TerrAscend Earnings + Call Notes
U.S. cannabis leader readies to expand.
Terrascend Earnings
$77.5M Revs; est. $80.9M
$15.6M AEBITDA; est. $15.9M
$37.7M GP; est. $38.2M
$12.6M OI; est. $8.9M
48.6% GM; est. 47.3%
($6.2M) NI; est. ($9.4M)
($0.03) EPS; est. ($0.02)
$13.1m CFFO
$11.7m FCF
#1 market share position in New Jersey throughout first half of 2024.
“For Q2, revenue and EBITDA increased materially year-over-year and we delivered another quarter of positive free cash flow. We have the right team, high-performing assets, and a major differentiation in having a ‘wide open map’. This will enable us to strike accretive deals to enter attractive new states via best in breed operators.
We’re closing in on multiple transactions to expand our geographic footprint and the recent closing of our $140M term loan provides the financial flexibility and fuel to execute this growth strategy. We can’t wait to share more details, when appropriate.”
Executive Chairman Jason G. Wild
Call Notes
YoY net revenue/ aEBITDA growth.
OPCF+
FCF+.
7.5% YoY revenue growth.
21.9% YoY aEBITDA growth; 20.2% margin.
$140m senior secured loan maturing Aug ’28.
^ no prepayment penalties; proceeds available for potential M&A transactions.
JW participated in the loan (on top of his equity stake)
No material debt maturing until late ’27.
Focused on larger tier 1 licenses in OH
^ allow 100k sq ft and up to 8 dispensaries.
In active discussions with multiple tier 1 operators
^ expect to close in on at least one of these in near-term.
When enter any market, want to be a market leader.
OH strategy is no different.
Taken a leadership role in case led by David Boies.
District court acknowledged there is pursuasive reasons to reexamine the way the CSA treats marijuana.
Taking case to Supreme Court, could be heard next year. 👀
This quarter marks 5th anniversary of operating in the U.S.
If I was told 5 years ago that the stock would be down 75% from when TSND was pre-revenue in the U.S, I wouldn’t have believed you and wouldn’t have been happy.
I’m not happy.
Short term voting machine, long term weighing machine.
More voting than weighing over last 5 years.
Keeping our head down and executing.
TSND held #1 market share in NJ through 1H ’24.
Holding Top positions in flower, vape, edibles and concentrates.
NJ Q2 wholesale revs up 100% YoY.
Down QoQ.
NJ revenue mix shifted to wholesale vs. retail.
NJ saw QoQ growth in retail during the quarter.
103 stores opened in NJ within 20 miles of TSND stores.
Maintained aEBITDA + CF margins in NJ due to strength of brands, cultivation yields, product quality, and low cost operations.
Exploring opportunities to expand NJ footprint through S/E partnerships.
MD retail/wholesale revs stable QoQ.
Recently completed Hagerstown MD cultivation expansion.
Additional supply will fuel wholesale growth and increase vertical sales in owned dispensaries.
Should enable gross margin improvements going forward.
Relocated MD dispensary in June.
More convenient store w/ drive through and increased floor space.
Believe have one of the highest retail footprints in MD.
In PA, retail revs flat QoQ; wholesale revs 2x’d YoY.
Growth driven by strong performance in value-oriented Legend brand, and expansion into edibles category w/ Valhalla + Wana brands.
Optimistic PA turns A/U in ’25.
Would be a $2b market by ’28.
Will turn on additional capacity in PA on A/U approach.
MI GM over 40% for 3rd consecutive quarter.
20 dispensaries in MI.
Expect to scale operational footprint in Midwest by entering OH, will better leverage MI scale / operational footprint.
MI the 2nd largest cannabis market in the U.S.
For M&A, evaluating best in-state operators at extremely accretive multiples.
Wholesale rev growth 75% YoY.
^ driven by increased demand for brands.
^ driven by new doors in NJ
^ driven by performance of edible brands in PA.
^ driven by doubling of wholesale revenue in MD.
Retail 8.7% decline YoY, mainly driven by new doors in NJ and reductions in unprofitable revenue in MI; offset by MD growth.
48.6% GM, down from 50.2% in YoY period.
Driven by channel mix shift + price compression in NJ.
^ partially offset by margin expansion in MI + MD.
GM up 60bps QoQ.
G&A of $22.1m, 28.5% margin; vs $28.5m and 39.5% margin in YoY period.
($6.2m) net loss vs. ($12.9m) in YoY period.
Driven by revenue / margin growth, while reducing G&A expenses.
$15.6m aEBITDA, 20.2% margin vs. $12.8m, 17.8% margin in YoY period.
$30.5m cash.
$13.1m CFFO(continuing) vs. $1.8m in YoY period.
8th consecutive quarter of CFFO(continuing).
Q2 ’24 included $8.4m federal tax refund, related to an amended return.
$1.4m CAPEX.
$11.7m FCF vs. ($0.2m) in YoY period.
Paid $5.8m of debt + $1.2m of distributions to NJ minority partners.
Q3 Guidance -expect flat to slightly down across the P&L sequentially.
Have financial resources + flexibility to execute on growth plans.
Moved debt from current to LT.
Flipped working capital to positive.
BDSA improved methodology of entire market.
As a result, TSND has been #1 in NJ for quite some time.
Spoke directly w/ BDSA to confirm their methodology, which is more accurate.
^ according to BDSA.
Seeing same growth in NJ retail trends into Q3.
Will continue to gain share.
Made a decision in NJ retail to extend Boontown facility.
Project will come online at beginning of ’25.
Quality of #1 market position.
Top 3 in all formats for NJ.
Exited the quarter in June for NJ.
Market grew by 1% in June, where TSND business grew by 4%.
Total of $30m tax refunds owed, received $8m thus far.
Nothing has been denied, no further news.
Massive improvements in yields in NJ during phase 1 of expansion.
Budgeted for ’24, knew was good on supply.
Thesis in NJ was that retail will be pressured, wholesale will make up, but didn’t know how long it would take / where stores would open.
Watching store by store traffic, basket size, items in basket, etc.
6mo of data gives TSND high confidence internal stores have gone back to growth.
Continuing to grow wholesale business in NJ helped prove needed to increase capacity in-state to service internal + external demand over next 1-2 years.
On M&A front, having a variety of conversations, different structures (some cash, mostly minimal cash; earn outs, etc.). Some extra cash on the balance sheet after repaying ’24 loan.
OH moved quicker than expected.
Hoping to be in OH in early days, first couple months of the program; feel more confident at this point + further along, will be in OH market in first 1-3 months of market being A/U.
OH M&A targets would drive material revenue / EBITDA.
Transformational deals.
Some deals w/ assets in multiple states that could add OH, but also looking at single state OH assets.
Learnings from previous deals on the operational side and on the structure side
^ learned in MD and structured earn outs out multiple years.
Have turned on several rooms in PA, helped double wholesale performance in state.
PA stores continue to average above state average per store.
Could potentially go deeper in PA retail.
Confidence in cult/manu capacity gives confidence to do that.
Inventory position in PA + across board very healthy across all states, especially PA.
Need to turn on additional rooms in PA to satisfy demand seen.
Wholesale, by nature, can be choppy QoQ.
NJ demand is there, confident will be able to continue filling that demand.
For wholesale to be successful, need brand, quality, relationships and ground game.
Will see NJ QoQ growth in wholesale into Q3.
Reason why decided need more capacity in ’25.
Rebounded to growth in NJ retail in Q2.
Being a little cautious there in guidance, may be able to beat it and growth retail, but assume wholesale growth offsets retail decline in NJ / remain flattish.
PA is healthy, further growth expected in wholesale.
Retail stable in MD.
Expect to grow MD wholesale.
^ finished capacity expansion, now building distribution / portfolio.
Expect growth in MD wholesale, not in the millions, but growth.
MI remains stable.
See potential cost synergies leveraging MI infrastructure into adjacent OH market.
Getting an OH deal done could push SG&A margin below 30%.
More interest in taking TSND stock as currency, but TSND less interested in using stock as part of the deal.
Deals are fighting for stock, or earn out notes.
Nothing to share on MI impact from OH border A/U.
TSND stores not closer to OH border to see that impact.
/end
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CB1 has a position and is an advisor; nothing herein should be considered advice.