2022.
- Revenue from Nova's proprietary data licensing arrangements was
$12.4 million for 2023, an increase
of 125% from $5.5 million in
2022.
- Net earnings of $3.0
million in 2023, compared to a loss of $11.2 million in 2022, an increase of 127%.
- Adjusted EBITDA for 2023 was $21.8
million compared to $9.2
million in 2022, an improvement of 137%.
- Cash provided by operating activities improved to $11.7 million in 2023, an $11.8 million increase from $(0.1) million in 2022.
- Nova expanded its private label collaboration with SNDL Inc.
("SNDL") through 2023, introducing large format flower SKUs
in the Ontario market in the first
half of the year. In September, the collaboration expanded further
with the introduction of the large format vape.
_______________________________
1 Source: Statistics Canada: Table 20-10-0056-01 Monthly
retail trade sales by province and territory (x 1,000), unadjusted,
as of December 2023.
|
SPECIFIED FINANCIAL MEASURES
Certain specified financial measures in this earnings release,
including Adjusted EBITDA, are non-IFRS measures and may not be
comparable to similar measures reported by other companies. This
non-IFRS financial measure should not be considered in isolation or
as an alternative for measures of performance prepared in
accordance with IFRS Accounting Standards.
Adjusted EBITDA
Adjusted EBITDA is a non-IFRS financial measure that the Company
uses to evaluate its operating performance. Adjusted EBITDA
provides information to investors, analysts, and others to aid in
understanding and evaluating the Company's operating results in a
similar manner to Management. Adjusted EBITDA is defined as
earnings (loss) and comprehensive earnings (loss) before finance
costs; gains and losses on fair value adjustments; depreciation;
impairments, lease remeasurements and other costs; and certain
one-time transaction costs and restructuring costs, as determined
by Management.
The following table reconciles Adjusted EBITDA to net earnings
(loss) and comprehensive earnings (loss) for the periods noted:
|
Three months
ended
December 31
|
Year ended
December 31
|
(expressed in
thousands)
|
2023
|
2022
|
2023
|
2022
|
Net earnings (loss) and
comprehensive earnings (loss)
|
438
|
(4,767)
|
3,027
|
(11,205)
|
Adjustments:
|
|
|
|
|
Finance
costs
|
1,186
|
1,074
|
4,630
|
3,976
|
Net loss (gain) on
fair value adjustments
|
115
|
125
|
(97)
|
(313)
|
Depreciation
|
2,826
|
2,884
|
11,393
|
10,948
|
Impairment, lease
remeasurements and other costs
|
1,821
|
2,887
|
2,129
|
3,006
|
Transaction costs
(1)
|
-
|
963
|
-
|
2,782
|
Restructuring costs
(2)
|
5
|
—
|
750
|
—
|
Adjusted
EBITDA
|
6,391
|
3,166
|
21,832
|
9,194
|
- Transaction
costs include expenses incurred in connection with SNDL's
acquisition of Alcanna Inc. on March 31, 2022, Nova's former
majority shareholder.
- Restructuring
costs include expenses incurred in connection with entering into
the implementation agreement with SNDL on December 20, 2022, as
amended, which agreement was subsequently terminated on November
17, 2023.
|
LIQUIDITY AND CAPITAL RESOURCES
Summary of Consolidated Cash Flows
Cash provided by
(used in)
|
Three months
ended
December 31
|
Year ended
December 31
|
(expressed in
thousands)
|
2023
|
2022
|
2023
|
2022
|
Operating
activities
|
4,967
|
2,782
|
11,721
|
(65)
|
Investing
activities
|
(388)
|
(1,668)
|
(2,330)
|
(8,408)
|
Financing
activities
|
(1,631)
|
(2,438)
|
(611)
|
2,979
|
Net increase
(decrease) in cash
|
2,948
|
(1,324)
|
8,780
|
(5,494)
|
Revolving Credit Facility
Nova has an uncommitted revolving credit facility with SNDL in
an aggregate principal amount not to exceed $15.0 million (the "Revolving Credit
Facility"). On November 17, 2023,
the term of the Revolving Credit Facility was extended to
March 31, 2024. The Company is in
discussions with the lender to further extend the maturity of the
Revolving Credit Facility.
As at March 25, 2024, the
Revolving Credit Facility is fully drawn.
STRATEGIC OUTLOOK
Nova aims to disrupt and solidify the cannabis retail market by
promoting a wide range of cannabis products at everyday best-value
prices while encouraging greater migration from the illicit
cannabis market. The Company's strategy is rooted in the quality of
its store footprint and locations, the sales efficiency of Nova
stores, and the appeal of the Value Buds brand. Nova remains
disciplined and customer-focused by choosing the best real estate
to execute its strategy – whether through acquiring stores or
building its own.
- The Company is focused on expanding its store footprint in the
prairie provinces and in the key markets of British Columbia and Ontario, following regulatory updates
increasing the cap on stores in the Ontario market, and proposed updates to the
eight-store cap in British
Columbia. Nova continues to pursue opportunities based on
the quality of the real estate and the potential of attractive
economic returns while avoiding unsustainable valuations.
- Nova optimized its data licensing program to increase mutually
beneficial results for both our retail operations and licensed
producers while increasing the scale and sustainability of the
program. Leveraging Value Buds volume and the Company's access to
high-quality analytics, the Company is well-equipped to deliver
continued margin and revenue expansion through program
optimizations and its ability to provide market-driven
solutions.
- To build on the success of the "Value Buds" brand and provide a
service to both consumers and industry partners, the Company
introduced its pilot concept, "Firesale Cannabis", in 2023. The
Company's cannabis liquidation pop-up helps licensed producers sell
aged inventory at deeply discounted prices, intending to provide
the most affordable cannabis products in Canada. As at March 25,
2024, the Company operates one "Firesale Cannabis" store in
Alberta.
- The Company is dedicated to enhancing retail fundamentals with
a keen focus on delivering a seamless end-to-end customer
experience across both physical and digital platforms. This
approach aims to bolster conversion rates and drive incremental
margin expansion. Nova is committed to implementing top-tier retail
strategies, which involve reshaping in-store dynamics and
optimizing the purchasing journey to effectively capitalize on
basket growth opportunities.
- Through its relationship with SNDL, Value Buds' private label
strategy has been successfully launched in Alberta and Ontario with four large format flower
offerings and a large format vape. The Company is exploring further
product extensions in the coming quarters to offer large format
pre-rolls and edibles. The private label strategy enables Nova to
develop higher gross margin offerings, build customer loyalty, and
create long-term brand awareness. The private label strategy
focuses on keystone segments, specifically large format, uniquely
curated for the Value Buds consumer, and drives meaningful
differentiation through the retail network.
CONFERENCE CALL
Nova will host a conference call and webcast at 10 a.m. EDT (8 a.m.
MDT) on Tuesday, March 26,
2024.
Call Access
Canada/USA Toll Free: 1-800-319-4610
International Toll: +1-604-638-5340
Webcast Access
To access the live webcast of the call, please visit the
following link:
https://services.choruscall.ca/links/novacannabis2023q4.html
Replay
The webcast archive will be available for three months via the
link provided above.
A telephone replay will be available for one month. To access the
replay dial:
Canada/USA TF: 1-800-319-6413 or International Toll:
+1-604-638-9010
When prompted, enter Replay Access Code: 0754
For further information, refer to the Company's financial
statements and MD&A for the three and nine months ended
September 30, 2023, which are
available from the Company's profile on SEDAR+, at
www.sedarplus.ca, or on the Company's website at
www.novacannabis.ca.
ABOUT NOVA CANNABIS INC.
Nova Cannabis Inc. (TSX: NOVC) is one of Canada's largest and fastest-growing cannabis
retailers with a goal of disrupting the cannabis retail market by
offering a wide range of high-quality cannabis products at
every-day best value prices. The Company currently owns and/or
operates 96 locations across Alberta, Ontario and Saskatchewan, primarily under its "Value Buds"
and "Firesale Cannabis" banners. Additional information about Nova
Cannabis Inc. is available at www.sedarplus.ca and the
Company's website at www.novacannabis.ca.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements or
information (collectively "forward-looking statements")
within the meaning of the "safe harbour" provisions of applicable
securities legislation. Forward-looking statements are typically
identified by words such as "continue", "anticipate", "will",
"believes", "should", "plan", "intention", "expects", and similar
words suggesting future events or future performance. All
statements and information other than statements of historical fact
contained in this news release are forward-looking statements. In
particular, this news release contains forward-looking statements
pertaining to: the Company's expectations regarding its growth and
business strategies; Nova's private label strategy and the
Company's ability to successfully launch additional private label
offerings; Nova's ability to become one of the largest cannabis
retailers in Canada; the Company's
ability to increase its market share; and the Company's expansion
in Alberta, Ontario and Saskatchewan and other jurisdictions in
Canada where it believes there is
business efficacy to operate.
With respect to forward-looking statements contained in this
news release, the Company has made assumptions regarding, among
other things: the Company's ability to identify locations for,
construct and open new stores and the costs related thereto; the
availability of hardware and equipment for those stores; government
regulation and applicable laws will not change in a manner adverse
to the Company; receipt of necessary regulatory approvals to open
new stores; the Company's ability to obtain leases for new sites
and attract the necessary personnel to operate new stores;
continued demand for the products the Company sells; other factors
that will drive sales growth in the Value Buds and Firesale
banners, including Nova's private label strategy; availability of
acquisition opportunities; sustainability of competitors'
businesses and competition in the retail cannabis industry,
including from the illicit cannabis market; consumer demands; and
factors that influence consumer behavior.
Although the Company believes that the expectations reflected in
the forward-looking statements, and the assumptions on which such
forward-looking statements are made, are reasonable, there can be
no assurance that such expectations and assumptions will prove to
be correct. Readers should not place undue reliance on
forward-looking statements included in this news release.
Forward-looking statements are not guarantees of future performance
and involve a number of risks and uncertainties that may cause
actual performance and financial results to differ materially from
any estimates, forecasts or projections. These risks and
uncertainties include, among other things, the risk that Nova will
be unable to execute its strategic plan and growth strategy as
planned without significant adverse impacts from various factors
beyond its control; business decisions and strategies of SNDL,
Nova's direct majority shareholder; dependence on suppliers;
limited operating history of the cannabis business; overall levels
of economic inflation; risk of infringement of intellectual
property rights; reliance on information and control systems;
potential delays or changes in plans with respect to capital
expenditures and the availability of capital on acceptable terms;
risks inherent in the retail cannabis industry; competition for,
among other things, customers, supply, capital and skilled
personnel; changes in labour costs and markets, including Nova's
ability to hire and retain staff at current wage levels and the
risk of possible future unionization; incorrect assessments of the
value of acquisitions; general economic and political conditions in
Canada (including Alberta, Ontario and Saskatchewan), and globally; the
unpredictability and volatility of the price of the Company's
common shares and the potential lack of an active trading market
for the Company's common shares; industry conditions, including
changes in government regulations; fluctuations in foreign exchange
or interest rates; unanticipated operating events; failure to
obtain regulatory and third‐party consents and approvals when
required; changes in tax and other laws that affect Nova and its
shareholders; the potential failure of counterparties to honour
their contractual obligations; stock market volatility; and the
other factors described in the Company's public filings available
at www.sedarplus.ca. Readers are cautioned that this list of risk
factors should not be construed as exhaustive.
The forward-looking statements contained in this news release
are made as of the date hereof. Except as expressly required by
applicable securities legislation, Nova does not undertake any
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. The forward-looking statements contained in this news
release are expressly qualified by this cautionary statement.
SOURCE Nova Cannabis Inc.