Average sales on an annual run-rate basis for
stores converted to Value Buds now $3.5
million versus $1.4 million
before conversion
EDMONTON, AB, Aug. 12, 2021 /CNW/ - Nova Cannabis Inc. (the
"Company" or "Nova") (TSX: NOVC) today released
its unaudited condensed interim consolidated financial statements
(the "interim financial statements") and management's
discussion and analysis ("MD&A") for the three and six
months ended June 30, 2021.
"During the second quarter we continued to successfully execute
against our growth strategy capturing market share at an aggressive
pace," said Darren Karasiuk, CEO of
Nova. "In two months from conversion, our Value Buds stores are
already operating at an average sales on an annual run-rate
basis1 of $3.5
million which is, in our estimation, at least three times
the sales volume of the average Alberta cannabis retailer."
"Value Buds is clearly resonating with Alberta cannabis consumers and drawing
customers from the illicit market as well as legal cannabis
retailers. We expect the same response in Ontario as we accelerate our pace of openings
in Canada's largest market. All
signs suggest that our high-volume value conscious consumer
strategy is disrupting the market, and we expect to benefit
disproportionately from the growth tailwinds in our markets."
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1
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Annual run rate is
a non-IFRS financial measure that does not have any standardized
meaning prescribed by IFRS and therefore may not be comparable to
similar measures presented by other issuers. For more information
on non-IFRS financial measures, see the 'Non-IFRS Financial
Measures' section and the 'Non-IFRS Financial Measures' in our
MD&A for the three and six months ended June 30, 2021, which is
available on the Company's website (www.novacannabis.ca) and on the
SEDAR website (www.sedar.com).
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Business and Operating Highlights
- Graduated from the TSX Venture Exchange and began trading on
the TSX on July 15, 2021
- Converted thirty-six (36) stores from legacy banners to Value
Buds
- Opened nine (9) new Value Buds stores: six (6) in Ontario and three (3) in Alberta
- Nova now has sixty (60) stores operating and a further
twenty-five (25) new stores are under development/construction with
thirty (30) more in Ontario under
active negotiation
- Launched Nova Cannabis Analytics, an ancillary revenue stream
offering comprised of a proprietary, regulatory-compliant data and
analytics platform with several subscription agreements signed
since its launch and subsequent to the end of the fiscal
quarter
- Bolstered its board composition with the election of
Marvin Singer, former senior partner
at Norton Rose Fulbright
Outlook
The Company expects to adopt an aggressive and disciplined
stance toward growth focusing on:
- Organic store openings
- Opportunistic and sensible acquisitions to complement organic
growth
- Same-store sales growth
- Private label
- Basket size growth
When it comes to both organic growth and acquisition
opportunities, the Company is focused on store locations that
management believes will have long-term viability. Management
recognizes that in Ontario, due to
its historically slow retail cannabis store rollout, many existing
cannabis retail locations have enjoyed monopoly-like positions in
very large trade areas. These monopolies have provided many
cannabis retailers with revenues that we believe are unsustainable
with greater competition and vulnerability to new retailers who can
offer better pricing as well as traditional retail fundamentals
such as visibility, parking, and proximity to other customer
draws.
It is anticipated that all existing stores will be converted to
Value Buds by the end of Q3 2021 and all new stores will be opened
with the Value Buds banner. Value Buds stores are designed to
accommodate the substantially increased customer count we see in
these high-volume stores.
The Company continues to expect to have at least eighty-five
(85) stores built and/or opened by the end of 2021.
Second Quarter 2021 Financial Highlights
The interim financial statements for the three and six months
ended June 30, 2021 reflect the
results of the stores formerly owned by Alcanna Inc. as well as the
results from the stores owned by the Company (when it was known as
YSS Corp.) from the closing of the reverse take-over transaction on
March 22, 2021 (the "RTO")
until June 30, 2021. The comparative
period for 2020 in the interim financial statements only presents
the financial results for the stores that were owned by Alcanna
Inc. and operated under the Nova Cannabis banner with a different
operating, pricing and margin strategy than they were operated
within 2021. As such, the interim financial statements for the
three and six months ended June 30,
2021 and 2020 are not directly comparable.
Sales increased 106.6% compared to the second quarter of 2020,
to $29.7 million from $14.4 million. The increase is primarily due to
the seven (7) retail cannabis stores that have opened since
March 31, 2020, the retail cannabis
stores acquired through the RTO and the increased sales from Nova
Cannabis banner stores that were re-branded to Value Buds at
various times throughout Q4 2020 and the first six months of
2021.
For further information, refer to the interim financial
statements and the MD&A of the Company for the three and six
months ended June 30, 2021, which are
available from the Company's profile on SEDAR, at www.sedar.com, or
on the Company's website at www.novacannabis.ca.
CONFERENCE CALL
Management will conduct a conference call on August 13, 2021 at 12:00p.m. ET (10:00a.m.
MT) to discuss its second quarter operating and financial
results. To participate, please dial (416) 406-0743 or (800)
806-5484 and use the required participant access code: 2286294#.
The playback will be made available approximately four hours after
the event at (905) 694-9451 or (800) 408-3053, required access
code: 5616005#.
ABOUT NOVA CANNABIS INC.
Nova Cannabis Inc. (TSX: NOVC) is one of Canada's largest and fastest growing cannabis
retailers with a goal to disrupt the cannabis retail market by
offering a wide range of high-quality cannabis products at
every-day best value prices. The Company currently operates sixty
(60) locations across Alberta,
Ontario, and Saskatchewan primarily under its Value Buds
and Nova Cannabis banners. The Company is majority owned by Alcanna
Inc. (TSX: CLIQ).
Additional information about Nova Cannabis Inc. is available at
www.sedar.com and the Company's website at www.novacannabis.ca.
NON-IFRS FINANCIAL MEASURES
Average sales on an annual run-rate basis is not a measure
recognized by IFRS and does not have a standardized meaning
prescribed by IFRS. Investors are cautioned that this measure
should not replace sales, net earnings or loss (as determined in
accordance with IFRS) as an indicator of the Company's performance,
of its cash flows from operating, investing and financing
activities or as a measure of its liquidity and cash flows. The
Company's method of calculating the aforementioned non-IFRS
financial measure may differ from the methods used by other
issuers. Therefore, the measure may not be comparable to similar
measures presented by other issuers.
Average sales on an annual run-rate basis is calculated by
taking the average of the actual weekly sales for July 2021 of the stores that have been converted
to Value Buds for at least eight (8) weeks, and multiplying by
fifty-two (52) weeks. This is one of the key metrics that the
Company uses to assess performance and provides a useful comparison
as to how these stores that have been converted to our Value Buds
discount banner are performing. Management believes the
presentation of average sales on an annual run-rate basis provides
for useful information to investors and shareholders as it provides
increased transparency on the current performance of these
stores.
FORWARD LOOKING STATEMENTS
This news release contains forward-looking statements or
information (collectively "forward-looking statements")
within the meaning of applicable securities legislation.
Forward-looking statements are typically identified by words such
as "continue", "anticipate", "will", "should", "plan", "intention",
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: Nova's average sales on an annual
run-rate basis; Nova's expectations for sales growth in
Ontario, in general and relative
to other cannabis retailers; Nova's retail cannabis business
strategy, including organic growth and strategic acquisitions;
Nova's discount pricing model; the conversion of Nova Cannabis
stores to the Value Buds banner and the timing thereof; the
Company's objectives, including planned construction of new stores,
timing of new store openings, evaluation of potential sites and
sales growth, particularly in the Value Buds banner; the ability of
the Company to obtain government licenses for its new stores;
Nova's gross margin as a percentage of sales and sales forecast for
the balance of 2021; and expectations as to consumer demands.
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; the cost
of converting existing stores to the Value Buds banner; demand for
the products the Company sells; other factors that will drive sales
growth in the Value Buds banner; 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, especially
given the unprecedented uncertainty of the full extent and impact
of COVID-19, 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 duration
and severity of the COVID-19 pandemic on the business, operations
and financial condition of the Company; 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; dependence on suppliers; 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; incorrect assessments of the value of
acquisitions; general economic and political conditions in
Canada (including Alberta and Ontario), and globally; 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 us and our
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.sedar.com. 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.