TerrAscend Q4 Report Shows Strong Revenue Growth, Margin Expansion And Cash Generation

TerrAscend Corp. (OTCQX: TRSSF), a leading North American cannabis operator with vertically integrated operations in Pennsylvania, New Jersey, and California, in addition to operating as a licensed producer in Canada, reported financial results for its fourth-quarter ending December 31, 2020, today, as follows:

Q4 Financial Highlights

(Unless otherwise stated, the results are in Canadian dollars - to convert to other currencies go here - and compared to the previous quarter.)

• Net Sales: increased 28% to $65M as a result of:
  • an increase in cultivation capacity in Pennsylvania and California,
  • the first sales into the New Jersey market,
  • the continued growth and ramp-up at its three retail stores in Pennsylvania as well as two new store locations in California.
• Gross Margin: increased to 60% from 59%
  • the result of a higher mix as well as improved yields and lower cost per pound from the Pennsylvania operations
• Gen./Admin. Exp.: reduced to 23% of net sales from 27%
  • the result of tight control of costs combined with continued robust revenue growth
• Adjusted EBITDA: increased 44% to $26M
• Adjusted EBITDA Margin: increased to 40% of net sales from 35%.
  • driven by improvements in both gross margin and G&A leverage.
• Net Income: loss increased by 521% to $(109)M
  • largely impacted by a net increase in fair value of warrant and derivative liability of $124 million and a revaluation of contingent consideration of $5 million.
• Adj. Net Income: increased by 54% to $20M from $13M
  • the second straight quarter the company has recorded a positive result 
• Cash Flow: increased to $24M from $0
  • driven by continued ramp-up in U.S. operations partially offset by income taxes

Management Commentary

Jason Wild, Executive Chairman said:

• "In Q4, we drove strong revenue growth, margin expansion, and cash generation by focusing on operational excellence, disciplined cost control, and effective allocation of capital...
• The business is firing on all cylinders and we are only now just beginning to realize the benefits of our recently completed investments:  
  • Sales from facility expansions in Pennsylvania, New Jersey, and California are just starting to come to market,
  • our acquisition in Maryland is expected to close imminently,
  • and two additional retail stores are set to open in New Jersey."

Q4 Operational Highlights

• Commenced sales from newly expanded State Flower cultivation facility in California
• Realized first sales from 25% capacity expansion in Pennsylvania 
• Closed on US$120 million term loan secured by Ilera business in Pennsylvania
• Closed on US$20 million loan from Canopy Growth to the Company's Arise Bioscience division
• Announced expansion of U.S. footprint via the acquisition of Maryland Based Grower Processor
• Opened fifth California Apothecarium dispensary in Capitola
• Received Permit to dispense medical cannabis at first New Jersey dispensary in Phillipsburg

2121 Guidance

Expects 2021 Net Sales to exceed US$290M and Adjusted EBITDA to exceed US$122M driven by the Company's emphasis on organic growth through expansion in high-quality, limited license markets while continuing to maintain tight control on costs.

• In Pennsylvania, sales and profits are expected to benefit from the annualization of multiple increases in cultivation capacity completed in 2020.
• In New Jersey, sales from the Company's 40,000 square foot greenhouse and 80,000 square foot indoor cultivation facilities are expected to ramp up throughout 2021
  • its Phillipsburg dispensary will achieve its first full quarter of sales in the first quarter of 2021 and
  • plans to open two additional dispensaries in the state in the second quarter and third quarter of 2021.
• In California, the Company is expected to increase the annual production capacity of super-premium craft flower from its expanded State Flower cultivation facility by 500%.

Stock Performance

While the TerrAscend stock price is UP 12.2% YTD (as of March 19th) it is DOWN 15.9% so far in March as illustrated in the chart below:

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