A 5th Consecutive Year of Positive Free Cash Flow
Unaudited Fiscal Year Financial Highlights (
- Revenue of
$28.3 million , down 2% from last year – state ofNevada sales down 6% over the same period1 - Gross Margin of 39.4%, down from 46.4% the previous year driven primarily by one-time items discussed below
- Adjusted EBITDA2 of
$4.6 million - Earnings (Loss) per Share of (
$0.02 ) compared to$0.00 last year - Cash Flow from Operations of
$3.3 million ; Free Cash Flow2 of$2.7 million inclusive of$1.3 million taxes paid in the year - Total Liabilities reduced by
$1.5 million for the year
Q4 Financial Highlights (
- Revenue of
$6.5 million – a 1% increase in same store sales over the previous Q4, offset by a decline in wholesale revenue - Gross Margin of 43.5%, up from 40.0% in Q3, and up significantly from 23.5% in Q4 last year
- Adjusted EBITDA of
$1.1 million , an increase of 16% over Q3 and 17% over the prior Q4 - Cash Flow from Operations of
$0.5 million which includes a partial tax payment made in Q4
Fiscal Year and Q4 Management and Operational Commentary:
"We are pleased our Company continues to outperform the state of
___________________ |
1 |
2 "Free Cash Flow", "Adjusted EBITDA" and "same store sales" are non-GAAP financial measures. See "Non-GAAP Financial Measures" below for a discussion of such non-GAAP financial measures and a reconciliation to the closest comparable GAAP financial measures. |
C21 generated
Gross Margin for the year was 39.4%, down from 46.4% last year, resulting from a number of factors including curtailment of our cultivation operations to facilitate grow room improvements, implementation of an expanded customer loyalty program, inflation pressures and price compression in the industry. Q4 Gross Margins of 43.5%, up from 23.5% in the fourth quarter last year, and up 350 basis points from Q3, reflects the rebound in margins having completed the improvements to the facility. Margins, while continuing to improve throughout the year, remain compressed relative to historical levels due to continued pricing pressures in the state.
Cash Flow from Operations was
C21 reported a Net Income Before Tax of
Cash at the end of Q4 was
As C21 operates in the cannabis industry, the Company is subject to the limitations of Internal Revenue Code ("IRC") Section 280E for US income tax purposes. Under 280E, the Company is only allowed to deduct expenses for tax purposes directly related to costs of goods sold. Given the recent announcement by the D.E.A. to reclassify cannabis as a Schedule III drug, C21 anticipates the elimination of the future applicability of IRC Section 280E on its business upon final rule. Many
During the year, the Company appointed
Following the year-end, the Company announced an agreement to acquire a 6,500sqf dispensary in
Non-GAAP Measures:
C21 reports its financial results in accordance with GAAP and uses a number of financial measures when assessing its results and measuring overall performance. Some of these financial measures and ratios are not calculated in accordance with GAAP. The Company refers to certain Non-GAAP financial measures such as "Free Cash Flow", "Adjusted EBITDA" and "same store sales". These measures do not have any standardized meanings prescribed by GAAP and may not be comparable to similar measures presented by other issuers. The Company considers these measures to be an important indicator of the financial strength and performance of its business. The Company believes the adjusted results presented provide relevant and useful information for investors because they clarify the Company's actual operating performance, make it easier to compare the Company's results with those of other companies and allow investors to review performance in the same way as the management of the Company. Since these measures are not calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, the Company's reported results as indicators of the Company's performance, and they may not be comparable to similarly named measures from other companies. The tables below provide reconciliations of Non-GAAP financial measures to the most directly comparable GAAP measures.
"Free Cash Flow" is defined as Cash Provided by Operating Activities from Continuing Operations in a period minus capital expenses of property and equipment. Management believes that Free Cash Flow, which measures the Company's ability to generate additional cash from our continuing business operations, is an important financial measure for use in evaluating the Company's financial performance. Free Cash Flow should be considered in addition to, rather than as a substitute for, consolidated net income as a measure of the Company's performance and net cash provided by operating activities as a measure of liquidity.
Free Cash Flow:
Quarter Ended | |||||
Cash Provided by Operating Activities OCF Margin% | $ 506,477 | $ (110,329) | $ 1,649,786 | $ 1,204,347 | $ 1,215,735 |
Purchase of Property and Equipment | (7,240) | (259,343) | (202,182) | (41,803) | (9,071) |
Free Cash Flow | 499,237 | (369,372) | $ 1,447,604 | $ 1,162,544 | 1,206,664 |
"Adjusted EBITDA" is defined as EBITDA (earnings before depreciation and amortization, depreciation and interest in cost of sales, income taxes, and interest) less accretion, loss from discontinued operations, one-time transaction costs and all other non-cash items. The Company has presented "Adjusted EBITDA" because its management believes it is a useful measure for investors when assessing and considering the Company's continuing operations and prospects for the future. Furthermore, "Adjusted EBITDA" is a commonly used measurement in the financial community when evaluating the market value of similar companies.
"same store sales" is a metric commonly used in the retail industry and is defined as retail sales for stores in operation in the applicable comparable periods. The Company believes this metric is useful in assessing sales trends over a particular period of time.
Adjusted EBITDA:
Q4 | Q3 | Q2 | Q1 | Q4 | |||||||||
Net Income (Loss) | $ (1,209,694) | $ (376,150) | $ (416,086) | $ (471,045) | $ (2,119,159) | ||||||||
Interest expenses, net | - | - | 3,956 | 31,254 | 60,530 | ||||||||
Provision for Income Taxes | 1,723,925 | 563,100 | 602,674 | 592,426 | 672,164 | ||||||||
Depreciation and Amortization | 359,568 | 355,536 | 346,294 | 347,578 | 340,664 | ||||||||
Depreciation and Interest in COGS | 203,092 | 203,092 | 203,092 | 203,092 | 203,091 | ||||||||
EBITDA | $ 745,578 | $ 739,930 | $ 703,305 | $ (842,710) | |||||||||
Change in fair value of derivative liabilities | 59,217 | - | - | 392,155 | 14,830 | ||||||||
Share based compensation | 5,527 | 5,499 | 5,595 | 5,507 | 20,803 | ||||||||
Loss from discontinued operations | (40,357) | 18,932 | 19,351 | 83,891 | 713,712 | ||||||||
One-time special project costs | - | 159,000 | - | - | - | ||||||||
Production curtailment, non-cash inventory adjustments | - | - | 206,000 | 450,000 | 1,012,000 | ||||||||
Other gain/loss | (4,083) | 13,800 | 921 | (73,695) | 18,723 | ||||||||
Adjusted EBITDA | $ 1,097,195 | $ 942,809 | $ 971,797 | $ 1,561,163 | $ 937,358 |
Q4 Balance Sheet Summary:
(US$) | |||
Assets | |||
Cash | 2,408,526 | 1,891,772 | |
Inventory | 2,708,721 | 4,173,573 | |
Other current | 2,015,548 | 2,533,949 | |
Current Assets | 7,132,795 | 8,599,294 | |
Fixed Assets/ | 47,233,895 | 49,712,110 | |
Total Assets | 54,366,690 | 58,311,404 | |
Liabilities | |||
Accounts payable | 2,106,399 | 2,921,426 | |
Promissory note – current portion | - | 2,026,667 | |
Income taxes payable | 9,719,872 | 7,736,858 | |
Other notes, current lease, deferred tax etc. | 2,351,292 | 2,289,316 | |
Current Liabilities | 14,177,563 | 14,974,267 | |
Lease liabilities | 8,074,139 | 8,554,702 | |
Derivative liability and other | 235,707 | 467,359 | |
Total Liabilities | 22,487,409 | 23,996,328 | |
Shareholders' Equity | 31,879,281 | 34,315,076 | |
Total Liabilities and Shareholders' Equity | 54,366,690 | 58,311,404 | |
Summary Income Statement for the years ended :
(US$) | ||
Revenue | 28,285,200 | 28,888,410 |
Cost of Sales | 17,135,434 | 15,487,264 |
Gross Profit | 11,149,766 | 13,401,146 |
Gross Margin% | 39.4 % | 46.4 % |
Total Expenses | 9,635,274 | 9,445,908 |
Income from Operations | 1,514,492 | 3,955,483 |
Income Tax Expense | (3,482,125) | (2,809,768) |
Net Income (Loss) | (2,472,975) | 293,211 |
Q4 Financial Summary:
Q4 | Q3 | ||
(US$) | |||
Revenue | 6,548,812 | 6,882,078 | |
Cost of Sales | 3,702,469 | 4,129,429 | |
Gross Profit Gross Margin% | 2,846,343 43.5% | 2,752,649 40.0% | |
Total Expenses | 2,317,335 | 2,532,967 | |
Income from Operations | 529,008 | 219,682 | |
Income Tax Expense | (1,723,925) | (563,100) | |
Net Income (Loss) | (1,209,694) | (357,218) | |
Earnings (Loss) Per Share | (0.01) | (0.00) |
Retail Sales Summary:
(US$) | Q4 | Q3 | Q2 | Q1 | Q4 |
Retail Sales | 6,303,351 | 6,433,991 | 6,383,974 | 6,193,356 | 6,248,051 |
Wholesale Sales | 245,461 | 448,087 | 778,133 | 1,498,847 | 785,001 |
Total Sales | 6,548,812 | 6,882,078 | 7,162,107 | 7,692,203 | 7,033,052 |
About
Cautionary Note Regarding Forward-Looking Information and Statements:
This news release contains certain "forward-looking information" within the meaning of applicable Canadian securities legislation and may constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, "Forward-Looking Statements"). Such Forward-Looking Statements represent the Company's beliefs and expectations regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company's control.
Forward-Looking Statements include, but are not limited to, statements with respect to: the completion of the new dispensary and the expected benefits to be derived therefrom, including the ability of the Company to expand its retail footprint in
Forward-Looking Statements are based on assumptions, estimates, analyses and opinions of management of the Company at the time they were provided or made in light of its experience and its perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, including: (i) the successful completion of the acquisition of the new dispensary in
A variety of factors, including known and unknown risks, many of which are beyond the Company's control, could cause actual results to differ materially from the Forward-Looking Statements in this news release. Such factors include, without limitation: the inability to consummate the acquisition of the new dispensary and the inability to obtain required regulatory approvals and third-party consents and the satisfaction of other conditions to the consummation of the dispensary acquisition on the proposed terms; the inability to effectively manage growth; inputs, suppliers and skilled labour being unavailable or available only at uneconomic costs; the adequacy of the Company's capital resources and liquidity, including but not limited to, availability of sufficient cash flow to execute the Company's business plan (either within the expected timeframe or at all); changes in general economic, business and political conditions, including changes in the financial markets; changes in applicable laws generally, including developments surrounding Section 280E, and adverse future legislative and regulatory developments involving medical and recreational marijuana; the risks of operating in the cannabis industry in
Although the Company believes that the assumptions and factors used in preparing, and the expectations contained in, the Forward-Looking Statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such Forward-Looking Statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements. Should assumptions underlying the Forward-Looking Statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected.
The Forward-Looking Statements contained in this news release are made as of the date of this news release, and the Company does not undertake to update any Forward-Looking Statements that are contained or referenced herein, except in accordance with applicable securities laws.
Neither the Canadian Securities Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Canadian Securities Exchange) accepts responsibility for the adequacy or accuracy of this release.
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