Sundial(SNDL) - 2024 Q4 - Annual Report

Management Highlights CEO Commentary & Strategic Actions The CEO expressed satisfaction with record Q4 and full-year 2024 results, exceeding the company's commitment to achieve break-even free cash flow - The company achieved continued progress in Q4 and full-year 2024, setting new records and exceeding its commitment to achieve break-even free cash flow for the full year[4] - Strategic initiatives include the privatization of Nova Cannabis Inc, acquisition of Indiva Inc, approval for the Parallel license transfer, and share repurchases[5][15][26][27][33] - The company has applied to list on the Canadian Securities Exchange (CSE), expected to be effective in April 2025, offering greater shareholder flexibility[7] - A target has been set to achieve $100 million in annual positive free cash flow within the next three years[8] Total Company Financial Performance SNDL achieved record full-year net revenue, gross profit, and gross margin in 2024, along with positive full-year cash flow and free cash flow - The company reported record full-year net revenue, gross profit, and gross margin, along with positive cash flow and free cash flow[1] - The Q4 operating loss was primarily impacted by a negative valuation adjustment of CAD 65.7 million on the SunStream portfolio and a CAD 15 million impairment on Spiritleaf intangible assets[6] Key Financial Metrics for Q4 and Full-Year 2024 | Metric (thousands of CAD) | Q4 2024 | Q4 2023 | % Change | Full-Year 2024 | Full-Year 2023 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenue | 257,679 | 248,450 | 3.7 % | 920,448 | 909,006 | 1.3 % | | Gross Profit | 68,799 | 57,336 | 20.0 % | 240,331 | 190,415 | 26.2 % | | Operating Loss | (76,089) | (85,017) | 10.5 % | (103,811) | (163,171) | 36.4 % | | Change in Cash and Cash Equivalents | (44,617) | (6,942) | -543 % | 23,318 | (84,545) | 128 % | | Gross Margin | 26.7 % | 23.1 % | 3.6 pp | 26.1 % | 20.9 % | 5.2 pp | | Adjusted Operating Loss | (60,472) | (27,094) | -123 % | (86,144) | (98,028) | 12 % | | Free Cash Flow | 11,625 | 1,383 | 741 % | 8,872 | (60,883) | 115 % | BUSINESS SEGMENT HIGHLIGHTS Liquor Retail As Canada's largest private liquor retailer, the segment saw increased operating income despite lower revenue, driven by strategic cost and margin management - SNDL is Canada's largest private liquor retailer, operating 165 stores as of March 17, 2025[17] - Net revenue declined in Q4 and full-year 2024, with same-store sales decreasing by 3.5% and 4.6% respectively, due to weaker market demand[18] Liquor Retail Segment Financial Metrics | Metric (thousands of CAD) | Q4 2024 | Q4 2023 | % Change | Full-Year 2024 | Full-Year 2023 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenue | 154,080 | 159,493 | -3.4 % | 555,259 | 578,895 | -4.1 % | | Gross Profit | 38,236 | 38,396 | -0.4 % | 139,706 | 137,286 | 1.8 % | | Gross Margin | 24.8 % | 24.1 % | 0.7 pp | 25.2 % | 23.7 % | 1.4 pp | | Operating Income | 12,325 | 10,120 | 21.8 % | 34,781 | 24,655 | 41.1 % | | Adjusted Operating Income | 12,325 | 10,120 | 21.8 % | 34,781 | 24,655 | 41.1 % | Cannabis Retail As a leading Canadian cannabis retailer, the segment achieved dynamic net revenue growth and significantly improved adjusted operating income for the year - SNDL is one of Canada's largest private cannabis retailers, operating 185 stores as of March 17, 2025[19] - Net revenue grew dynamically in Q4 and for the full year, with same-store sales increasing by 6.3% and 3.5% respectively, driven by the Value Buds brand[25] - Q4 operating income was impacted by a CAD 15 million impairment on Spiritleaf intangible assets, though adjusted operating income improved significantly[25] Cannabis Retail Segment Financial Metrics | Metric (thousands of CAD) | Q4 2024 | Q4 2023 | % Change | Full-Year 2024 | Full-Year 2023 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenue | 83,170 | 75,152 | 10.7 % | 311,689 | 289,980 | 7.5 % | | Gross Profit | 20,490 | 20,045 | 2.2 % | 78,827 | 73,690 | 7.0 % | | Gross Margin | 24.6 % | 26.7 % | -2.0 pp | 25.3 % | 25.4 % | -0.1 pp | | Operating Income | (8,997) | (849) | -959.7 % | (1,742) | 4,840 | -136.0 % | | Adjusted Operating Income | 6,003 | (849) | 807.1 % | 13,258 | 4,840 | 173.9 % | Cannabis Operations The Cannabis Operations segment reported significant improvements in revenue and profitability, driven by increased distribution and operational efficiencies - Net revenue growth was driven by increased provincial board and B2B distribution, consumer innovation, and operational efficiency[26] - The acquisition of Indiva contributed CAD 7.5 million in revenue from November 4 to December 31, 2024[26] - Improved gross profit and operating income were attributed to enhanced scale efficiencies and productivity measures[26] Cannabis Operations Segment Financial Metrics | Metric (thousands of CAD) | Q4 2024 | Q4 2023 | % Change | Full-Year 2024 | Full-Year 2023 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenue | 37,092 | 26,044 | 42.4 % | 109,470 | 87,071 | 25.7 % | | Gross Profit | 10,073 | (1,105) | 1011.6 % | 21,798 | (20,561) | 206.0 % | | Gross Margin | 27.2 % | -4.2 % | 31.4 pp | 19.9 % | -23.6 % | 43.5 pp | | Operating Income | 4,391 | (65,749) | 106.7 % | 2,663 | (112,744) | 102.4 % | | Adjusted Operating Income | 4,439 | (7,715) | 157.5 % | 3,091 | (52,728) | 105.9 % | Investments The investment portfolio reported a negative operating income in Q4 due to valuation adjustments, though a key milestone was achieved with the Parallel license transfer approval - As of December 31, 2024, the cannabis-related investment portfolio had a book value of CAD 449.1 million, with CAD 413.1 million invested in SunStream Bancorp Inc[26] - The portfolio generated a negative operating income of CAD 63.7 million in Q4 2024, including a CAD 65.7 million negative valuation adjustment for the SunStream portfolio[26] - The negative valuation adjustment was due to increased US industry risk, unfavorable Florida cannabis ballot results, and deteriorating performance of Parallel and Skymint[26] - On February 4, 2025, the Florida Department of Health approved the license transfer for Parallel, a significant milestone in its restructuring process[26] - On March 17, 2025, the company announced the purchase of 4,350,000 common shares of High Tide, representing a 5.4% ownership stake[27] Financial Statements Condensed Consolidated Statement of Loss and Comprehensive Loss The statement shows a significant reduction in net loss for 2024, with improvements in both gross profit and operating loss compared to the previous year Condensed Consolidated Statement of Loss and Comprehensive Loss (thousands of CAD) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net Revenue | 920,448 | 909,006 | | Cost of Sales | 680,117 | 718,591 | | Gross Profit | 240,331 | 190,415 | | Investment Revenue | 15,551 | 5,259 | | Share of Loss of Equity-Accounted Investees | (65,459) | 6,758 | | Sales and Marketing | 12,004 | 15,045 | | Research and Development | 346 | 324 | | Depreciation and Amortization | 54,250 | 60,216 | | Share-Based Compensation | 20,037 | 15,400 | | Restructuring Costs | 2,667 | 19,573 | | Asset Impairment, Net | 17,317 | 54,967 | | Loss on Disposal of Assets | 370 | 353 | | Operating Loss | (103,811) | (163,171) | | Other Expenses, Net | (1,798) | (8,845) | | Loss Before Income Taxes | (105,609) | (172,016) | | Income Tax Credit | 9,405 | — | | Net Loss from Continuing Operations | (96,204) | (172,016) | | Net Loss from Discontinued Operations | — | (4,535) | | Net Loss | (96,204) | (176,551) | | Comprehensive Loss | (62,851) | (189,322) | Condensed Consolidated Statement of Financial Position The statement details the company's assets, liabilities, and equity, showing a decrease in total assets and liabilities alongside an increase in cash and cash equivalents Condensed Consolidated Statement of Financial Position (thousands of CAD) | Item | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and Cash Equivalents | 218,359 | 195,041 | | Restricted Cash | 19,815 | 19,891 | | Inventories | 127,919 | 129,060 | | Equity-Accounted Investees | 413,124 | 538,331 | | Goodwill | 124,248 | 119,282 | | Total Assets | 1,349,242 | 1,473,164 | | Liabilities | | | | Accounts Payable and Accrued Liabilities | 56,275 | 68,210 | | Lease Liabilities (Current) | 34,256 | 30,537 | | Lease Liabilities (Non-Current) | 118,017 | 136,492 | | Total Liabilities | 215,886 | 243,824 | | Shareholders' Equity | | | | Share Capital | 2,346,728 | 2,375,950 | | Accumulated Deficit | (1,323,965) | (1,260,851) | | Total Shareholders' Equity | 1,133,356 | 1,212,069 | | Total Liabilities and Shareholders' Equity | 1,349,242 | 1,473,164 | Condensed Consolidated Statement of Cash Flows The statement shows a shift to positive cash flow from operating and investing activities in 2024, resulting in an overall increase in cash and cash equivalents Condensed Consolidated Statement of Cash Flows (thousands of CAD) | Item | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 54,914 | (16,648) | | Net Cash from Investing Activities | 17,763 | (24,817) | | Net Cash from Financing Activities | (49,359) | (43,080) | | Change in Cash and Cash Equivalents | 23,318 | (84,545) | | Cash and Cash Equivalents, End of Period | 218,359 | 195,041 | Non-IFRS Measures Adjusted Operating Income (Loss) This non-IFRS metric provides a clearer view of underlying operational profitability by excluding certain non-recurring or non-cash items - Defined as operating income (loss) less restructuring costs, goodwill and intangible asset impairments, and asset impairments triggered by restructuring activities[42] Reconciliation of Adjusted Operating Loss to Operating Loss (thousands of CAD) | Segment | Q4 2024 Operating Loss | Q4 2024 Adjusted Operating Loss | Full-Year 2024 Operating Loss | Full-Year 2024 Adjusted Operating Loss | | :--- | :--- | :--- | :--- | :--- | | Liquor Retail | 12,325 | 12,325 | 34,781 | 34,781 | | Cannabis Retail | (8,997) | 6,003 | (1,742) | 13,258 | | Cannabis Operations | 4,391 | 4,439 | 2,663 | 3,091 | | Investments | (63,724) | (63,724) | (50,013) | (50,013) | | Corporate | (20,084) | (19,515) | (89,500) | (87,261) | | Total | (76,089) | (60,472) | (103,811) | (86,144) | Gross Margin This supplementary financial measure is calculated by dividing gross profit by net revenue to assess the profitability of sales - Gross margin is a supplementary financial measure calculated by dividing gross profit by net revenue[45] Free Cash Flow This non-IFRS metric assesses the company's ability to generate positive cash flow by excluding cash used for non-operational items - Defined as the total change in cash and cash equivalents less cash used for share repurchases, dividends, changes in debt instruments, and net cash for acquisitions/dispositions[47] Reconciliation of Free Cash Flow to Change in Cash (thousands of CAD) | Item | Q4 2024 | Q4 2023 | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | :--- | :--- | | Change in Cash and Cash Equivalents | (44,617) | (6,942) | 23,318 | (84,545) | | Adjustments: | | | | | | Common Share Repurchases | 13,219 | — | 13,219 | 1,536 | | Change in Long-Term Investments | 5,033 | 8,325 | (67,309) | 25,821 | | Acquisitions, Net of Cash Acquired | 37,990 | — | 39,644 | (3,695) | | Free Cash Flow | 11,625 | 1,383 | 8,872 | (60,883) | Same Store Sales This non-IFRS metric evaluates retail sales trends by focusing on revenue generated from existing stores, excluding the impact of openings and closures - Same-store sales represent revenue from existing retail locations in comparable periods, excluding the impact of store openings and closures[50][51] Company Information & Disclosures About SNDL Inc. SNDL is a vertically integrated cannabis company and Canada's largest private liquor and cannabis retailer, deploying capital across the North American cannabis sector - SNDL Inc is Canada's largest vertically integrated cannabis company and the largest private liquor and cannabis retailer[31] - Retail banners include Ace Liquor, Wine and Beyond, Liquor Depot, Value Buds, Spiritleaf, and Superette[31] - The investment portfolio aims to deploy strategic capital across the North American cannabis industry through direct and indirect investments and partnerships[31] Equity Position The company maintains a strong balance sheet with significant unrestricted cash and investments, no outstanding debt, and an active share repurchase program - As of December 31, 2024, the company had CAD 667.6 million in unrestricted cash, marketable securities, and investments, with no outstanding debt and a net book value of CAD 1.1 billion[33] - The company repurchased 10,764,107 common shares over the last six months at an average price of $1.81 per share[33] Forward-Looking Information Cautionary Statement This release contains forward-looking statements subject to risks and uncertainties, which are not guarantees of future performance and are based on current expectations - The press release contains forward-looking statements regarding operational goals, strategic initiatives, financial performance, and regulatory changes[32] - These statements are based on management's current expectations and are subject to known and unknown risks that may cause actual results to differ materially[34] - The company disclaims any intention or obligation to update or revise any forward-looking statements, except as required by applicable law[34] Conference Call & Webcast SNDL held a conference call and webcast on March 18, 2025, to discuss its Q4 and full-year 2024 financial and operational results - The company held a conference call and webcast on Tuesday, March 18, 2025, at 10:00 a.m. ET[2][30] - Links were provided to access the live webcast and a replay of the event[31]