TRSSF - TerrAscend Sales Rise As Company Takes Back Guidance
TerrAscend Corp. (CSE: TER) (OTCQX: TRSSF) reported its financial results for the second quarter period ending June 30, 2021 as revenues increased 72% to $58.7 million over last year’s $32.4 million. Sales grew 10% sequentially over the first-quarter sales of $53.4 million. TerrAscend reported a net loss of $23 million , which the company said was largely impacted by a non-cash loss on the fair value of warrants of $20 million , a non-cash impairment of intangibles of its Arise Bioscience CBD division of $8.6 million , and an unrealized foreign exchange loss of $3 million primarily related to USD cash balances held in Canada .
The stock was falling over 12% in early trading to lately sell at $7.37.
Guidance Withdrawn
Notably, TerrAscend withdrew its previous 2021 guidance due to temporary yield declines of quality flower in Pennsylvania related to ongoing construction and expansion. In addition to that, the company has decided to increase its allocation of the company’s branded products to its own Apothecarium dispensaries in New Jersey. TerrAscend said that while its more profitable in the long run, retail sales take longer to sell through when compared to wholesale sales. The company said in a statement that when evaluating the potential of its dispensaries in an adult-use environment, management believes prioritizing the company’s retail channel in a supply-constrained market is the best path for building shareholder value. Last quarter the company raised its full-year guidance to $300 million versus the previous guidance of $290 million and Adjusted EBITDA was expected to exceed $128 million versus previous guidance of $122 million .
“During the second quarter, we continued to deliver year-over-year and sequential revenue growth while maintaining industry-leading Adjusted EBITDA margins above 40%,” said CEO Jason Wild. “Due to expansion-related yield reduction in Pennsylvania , which I believe to be temporary, and a decision to prioritize allocation of our branded products to our own New Jersey dispensaries, I felt it was appropriate to withdraw guidance for 2021. Looking ahead, 2022 will be a breakout year as we benefit from investment in cultivation capacity expansions and best-in-class retail experiences. I expect Pennsylvania to show substantial growth benefitting from the current expansion, while in New Jersey we will have our M aplewood , Phillipsburg , and Lodi stores opened along with our 140,000 square foot cultivation and processing facility, which is fully operational and prepared to supply an adult-use New Jersey market.”
While the company is sitting on a pile of cash with $154 million as of June 30, 2021 , It’s a big drop from the $234 million as of March 31, 2021. However, the company said it is sufficient to fund planned growth initiatives. SG&A expense, excluding stock-based compensation, were $14.8 million versus $11.3 million in the second quarter of 2020. The company said that the year-over-year increase was primarily due to increased salaries and professional fees as well as a one-time legal settlement of $0.7 million .
Cookies Come To NJ
The company signed an agreement to supply COOKIES licensed product and bring COOKIES Corners to all three Apothecarium dispensaries in New Jersey .
“We are excited to announce our agreement with COOKIES to be the sole cultivator and manufacturer in New Jersey for one of the country’s most recognized cannabis brands and the planned opening of ‘COOKIES Corners’, a store-in-store concept, within each of our three retail locations, subject to certain conditions and regulatory approval. New Jersey is an important market for us and this agreement with COOKIES will enable us to further solidify our leading position as the state is expected to implement adult-use by the end of this year,” stated Jason Wild , Executive Chairman of TerrAscend.
The company also seems to be signaling its desire to get out of the CBD business. TerrAscend said it has decided to undertake a strategic review process to explore, review, and evaluate potential alternatives for its Arise CBD business.