CALGARY, April 22, 2020 /CNW/ - YSS Corp.™ (the
"Company" or "YSS") (TSXV: YSS) (WKN: A2PMAX), a
premier Canadian cannabis retailer with operations under the
YSSTM and Sweet TreeTM brands and a trusted
destination to explore and discover cannabis in Canada, is
pleased to announce its fourth quarter and year end 2019
financial results and provide a preliminary outlook on Q1 2020.
2019 was an eventful year for YSS, highlighted by growth from
zero to 14 operating stores, three acquisitions, multiple corporate
changes and cannabis sector volatility, all in the headwinds of
industry challenges including supply shortages, multiple licensing
moratoriums, an evolving regulatory environment, competition from
the black market, industry scandals and delays in cannabis 2.0
product roll-out. The Company's unwavering focus on
fundamentals, corporate flexibility and value creation, supported
by conservative financial and operational practices, was critical
to navigating 2019 and has positioned YSS for sustainability in
2020 and beyond, despite recent industry challenges and the broader
potential business and economic impact caused by the COVID-19
pandemic.
"I'm extremely proud of our team's performance and
accomplishments in 2019," said Theo
Zunich, President and CEO of YSS. "The Canadian cannabis
industry continues to offer attractive growth potential and we are
positioning the Company to capture that growth. In 2019 we
developed a sound foundation, highlighted by strides made in Q1
2020, that we can continue to build on during the rest of the year
with the objective of exiting 2020 with a positive run-rate
EBITDA."
2019 Highlights
1 Non-IFRS
measure. Store-Level EBITDA is defined as revenue less cost
of goods sold and operating costs before corporate general &
administrative expenses and Corporate EBITDA is defined as
Store-Level EBITDA less corporate general & administrative
costs.
|
Results
Snapshot:
|
Q4
2019
|
Full Year
2019
|
Revenue
($000s)
|
$3,652
|
$8,541
|
Gross Margin
($000s)
|
$1,067
|
$2,701
|
Gross Margin
(%)
|
29%
|
32%
|
Store-Level
EBITDA1 ($000s)
|
$36
|
$821
|
Corporate
EBITDA1 ($000s)
|
($896)
|
($2,224)
|
- Cash on hand at December 31, 2019
of $6.4 million with no debt
obligations, positions YSS with the financial flexibility to
support the Company's operations, organic growth initiatives and
strategic acquisition opportunities.
- Inventories of cannabis and cannabis accessories totaled
$1.0 million at the end of Q4 2019,
compared to $1.3 million at the end
of Q3 2019, reflective of the Company's successful inventory
optimization strategies.
- Organic store build-out costs averaged $379 thousand on the most recent six stores, a
27% decrease from the first six constructed stores.
- Established critical operational foundation and technology
implementation to facilitate efficient future expansion with
limited incremental general and administrative expenses.
2019 Year in Review
The first full calendar year of cannabis legalization in
Canada proved to be illustrative
of the dynamics and challenges of an industry at the very beginning
of its life cycle. Expectations, analyst forecasts and growth
were muted by regulatory delays and uncertainty, supply chain
issues, and competition from the black market. Progress was
made in 2019 but the year is not representative of the ultimate
potential of the cannabis industry in Canada.
Over the past twelve months, YSS remained focused on building an
organization that is prudently managed within an early stage
industry that offers attractive, multi-year growth potential.
The Company believes that adhering to capital discipline and
fundamental retail principles are the keys to success as the
industry aligns with the traditional consumer packaged goods
sector; cost controls and operational efficiencies are
critical. Throughout 2019, YSS has demonstrated the ability
to pivot as needed, to move aggressively or defensively depending
on market conditions, and has maintained a strong balance sheet
that will enable it to weather uncertainty and execute on growth
strategies.
During the fourth quarter of 2019, the market conditions in
Alberta became more representative
of a competitive retail environment with hundreds of new cannabis
store entrants, an improving supply dynamic and material wholesale
price decreases. Existing cannabis stores in Alberta were confronted with new aggressive
competition and forced to cut margins to both compete and liquidate
old inventory purchased at higher wholesale prices.
Meanwhile, the legal market, as a whole, made small steps in
capturing its share of the black market. Data analysis
demonstrating growing traffic and stable basket sizes, despite the
increased competition and reduced product prices, supports these
conclusions. YSS views the fourth quarter of 2019 as a
corporate baseline period for future results.
Q1 2020 Outlook
- Subsequent to year end, YSS opened three additional locations,
including its two flagship stores in Calgary (YSS 4th Avenue and Sweet Tree 17th
Avenue), as well as YSS Grande Prairie, which brought the Company's
operating stores to 17.
- Forecast revenue for Q1 2020 is expected to be approximately
$4.2 million, representing an 15%
increase over Q4 2019.
- Gross margin in Q1 2020 is forecast to be approximately
$1.3 million, representing a 30%
gross margin as a percentage of sales for the quarter and a 19%
increase in gross margin over Q4 2019.
The initial introduction of cannabis edibles in January 2020 further diversified YSS' product
offering and has been met with strong demand and positive customer
feedback. On February 7, 2020,
the Alberta Gaming Liquor and Cannabis Commission ("AGLC") reversed
the decision to postpone the introduction of cannabis vaporizer
products, which became available in Alberta stores mid-February and have proven to
be the highest growth product in the quarter. Additional
cannabis 2.0 products, including gummies, beverages, topicals and
concentrates, are now available in limited supplies and dried
flower supply continues to improve in terms of quality, price and
availability. The improving supply dynamic will continue to
enhance YSS' exciting suite of products.
YSS Operational Update
The current COVID-19 situation has created an unprecedented
operating environment for many businesses, including YSS.
Cannabis retail has been deemed an essential service and
allowable business in Alberta and
Saskatchewan, respectively, and
YSS and Sweet Tree stores remain open with reduced operating
hours. Although operations have not been materially
disrupted, YSS follows a general practice of continually pursuing
optimization strategies and is collaborating with landlords and
investigating government sponsored assistance programs that would
further solidify corporate stability.
Trust has always been one of the Company's core business values
and now, in the face of the COVID-19 pandemic, trust is prioritized
more than ever. YSS cares deeply about the safety and
well-being of its employees, customers, and partners, and has put
measures in place to ensure stores are clean and safe. In
addition, YSS will be launching its click-and-collect platform in
the coming days. More information on our COVID-19 response
and the launch of click-and-collect can be found at the YSS
website: www.ysscorp.ca.
In Alberta, YSS is advancing
plans to commence construction on two locations, one in
Calgary and one in Edmonton.
In Ontario, YSS has received
its Retail Operator License from the Alcohol and Gaming Commission
of Ontario ("AGCO") and has
applied for a Retail Store Authorization for its Waterloo location.
Restrictions on non-essential construction and a temporary
pause on issuing new Retail Store Authorizations limits further
progress at this time. The Company's strategy is to remain
focused but flexible in Ontario
where progress is not critical to the short-term goal of exiting
the year with a positive run-rate EBITDA .
Additional Information
Selected financial and operational information is outlined in
this press release and should be read in conjunction with YSS' the
audited consolidated financial statements for the year ended
December 31, 2019 (the "annual
financial statements") and the related management's discussion and
analysis ("MD&A"), each of which is filed on SEDAR at
www.sedar.comand posted to the Company's website at
https://ysscorp.ca/.
For information on store locations and opening dates please
visit www.ysscorp.ca, www.sweettreecannabis.com and follow us on
social media.
For additional information regarding YSS Corp. please see the
Company's website at www.ysscorp.ca/investors and filings available
under the Company's profile on SEDAR at www.sedar.com.
About YSS Corp.
With retail operations under the YSSTM and
Sweet TreeTM brands, YSS Corp. is a premium
cannabis retailer and the trusted destination to explore and
discover cannabis in Canada. YSS
operates 17 locations across Alberta and in Saskatchewan under the YSS and Sweet Tree
brands. In addition, YSS maintains a strategic portfolio of
under construction, secured and prospective locations that
represent future organic growth potential for the Company. YSS
management brings proven expertise across capital markets, retail
operations, hospitality, cannabis, financial management and a
strong commitment to deliver shareholder value by leveraging
high-quality opportunities within this exciting new industry. The
YSS retail experience is built on our five fundamental pillars:
convenience, value, selection, team, and above all else, trust.
Forward-Looking and Cautionary Statements
This news release may include forward-looking statements
including opinions, assumptions, estimates, the Company's
assessment of future plans and operations, and, more particularly,
statements concerning: YSS' retail cannabis business strategy,
including organic growth and strategic activities; the Company's
operations; COVID-19, the Company's continuous monitoring
thereof, actions taken in response thereto and the impact on the
Company's business, financial condition and results of
operations; the sustainability of the Company in
2020 and beyond; the objective of exiting 2020 with a positive
run-rate EBITDA; the Company's business strategy, including its
adherence to capital discipline and fundamental retail principals
and the impact thereof; the Company's strong balance sheet position
that will enable it to weather uncertainty and execute on growth
strategies; the supply of cannabis 2.0 products; the future
performance of the operating retail cannabis stores, including the
forecasted revenue and gross margin for the first quarter of 2020;
the Company's construction plans for two locations in Alberta; the Company's strategy with respect
to entering into Ontario; and the
Company's click and collect platform and timing thereof.
When used in this document, the words "will," "anticipate,"
"believe," "estimate," "expect," "intent," "may," "project,"
"should," and similar expressions are intended to be among the
statements that identify forward-looking statements.
The forward-looking statements are founded on the basis of
expectations and assumptions made by the Company. Forward-looking
statements are subject to a wide range of risks and uncertainties
and, although the Company believes that the expectations
represented by such forward-looking statements are reasonable,
there can be no assurance that such expectations will be realized.
Any number of important factors could cause actual results to
differ materially from those in the forward-looking statements
including, but not limited to: risks relating to COVID-19,
government regulation and laws and changes thereto (including with
respect to cannabis and COVID-19); the Company's operations;
the Company's ability to capitalize on
potential opportunities that may arise and the ability to exercise
thereon; risks relating to future acquisitions, construction
and development of new stores; the receipt of necessary
permits, licenses and regulatory and third party approvals and the
timing thereof; competition; the ability of management to execute
its strategic plan; dependence on key personnel; labour costs,
shortages and labour relations; availability of cannabis products
and accessories from licensed producers and suppliers; supply
interruption or delays; dependence on suppliers; intellectual
property risks; risks related to product recalls and product
liability; unfavourable publicity and consumer perception with
respect to cannabis generally and cannabis administration; risks
related to cybersecurity; industry conditions and events;
the size of the recreational cannabis market; changing customer
habits; the state of the economy including general economic
conditions in Canada, the U.S. and
globally; the unpredictability and volatility of the price of the
common shares; restrictions on potential growth; availability of
sufficient financial resources to fund the Company's capital
expenditures; changes in tax rates and government mark-ups;
the state of domestic capital markets; the ability to obtain
financing; changes in general market conditions; and other factors
more fully described from time to time in the reports and filings
made by the Company with securities regulatory authorities. Please
refer to the Company's management's discussion and analysis for the
year ended December 31, 2019 for
additional risk factors relating to the Company, which can be
accessed under the Company's profile on
www.sedar.com.
Except as required by applicable laws, the Company does not
undertake any obligation to publicly update or revise any
forward-looking statements.
This news release contains future-oriented financial
information and financial outlook information (collectively,
"FOFI") about the Company's revenue and gross margin, which are
subject to the same assumptions, risk factors, limitations, and
qualifications as set forth in the above paragraphs. FOFI contained
in this document was approved by management as of the date of this
document and was provided for the purpose of providing further
information about YSS' future business operations.
YSS disclaims any intention or obligation to update
or revise any FOFI contained in this document, whether as a result
of new information, future events or otherwise, unless required
pursuant to applicable law. Readers are cautioned that the FOFI
contained in this document should not be used for purposes other
than for which it is disclosed herein.
Store-level EBITDA (Earnings Before Interest Tax Depreciation
Amortization) is not a measure recognized by IFRS and does not have
a standardized meaning prescribed by International Financial
Reporting Standards ("IFRS"). Investors are cautioned that this
measure should not be relied on as an indicator of the Company's
financial performance, of its cash flows from operating, investing
and financing activities or be relied on 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, this measure may not be
comparable to similar measures presented by other issuers. Please
refer to the MD&A for additional information relating to
non-IFRS measures.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this news release.
SOURCE YSS Corp.