TerrAscend Announces Revenues for Second Quarter 2019 and Increases Full Year Guidance

Published: August 23, 2019

TerrAscend Announces Revenues for Second Quarter 2019 and Increases Full Year Guidance

TerrAscend Corp. reported financial results for the second quarter ending June 30, 2019. Financial results and analyses are available on the Company’s website (www.terrascend.com) and SEDAR (www.sedar.com). All figures are reported in Canadian dollars, unless otherwise indicated.

Financial Highlights

  • For the three months ended June 30, 2019, TerrAscend generated revenue of $17.6 million, an increase of 21% from $14.6 million in the first quarter of 2019 and compared with $0.01 million in the comparable second quarter of 2018.
  • Adjusted EBITDA (non-GAAP measure) was ($12.5 million) for the second quarter of 2019, compared with ($6.4 million) in the first quarter of 2019 and ($4.0 million) in the comparable second quarter of 2018.
  • On a pro forma basis, TerrAscend, including completed and pending disclosed acquisitions, generated $42 millionof revenue in the second quarter, or over $168 million on an annualized basis. Second quarter pro forma revenue increased 13% over first quarter pro forma revenue of $37 million.1
  • Company raises guidance. Revenues now expected to exceed $141 million1 in 2019, up from $135 million1 as previously announced on April 15, 2019
  • As of June 30, 2019, the Company held $17 million in cash and cash equivalents. On May 27, 2019, the Company closed the previously announced private placement with total proceeds of approximately $69 million.

“The Company continues to experience strong growth in demand.  We are pleased to be in the position to raise our revenue guidance only four months after initially providing it,” said Michael Nashat, TerrAscend’s CEO. “We are seeing a substantial acceleration in sales growth in the third quarter and expect this to continue through the fourth quarter.  In Canada, our Haven Street Premium Cannabis brand is resonating with consumers. This sales growth will be driven by licensing of expanded space, scaled-up production, increased automation, improvements in operational efficiencies and continued growth in the adult-use, medical and international markets.”

“We continue to focus on improving margins, which will be fueled by cost effective strategic supply agreements that provide access to bulk dry flower and extract-based cannabinoids while maintaining TerrAscend’s standards for quality and consistency. We currently have nine existing bulk supply partners and several additional new partners coming online in the near term. Additionally, our new product launches, including vape pens and cartridges, premium edibles and hot beverages, will utilize our improving operational scalability to create high margin product formats, delivering incremental shareholder value.”

Second Quarter 2019 Highlights

  • The Company has completed construction and has commenced the licensing process with Health Canada for the additional 41,000 square feet of its 67,000 square foot Mississauga facility. Once licensing has been granted, the Company expects to deliver significant increases in production capacity, automation and cost efficiency. Specifically, the scalability of our operations will allow us to fill in excess of 400,000 Vape Pens/ Cartridges per month. The expanded space is expected to be licensed and online by the fourth quarter of 2019.
  • In the second quarter, the Company received its GMP certificate in accordance with the rules governing medicinal products in the European Union for its facility in Mississauga, Ontario.
  • On May 27, 2019, the Company closed its upsized non-brokered private placement to raise approximately $69 million through the issuance of common shares. Please refer to the Company’s press releases dated May 7, 2019and May 28, 2019 for more information.
  • On June 6, 2019, the Company announced the closing of the California component of the Apothecarium transaction. Apothecarium is a multi-state award-winning retail dispensary operator with three dispensaries in California; a vertically integrated operation in Nevada with cultivation, manufacturing, and an Apothecarium dispensary; and Valhalla Confections, a California provider of leading premium edible products. The Apothecarium Nevada transaction will close once the Company receives final regulatory approvals from certain authorities, which is expected to occur late in the third quarter of 2019.
  • The Company continues to drive sales for its adult-use brand, Haven Street premium cannabis, in the six Canadian provincial jurisdictions where it is sold, achieving top-10 selling status where reported.
  • The Company made substantial progress in building out its U.S. dispensary footprint. It plans to open new Apothecarium locations in Berkeley, California, an additional undisclosed California location, and Phillipsburg, New Jersey in the fourth quarter of 2019.
  • In June of 2019, Arise Biosciences (“Arise”) officially launched its new Original Hemp™ brand, featuring a premium line of hemp-derived cannabinoid products, which is experiencing strong consumer demand and feedback.
  • The Company continues to execute in New Jersey, including hiring of key personnel and the building-out of its cultivation/processing facility in Boonton Township and dispensary in Phillipsburg. The Company expects both sites will be operational in the fourth quarter of 2019.
  • On July 19, 2019, PharmHouse Inc., TerrAscend Canada’s supply partner, secured a cannabis cultivation license from Health Canada. PharmHouse will grow and supply flower, trim, and clones to TerrAscend Canada from 20% of the dedicated flowering from its 1.3 million square foot greenhouse.
  • On August 7, 2019, TerrAscend Canada entered into a new strategic supply agreement with Indiva Limited for bulk extraction services to provide bulk supply for TerrAscend’s next generation of product formats.

Subsequent Events

  • On July 8, 2019 the Company received its oil sales license and has commenced sales in Canada.
  • On August 2, 2019, the Company signed a definitive agreement to acquire Ilera Healthcare (“Ilera”), one of five vertically-integrated cannabis cultivator, processor, and dispensary operators in Pennsylvania. Ilera plans to open two additional dispensary sites in Pennsylvania within the year. In addition to selling its products in its own dispensary, Ilera distributes its dried flower, concentrates, tinctures, and topicals to 50 of Pennsylvania’s 52 medical cannabis dispensaries. The Company is progressing through the required closing conditions and anticipates the transaction closing before year end.
  • On August 14, 2019, TerrAscend made its first shipment to Germany through its sales and distribution agreement with iuvo Therapeutics GmbH, making it the first and only global cannabis operator with sales in the US, Canada, and the EU.
  • Construction is now complete at the Company’s Drug Preparation Premises, SolaceRx, and the Company expects licensing from the Ontario College of Pharmacists in the fourth quarter.

Second Quarter 2019 Results

 Three months 
ended June 30, 
2019

 Three months 
ended June 30, 
2018

$

$

Sales

17,572

9

Gross profit (loss) before gain on fair value of biological assets

1,509

(1,025)

Net impact, fair value of biological assets

649

99

Gross profit (loss)

2,158

(926)

Total operating expenses

21,671

4,272

Net Loss and Comprehensive Loss after Income Tax

(21,532)

(5,198)

Less: Net loss attributable to non-controlling interest

432

Net loss attributable to controlling interest

(21,100)

(5,198)

Net loss per share – basic

(0.37)

(0.05)

 Three months 
ended June 30, 
2019

 Three months 
ended June 30, 
2018

Three months 
ended March 31, 
2019

Net Loss and Comprehensive Loss after Income Tax

(21,532)

(5,198)

(11,200)

Unrealized gain on changes in fair value of biological assets

(1,009)

(99)

(444)

Realized loss on changes in fair value of biological assets

360

17

Accretion and accrued interest

1,300

732

Transaction costs

2,997

808

Depreciation of property, plant and equipment

556

185

290

Amortization of intangible assets

878

20

565

Share-based payments

2,196

1,127

2,566

Unrealized gain on investments

2,107

617

Current income taxes

39

Future income taxes

(414)

(372)

Adjusted EBITDA – Non-GAAP Measure

(12,522)

(3,966)

(6,421)

December 
31, 2018

June
30, 2019

$

$

Cash and cash equivalents

21,773

17,056

Working capital

27,718

(17,826)

Non-current assets

30,184

212,470

Total assets

88,978

280,947

Current liabilities

31,076

86,303

Long-term liabilities

43,103

Total shareholders’ equity

57,902

151,541

TerrAscend provides quality products, brands, and services to the global cannabinoid market. As the first North American Operator (“NAO”), with scale operations in both Canada and the US, the Company participates in the medical and legal adult use market across Canada and in several US states where cannabis has been legalized for therapeutic or adult use.

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