Inner Spirit Holdings Ltd., a Canadian company that has established a national network of Spiritleaf retail cannabis stores, today announced it has filed its Audited Consolidated Financial Statements and corresponding Management’s Discussion and Analysis for the year ended December 31, 2020. The filings are available for review on the Company’s SEDAR profile at www.sedar.com and the Company’s website at www.innerspiritholdings.com.
Inner Spirit reported the following financial highlights for the year ended December 31, 2020. A reconciliation of the non-IFRS financial measures can be found under the “Non-IFRS Financial Measures” section of this news release.
- Total revenue was $26.8 million, an increase of 244% compared with $7.8 million in 2019.
- Royalty revenue was $4.2 million, an increase of 217% compared with $1.3 million in 2019. The increase in franchise royalties collected by Inner Spirit illustrates the rapid growth of the Spiritleaf network and highlights the benefits of the franchise model.
- System-wide retail sales1 was $105.3 million, an increase of 258% compared with $29.4 million in 2019. System-wide retail sales represent the aggregate revenue earned by franchised Spiritleaf retail cannabis stores and corporate-owned Spiritleaf retail cannabis stores, and do not solely represent the Company’s revenue. The Company only receives royalties and advertising fees in respect of franchised Spiritleaf retail cannabis store revenue forming part of the system-wide retail sales.
- Gross profit was $12.7 million or a gross margin of 47.2%, an increase of $8.9 million compared with $3.7 million or a gross margin of 47.9% in 2019.
- Operating loss before other expenses was $0.1 million, an improvement of $6.3 million compared with $6.4 million in 2019.
- Total net loss was $3.1 million, or $0.01 per share, compared with $11.3 million, or $0.06 per share, in 20192.
- Adjusted EBITDA1 was $3.4 million, an improvement of $8.2 million compared with an Adjusted EBITDA1 loss of $4.8 million in 2019.
- Cash flow provided by operations was $4.2 million, an improvement of $9.3 million compared with cash flow used in operations of $5.2 million in 2019.
- Cash increased to $4.7 million as at December 31, 2020, compared with $2.0 million as at December 31, 2019.
Inner Spirit reported the following financial highlights for the quarter ended December 31, 2020. Again, a reconciliation of the non-IFRS financial measures can be found under the “Non-IFRS Financial Measures” section of this news release.
- Total revenue was $9.2 million, an increase of 174% compared with $3.3 million in the fourth quarter of 2019.
- System-wide retail sales1 was $36.6 million, an increase of 164% compared with $13.9 million in the fourth quarter of 2019. System-wide retail sales represent the aggregate revenue earned by franchised Spiritleaf retail cannabis stores and corporate-owned Spiritleaf retail cannabis stores, and do not solely represent the Company’s revenue. The Company only receives royalties and advertising fees in respect of the franchised Spiritleaf retail cannabis store revenue forming part of the system-wide retail sales.
- Total net income was $1.1 million, an improvement of $5.1 million compared with a total net loss of $4.0 million in the fourth quarter of 20192.
“The Company’s financial results for 2020 show excellent year over year growth as we posted record revenue of $26.8 million for the year and in the fourth quarter were able to achieve net income of $1.1 million. Our now-proven ability to manage costs and operate efficiently as we build out the Spiritleaf network of stores bodes well for our future success,” said Darren Bondar, President and CEO of Inner Spirit.
BOUGHT DEAL OFFERING
Subsequent to the year-end, Inner Spirit announced a bought deal offering (the “Offering“) on February 17 and 18, 2021, which is expected to close on or about March 31, 2021. The Company intends to use the proceeds of the Offering to build out additional corporate Spiritleaf retail cannabis stores in select markets as well as for strategic, working capital and general corporate purposes.
The Company has developed a proven model of opening and operating Spiritleaf retail cannabis stores in key markets across Canada. In 2020, the Company opened 30 corporate and franchise Spiritleaf stores in British Columbia, Alberta, Saskatchewan, Ontario, and Newfoundland and Labrador. As of this weekend, an additional 14 corporate and franchise stores will have been opened so far in 2021. The Company recently opened a franchised store in Owen Sound, Ontario and plans to open a franchised store in downtown Toronto on the busy thoroughfare of Queen Street West this weekend. With the additions, Spiritleaf will have 25 locations serving communities in Ontario and a total of 82 locations across the country.
“We’re able to expand the Spiritleaf network organically due to the support and dedication of our franchise partners, employees, customers, strategic partners and investors. We have developed a strong business model that attracts entrepreneurs to invest their hard-earned capital in the Spiritleaf opportunity and to represent the brand in their communities. We have additional Spiritleaf store locations being prepared to open across the country and expect to exceed 100 stores by the end of the year,” said Bondar.
New Spiritleaf stores are expected to open in the Company’s existing markets of British Columbia, Alberta, Saskatchewan, Ontario, and Newfoundland and Labrador as well as in Manitoba in 2021.
Spiritleaf stores have been operating with enhanced customer service processes to ensure the safety of employees and customers due to the ongoing COVID-19 pandemic. Spiritleaf’s Select & Collect service enables customers to pre-shop and order online prior to pick-up in store or curbside or via delivery where permitted. The fast-growing and popular Spiritleaf Collective customer benefits program, which recently surpassed 230,000 members, streamlines and individualizes the shopping experience for guests. Please visit www.spiritleaf.ca for information on store openings, locations and operating hours.
“The Company certainly didn’t experience anything near a normal retail environment in 2020 due to the ongoing pandemic. Our Spiritleaf franchise partners and employees have been instrumental in keeping the organization focused and able to serve our communities and our customers to the best of our ability and in a safe manner at all times. These efforts enabled us to achieve many goals in 2020 as we became the largest single brand cannabis retailer in the country while delivering a truly authentic Spiritleaf experience to our customers,” said Bondar.
System-wide retail sales and Adjusted EBITDA are non-IFRS financial measures. For more details, see the “Non-IFRS Financial Measures” section below.
The comparative period has been restated to correct an accounting error treatment of the initial measurement and recognition of the convertible debentures issued in the second quarter of 2019. For more details, see the “Prior Period Restatement” section below.
About Inner Spirit
Inner Spirit Holdings Ltd. (CSE:ISH) is a franchisor and operator of Spiritleaf recreational cannabis stores across Canada. The Spiritleaf network includes franchised and corporate-owned locations, all operated with an entrepreneurial spirit and with the goal of creating deep and lasting ties within local communities. Spiritleaf aims to be the most knowledgeable and trusted source of recreational cannabis by offering a premium consumer experience and quality curated cannabis products including its Origins private label offering. The Company is led by passionate advocates for cannabis who have years of retail, franchise and consumer marketing experience. Spiritleaf holds a Franchisees’ Choice Designation from the Canadian Franchise Association for its award-winning national support centre. The Company’s key industry partners and investors include Auxly Cannabis Group Inc. (TSX.V:XLY), HEXO Corp (TSX:HEXO) (NYSE:HEXO), and Prairie Merchant Corporation. Learn more at www.innerspiritholdings.com and www.spiritleaf.ca.