Fourth quarter sales growth of 4.2% and
increased gross margin percentage to 20.8% from 18.9%
compared to the third quarter of 2022, driven by the
execution of Nova's disciplined pricing strategy and private label
initiatives
EDMONTON, AB, March 29,
2023 /CNW/ - Nova Cannabis Inc. (the "Company"
or "Nova") (TSX: NOVC) today released its annual audited
consolidated financial statements (the "annual
financial statements") and management's discussion
and analysis ("MD&A") for the year ended
December 31, 2022. All financial information in this press
release is reported in millions of Canadian dollars and represents
results from continuing operations, unless otherwise indicated.
"Building on the consistent momentum we've demonstrated through
the year, Nova once again posted record revenue for the fourth
quarter of 2022 as the Value Buds format continues to standout in a
competitive marketplace," said Marcie
Kiziak, CEO of Nova. "Our revenue growth is
accompanied by gross margin growth, as we've started to adjust
pricing in certain areas where the competitive pressures have
waned. This, along with growing revenues from data analytics
licensing and the successful launch of our private label products
in partnership with SNDL, gives us levers to drive future gross
margin growth as we capture greater market share, further
validating our strategy. These remarkable achievements are a
testament to the dedication and hard work of our management team
and employees, who have worked tirelessly to optimize our
operations and drive efficiencies. By focusing on our core
strengths and investing in our people and processes, we expect to
unlock continued value for our shareholders."
FOURTH QUARTER 2022 FINANCIAL AND OPERATING
HIGHLIGHTS
- Record revenue of $61.4 million,
a 28.9% increase from the fourth quarter of 2021, and a 4.2%
increase from the third quarter of 2022.
- Gross margin of $12.8 million, or
20.8% of revenue, a 51.8% increase from the fourth quarter of 2021,
and an increase of 14.6% from the third quarter of 2022.
- Net loss of $4.8 million in the
fourth quarter of 2022 compared to a net loss of $5.1 million in the fourth quarter of 2021.
- Adjusted EBITDA for the fourth quarter of 2022 was $3.2 million compared to $2.5 million for the third quarter of 2022.
- Same store sales have increased 2.7% in Ontario and 1.8% in Alberta in the fourth quarter of 2022 compared
to the third quarter of 2022.
- As of March 28, 2023, Nova has 91
stores currently operating, an increase of seven stores since
September 30, 2022, and 17 stores
since the beginning of 2022.
- Nova's market share was 26.4% in Alberta and 7% in Ontario in the fourth quarter of 2022, based
on management's estimates using industry data
available1.
- In November 2022, Nova launched
four private label products in Alberta under the Value Buds brand in large
format 14-gram and 28-gram offerings of blended whole flower,
sourced from SNDL Inc. ("SNDL"). Private label sales
represented approximately 2.6% of Alberta retail sales in the fourth quarter of
2022. Private label margins are approximately 5% higher than
comparable competitor products.
- Value Buds 28-gram offerings launched in the Ontario market in late February 2023, and the 14-gram format is expected
to launch later in 2023.
_______________________________
|
1 Source:
Statistics Canada: Retail trade sales by province and
territory
|
FISCAL YEAR 2022 FINANCIAL AND OPERATING HIGHLIGHTS
- Revenue of $226.4 million, a
68.5% increase from $134.4 million in
2021.
- Gross margin of $43.9 million, or
19.4% of sales, a 76.2% increase from $24.9
million, or 18.5% of sales, in 2021.
- Net loss of $11.2 million in
2022, compared to a loss of $20.6
million in 2021.
- Adjusted EBITDA for 2022 was $9.2
million compared to a loss of $2.6
million in 2021, an improvement of 450%.
- The year-over-year cash used in operating activities
significantly improved to $0.1
million in 2022 compared to $10.0
million in 2021.
- Liquidity, including cash and credit facility availability, of
$11.4 million as at December 31, 2022.
LIQUIDITY AND CAPITAL RESOURCES
Summary of Consolidated Cash Flows
Cash provided by
(used in)
|
Three months
ended
December
31,
|
Twelve months
ended
December
31,
|
($000s)
|
2022
|
2021
|
2022
|
2021
|
Operating
activities
|
2,782
|
(595)
|
(65)
|
(9,978)
|
Investing
activities
|
(1,668)
|
(2,957)
|
(8,408)
|
(12,374)
|
Financing
activities
|
(2,438)
|
(1,385)
|
2,979
|
31,442
|
Net increase
(decrease) in cash
|
(1,324)
|
(4,937)
|
(5,494)
|
9,090
|
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 October 31, 2022,
the term of the Credit Facility was extended to April 30, 2023.
As at March 28, 2023, $11.2 million in principal and accrued but unpaid
interest is outstanding on the Revolving Credit Facility.
ATM Program
On July 22, 2022, the Company
announced the establishment of an at-the-market equity offering
program (the "ATM Program") that allows the Company to issue
up to $20.0 million of Nova Shares
from treasury to the public at the discretion of the Company and
subject to regulatory requirements. Any Nova Shares sold through
the ATM Program will be sold at prevailing market prices when
issued in ordinary broker's transactions on the TSX, or another
Canadian marketplace on which the common shares are listed, quoted,
or otherwise traded. The ATM Program provides Nova optionality to
access additional capital if needed. On December 29, 2022, the Company issued 16,500 Nova
Shares through the ATM Program for nominal proceeds, net of share
issuance costs. No Nova Shares were issued under the ATM Program
subsequent to December 29, 2022.
STRATEGIC OUTLOOK
Nova's strategy is to be one of the largest and fastest-growing
cannabis retailers in Canada. Its
goal is 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 continues to
remain disciplined and customer focused by choosing the best real
estate for its strategy – whether through acquiring stores or
building its own.
- The Company partnered with SNDL for its Value Buds' private
label strategy, which launched in November
2022 in Alberta. 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.
- The Company continues to remain aggressive with its pricing
strategy to capture further market share. Nova has begun adjusting
pricing across all categories in Alberta to test elasticity and understand
consumer buying trends. This contributed to the sequential gross
margin improvement in the fourth quarter of 2022 from the third
quarter of 2022.
- Nova has opened or acquired an additional three stores in 2023,
one in Alberta and two in
Ontario. Pending completion of the
strategic partnership with SNDL, announced by the Company on
December 20, 2022, the Company will
acquire an additional 26 stores located in Alberta, Saskatchewan and Ontario from SNDL's retail network, increasing
the Company's store footprint by more than 28%.
CONFERENCE CALL
Nova will host a conference call and webcast at 10:30 a.m. EDT (8:30 a.m.
MDT) on Wednesday, March 29,
2023.
Call Access
Canada: 1-800-319-4610
International: +1-604-638-5340
Webcast Access
To access the live webcast of the call, please visit the
following link:
https://services.choruscall.ca/links/novacannabis2022q4.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 Toll Free: 1-800-319-6413 or International
Toll: +1-604-638-9010
When prompted, enter Replay Access Code: 9968#
For further information, refer to the Company's interim
financial statements and MD&A for the three and twelve months
ended December 31, 2022, which are
available from the Company's profile on SEDAR, at www.sedar.com, or
on 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 applicable securities legislation.
Forward-looking statements are typically identified by words such
as "continue", "anticipate", "will", "believes", "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: the Company's
expectations regarding its growth and business strategies; the
launch of the at-the-market equity offering program and the
issuance of common shares thereunder; Nova's private label
strategy; Alberta and Ontario expansion; and the completion of the
Nova Reorganization and the expected benefits resulting
therefrom.
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; demand
for the products the Company sells; other factors that will drive
sales growth in the Value Buds banner, 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;
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, Ontario and Saskatchewan), 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 Nova and its shareholders; the Company's ability to
complete the Nova Reorganization and to realize the projected
benefits; 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.