ShinyBud Corp. reported financial results for its fiscal 2023 first quarter for the three months ended April 30, 2022 (the “first quarter”).
“We achieved record revenue and gross profit for the quarter and maintained a strong gross margin in a highly-competitive, deeply discounted retail sector,” said Kevin Reed, Chairman and Chief Executive Officer.
Mr. Reed added, “With our cannabis business established, we are excited to differentiate our company from other cannabis retailers by broadening our growth strategy to encompass pharmacy. We believe that the convergence of cannabis, health and wellness, pharmacies and medical care services is where the growth potential lies for ShinyBud, and that adding pharmacies to our corporate portfolio will bring benefits to both our customers and our shareholders.”
Fiscal 2023 First Quarter Highlights
Three months ended April 30, 2022 compared to the three months ended April 30, 2021.
- Record quarterly revenue grew 74% to $7.6 million
- Record quarterly gross profit of $2.8 million, a 72% increase
- Opened two new corporate locations, including Eastern Ontario’s only drive-thru cannabis store
- Strong gross margin of 37.4% compared to 37.9% year-over-year and 35.2% quarter-over-quarter
- Comprehensive net loss of $1.8 million comprised of a $0.42 million loss from store-level operations and a $1.3 million loss from corporate activities
- EBITDA(1) of negative $0.6 million compared to a gain of $0.8 million
- Adjusted EBITDA(1) decreased to $0.05 million from $0.8 million
- Cash balance of $2.6 million as at April 30, 2022
- Launched ShinyBuddy Club customer loyalty program in March 2022
Financial Highlights
Summary of financial information for the first fiscal quarter of 2023 for the three months ended April 30, 2022 compared to the three months ended April 30, 2021.
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Three Months Ended April 30, |
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|
2022 |
2021 |
Change |
|
|
$ |
$ |
||
|
Sales |
7,574,520 |
4,342,192 |
74 % |
|
Gross profit |
2,835,680 |
1,644,538 |
72 % |
|
Gross profit margin |
37.4 % |
37.9 % |
0 % |
|
General and administrative |
4,035,520 |
1,045,335 |
286 % |
|
(Loss) income before other income (expenses) |
(1,335,504) |
554,389 |
(341 %) |
|
Net (loss) income and net comprehensive (loss) income |
(1,758,475) |
363,774 |
(583 %) |
|
Basic and diluted (loss) income per share |
(0.16) |
0.05 |
(420 %) |
|
EBITDA(1) |
(568,311) |
789,519 |
(172 %) |
|
Adjusted EBITDA(1) |
46,345 |
789,519 |
(94 %) |
“ShinyBud’s first fully consolidated quarter as a corporate entity and collective management team reveals a strong performing retail platform underlying our cannabis line of business,” stated Jude Pinto, Chief Financial Officer and Chief Information Officer. “Following record revenue and a healthy gross margin, we will focus on enhancing EBITDA and maintaining a cannabis store portfolio in the range of 25 to 35 stores as our near-term retail growth plans will focus on pharmacy. Given the current macro market volatility, management believes that expanding ShinyBud’s operations into a retail sector that is complementary to cannabis and offers solid standalone business economics is a prudent approach to protecting shareholder value.”
Consolidated Performance
Three months ended April 30, 2022 compared to the three months ended April 30, 2021.
- During the first quarter, ShinyBud opened two new cannabis stores in Windsor and Ottawa, Ontario, increasing its corporate store count from 28 to 30 stores. Subsequent to the quarter, the Company opened an additional location in Stittsville, Ontario for a current total of 31 corporate stores.
- Record quarterly revenue of $7.6 million, 74% higher than the prior year period primarily driven by the growth in ShinyBud’s retail network through new store openings and acquisitions. completed in connection with a business combination with Mihi Inc. completed in January 2022. The ShinyBuddy Data Program contributed $0.49 million in revenue compared to $0.13 million in the prior year.
- Record quarterly gross profit of $2.8 million and 72% higher than the prior year interim period primarily driven by an expanded store network. During the first quarter, the Company focused on maintaining its strong gross margin of 37.4% by offering a carefully curated product offering and adding higher margin cannabis products.
- Total general and administrative expenses increased to $4.1 million, a 286% increase from the prior year period primarily due to the level of activity related to expanding the retail store network from eight stores to 30 stores and establishing scalable corporate functions to deliver against strategic growth plans. Notable increases include salaries and benefits, legal and professional fees primarily related to one-time strategic setup costs, and insurance and licensing fees.
- Comprehensive net loss of $1.8 million compared to a net comprehensive income of $0.4 million in the prior year interim period. Comprehensive net loss $1.8 million includes a $0.4 million loss from store-level operations and a $1.3 million loss from corporate activities.
- Excluding one-time professional fees, store-level net income for this quarter was $0.3 million with $1.0 million in corporate costs attributed to the Company’s cannabis line of business and $0.3 million in corporate costs attributed to the Company’s new pharmacy line of business. The Company expects that corporate costs will continue to proportionately shift as the Company reallocates resources to establishing its pharmacy network.
- A total $1.6 million revaluation of derivative liabilities, recorded as non-cash accounting gains, related to outstanding share purchase warrants that include a cashless exercise feature.
- A $1.3 million loss on extinguishment of loan payable recorded as a non-cash accounting loss related to the FirePower loan amendment executed on April 30, 2022.
- EBITDA(1) of negative $0.6 million compared to positive EBITDA of $0.8 million in the prior year interim period.
- Adjusted EBITDA(1) decreased to $0.05 million from $0.8 million in the prior year interim period. After the reversal of interest and depreciation and amortization, the significant one-time drivers of Adjusted EBITDA(1) are $0.5 million in strategic set up costs, a $1.6 million non-cash gain on revaluation of derivative liabilities related to outstanding warrants that include a cashless exercise feature, and a $1.3 million non-cash accounting loss on extinguishment of loan payable on the FirePower loan payable.
Of the $0.05 million in Adjusted EBITDA(1), $1.2 million is attributable to recurring retail cannabis line of business results offset by $0.8 million of corporate costs attributable to the cannabis business and an additional $0.3 million of corporate costs incurred as part of the emerging infrastructure for the pharmacy line of business.
Updated Retail Store Targets
Retail Cannabis
Currently, the Company has 31 corporate stores across Ontario and regularly assesses the performance of each. During the first quarter, the Company performed an analysis of impairment of its property and equipment based on the historical performance of each of its retail stores. At April 30, 2022, management assessed that there were indicators of impairment at two of its retail store locations as the economic performance of these locations were worse than expected. The Company will continue to assess the performance of each of its stores and is planning have a cannabis store portfolio in the range of 25 to 35 corporate stores by the end of its fiscal year ending January 31, 2023, compared to the initial target of 59 total corporate stores by December 31, 2022(2).
The Company is also targeting a total of 5 to 15 franchise and/or licensed stores by fiscal year end, compared to the 20 total franchise stores initially anticipated by December 31, 2022(2). ShinyBud does not currently expect to develop new greenfield locations until the macro competitive factors in Ontario’s retail cannabis industry stabilize. Management will continue to assess potential tuck-in acquisition opportunities on a case-by-case basis.
Going forward, the key areas of focus for the Company’s cannabis line of business will include steadily enhancing EBITDA(1), tailoring competitive positioning within each community where it operates, and optimizing network capital and real estate utilization.
Retail Pharmacy
In May, the Company announced it is broadening its retail growth strategy with a focus on health and wellness with a goal to differentiate itself from other cannabis retailers. This retail extension stems from a deep understanding of what the Company’s customers are looking for as it relates to their health and wellness needs. The Company believes that the convergence of cannabis, health and wellness, pharmacies and medical care services is where the growth potential lies for ShinyBud, and that adding pharmacies to its corporate portfolio will strengthen its business model. To carry out its health and wellness strategy, the Company has established mīhī Health & Wellness and is targeting to acquire between 5 to 10 retail pharmacies in Ontario by the end of its fiscal year ending January 31, 2023. The development of new greenfield pharmacy locations is not anticipated, unless existing corporate lease obligations within the Company’s cannabis portfolio demonstrate strong potential for a pharmacy as the best use of a retail space.
Key areas of focus for the Company’s pharmacy line of business will include steadily enhancing EBITDA(1) through scale and leveraging pharmacy retail experience upon acquisition of each new location, building brand presence, and optimal competitive positioning within each community where it operates.
To better reflect its broader strategy, the Company is proposing to change its corporate name to “Shiny Health & Wellness Corp.”, subject to receipt of regulatory approvals (including of the TSX Venture Exchange).
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Endnotes |
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(1) |
The Company defines EBITDA and Adjusted EBITDA as per the table below. EBITDA and Adjusted EBITDA are non-IFRS financial measures that do not have standardized meanings prescribed under the Company’s generally accepted accounting principles (GAAP), being International Financial Reporting Standards (IFRS), and may not be comparable to similar measures disclosed by other issuers. The Company defines EBITDA and Adjusted EBITDA as per the table below. Management calculates “EBITDA” for a financial period as the Company’s income (loss) for the period, as determined in accordance with IFRS, before accretion and interest, tax, and depreciation and amortization, and calculates “Adjusted EBITDA” for a financial period as the EBITDA for the period after adjusting to remove transaction and acquisition costs, impairment, loss on settlement of loan, listing expense, gain on revaluation of derivative liability, gain on change in fair value, and share-based compensation. |
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Management uses EBITDA and Adjusted EBITDA to assess the Company’s ability to generate cash from operations, and the Company believes them to be useful measures for this purpose. They are, however, supplementary information only and should not be relied upon for comparative or investment purposes. Readers must not consider non-IFRS measures in isolation or as a substitute for analysis of the Company’s financial results as reported under IFRS. EBITDA and Adjusted EBITDA are not, and must not be construed as alternatives to, net income (loss) or cash flow from operating activities as determined under IFRS. |
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The following table reconciles net (loss) income for the periods indicated to EBITDA and Adjusted EBITDA, respectively: |
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Three-month period ended April 30, |
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|
2022 |
2021 |
|
|
($) |
($) |
|
|
Net (loss) income |
(1,758,475) |
363,774 |
|
Income tax (recovery) expense |
– |
98,000 |
|
Finance costs |
403,596 |
92,615 |
|
Depreciation & amortization |
786,568 |
235,130 |
|
EBITDA |
(568,311) |
789,519 |
|
One-time strategic costs |
509,342 |
– |
|
Revaluation gain on derivative liability |
(1,596,532) |
– |
|
(Gain) loss on change in fair value |
(136,221) |
– |
|
Impairment |
484,706 |
|
|
Loss on extinguishment of loan payable |
1,267,726 |
|
|
Share-Based compensation |
85,635 |
– |
|
Adjusted EBITDA |
46,345 |
789,519 |
|
Notes to table above: |
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Cash outflow for the lease liabilities during the quarter ended on April 30, 2022 were $459,451. |
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Cash outflow for the lease liabilities during the quarter ended on April 30, 2021 were $152,823. |
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(2) |
As initially reported in the Company’s filing statement filed January 19, 2022 on SEDAR under the Company’s issuer profile at www.sedar.com. |
About ShinyBud
ShinyBud Corp. is on a mission to help people Never settle, Live fully. The Company recently broadened its retail growth strategy beyond adult-use cannabis by establishing mīhī Health & Wellness, a new line of business focused on building a network of community pharmacies across Ontario. Striving to provide a more diverse and accessible cannabis experience for adult consumers, ShinyBud Cannabis Co. is one of Ontario’s largest cannabis retailers by store count. The Company’s board and management team hold extensive retail operating experience, a key competitive differentiator in leading its growth strategy. ShinyBud trades on the TSX Venture Exchange (TSXV) under the ticker symbol SNYB. For more information, please visit investors.shinybud.com.
