TerrAscend (TSNDF) reported its financial and operating results for the second quarter ended June 30, 2023, on Friday. All financial information is provided in U.S. dollars unless otherwise indicated and compared with the previous quarter.

[Ed. note: This article discusses a small-cap company with a penny-stock price. Such stocks can still be more easily manipulated; do your own careful due diligence.]

Q2 Financial Highlights

• Net Revenue: up for 7th consecutive quarter by 3.9% to $72.1M
• Gross Profit: up 12.7% to $36.2M
  • Gross Profit Margin: up to 50.2% from 48.8%
• Gen. & Admin. Exp.: up 34.4% to $30.5M
  • as a % of Net Revenue: up to 42.3% from 39.9%
• Adj. EBITDA: up 4.9% to $12.8M
  • Adj. EBITDA Margin: up to 17.8% from 17.6%
• Net Income (Loss): down 32.8% to $(12.9)M
• Cash (Equiv. + Restricted): up 3.0% to $34.5M

Q2 Business & Operational Highlights

• Announced three dispensary acquisitions in Maryland to reach the four store limit in the state
• Closed on the acquisitions of Blue Ridge Wellness and Peninsula Alternative Health dispensaries in Maryland
• Closed Private Placements for total aggregate proceeds of $21.0 million
• Closed on a $25.0 million commercial loan with Stearns Bank carrying an interest rate of prime plus 2.25%, equivalent to 10.5%, with proceeds used to pay down higher interest debt
• Paid down $37.0 million of senior secured term loan in Pennsylvania
• Completed sale of Mississauga facility for $14.3 million
• Launched Legend brand in Michigan
• Introduced Wana infused gummies in New Jersey and Maryland
• Opened fifth Cookies dispensary in Michigan
• Expanded Cookies partnership into Maryland
• Completed a re-organization of the Company in order to list on the TSX

Management Commentary

Jason Wild, Executive Chairman of TerrAscend, said:

• “We are pleased to deliver results in the second quarter that exceeded our internal forecasts. We have made substantial progress over the last several months across virtually all facets of our business. We have:
  • significantly improved our margins,
  • transformed our balance sheet,
  • materially lowered our interest expense,
  • delivered positive operating cashflow,
  • acquired four dispensaries in Maryland and
  • successfully listed on the TSX,
• all while driving sector leading revenue growth of 26% in the first half of 2023.
• These achievements give us confidence in the remainder of the year, as evidenced by our full year revenue and Adjusted EBITDA guidance (see below). We expect to deliver significant growth in revenue and profitability as we realize the benefits of our now vertically integrated operations in Maryland as well as continued strong execution in our other geographies.”

Outlook for 2023

• The Company is reiterating its outlook for Net Revenue and Adjusted EBITDA from continuing operations for 2023 to be at least $305 million and at least $58 million, respectively, representing year-over-year growth of 23% in Net Revenue and 49% in Adjusted EBITDA from continuing operations.

Stock Performance

• The stock price jumped 5.6% on Friday with the release of the Q2 financial report and is now up 19.0% so far in August and is now up 53.6% YTD. That compares very favorably with the remaining 6 constituents in the munKNEE American MSO Cannabis Index which are down 10.5%, on average, so far in August and down 29.2% YTD and the Pure U.S. Cannabis ETF (MSOS) which is down 6.9% MTD and down 23.0% YTD.

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