Sundial(SNDL) - 2025 Q1 - Quarterly Report

Condensed Consolidated Interim Financial Statements Condensed Consolidated Interim Statements of Financial Position As of March 31, 2025, SNDL Inc. reported total assets of $1.31 billion, a slight decrease from $1.35 billion at the end of 2024, with total liabilities decreasing to $212.1 million from $215.9 million, resulting in a decline in total shareholders' equity to $1.10 billion from $1.13 billion primarily due to net loss and share repurchases Consolidated Statement of Financial Position Highlights (in thousands of CAD) | As at | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | 420,754 | 461,840 | | Total Non-Current Assets | 891,519 | 887,402 | | Total Assets | 1,312,273 | 1,349,242 | | Total Current Liabilities | 91,155 | 90,557 | | Total Non-Current Liabilities | 120,919 | 125,329 | | Total Liabilities | 212,074 | 215,886 | | Total Shareholders' Equity | 1,100,199 | 1,133,356 | | Total Liabilities and Shareholders' Equity | 1,312,273 | 1,349,242 | Condensed Consolidated Interim Statements of Loss and Comprehensive Loss For the three months ended March 31, 2025, SNDL reported a net loss of $14.7 million on net revenue of $204.9 million, compared to a net loss of $4.7 million on net revenue of $197.8 million in the same period of 2024, driven by a higher operating loss and a share of loss from equity-accounted investees Statement of Loss Highlights (in thousands of CAD, except per share amounts) | For the three months ended March 31 | 2025 | 2024 | | :--- | :--- | :--- | | Net Revenue | 204,914 | 197,750 | | Gross Profit | 56,641 | 50,400 | | Operating Loss | (12,053) | (4,377) | | Net Loss | (14,707) | (4,652) | | Comprehensive (Loss) Income | (20,285) | 5,382 | | Net Loss Per Share (Basic and Diluted) | $(0.06) | $(0.01) | Condensed Consolidated Interim Statements of Changes in Shareholders' Equity Shareholders' equity decreased from $1.13 billion at the end of 2024 to $1.10 billion at March 31, 2025, primarily due to a net loss of $14.7 million, share repurchases of $15.3 million, and other comprehensive loss of $5.6 million, partially offset by share-based compensation - Key changes in shareholders' equity for the three months ended March 31, 2025 include a net loss of $14.7 million and share repurchases totaling $15.3 million[8] Changes in Shareholders' Equity (in thousands of CAD) | Description | Amount | | :--- | :--- | | Balance at December 31, 2024 | 1,133,356 | | Net loss | (14,707) | | Other comprehensive loss | (5,578) | | Share repurchases | (15,331) | | Share-based compensation | 2,459 | | Balance at March 31, 2025 | 1,100,199 | Condensed Consolidated Interim Statements of Cash Flows For the first quarter of 2025, the company generated $7.8 million in cash from operating activities, a significant improvement from $3.3 million in the prior-year period, with cash from investing activities positive at $17.2 million, and financing activities using $22.5 million, leading to an overall increase in cash and cash equivalents by $2.5 million to $220.9 million Cash Flow Summary (in thousands of CAD) | For the three months ended March 31 | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | 7,788 | 3,301 | | Net cash provided by (used in) investing activities | 17,172 | (1,676) | | Net cash used in financing activities | (22,452) | (7,712) | | Change in cash and cash equivalents | 2,508 | (6,087) | | Cash and cash equivalents, end of period | 220,867 | 188,954 | - The primary use of cash in financing activities was the repurchase of common shares, amounting to $15.0 million[10] Notes to the Condensed Consolidated Interim Financial Statements Note 1: Description of Business SNDL Inc. operates primarily in Canada with principal activities in liquor retail, cannabis retail, cannabis production and distribution, and capital deployment into investment opportunities, while monitoring potential impacts from new U.S. tariffs without significant financial impact in Q1 2025 - The company's main business activities include retailing alcoholic beverages, operating cannabis stores, producing cannabis products, and making strategic investments[14] - SNDL operates solely in Canada but pursues indirect U.S. investment opportunities through its SunStream joint venture[15] - The company is monitoring the impact of new U.S. tariffs on its input costs and foreign exchange rates, but noted no significant impact in Q1 2025[18][19] Note 3: Business Acquisitions On November 4, 2024, SNDL closed its acquisition of the Indiva Group for approximately $21.1 million, primarily through a credit bid extinguishing debt, which resulted in a provisional bargain purchase gain of $5.46 million - SNDL acquired Indiva Group on November 4, 2024, for consideration of $21.1 million, consisting of $20.7 million in debt extinguishment and $0.4 million in cash[25] - The acquisition resulted in a bargain purchase gain of $5.46 million, which was recorded in the consolidated statements of loss for the year ended December 31, 2024[27][28] Note 4: Segment Information For Q1 2025, SNDL's operations are divided into four segments: Liquor Retail, Cannabis Retail, Cannabis Operations, and Investments, with Liquor Retail being the largest contributor to net revenue, while Cannabis Retail generated the highest gross profit and operating income, and the Corporate segment reported a significant operating loss Segment Performance for Three Months Ended March 31, 2025 (in thousands of CAD) | Segment | Net Revenue | Gross Profit | Operating Income (Loss) | | :--- | :--- | :--- | :--- | | Liquor Retail | 109,472 | 27,803 | 1,980 | | Cannabis Retail | 77,540 | 19,627 | 5,162 | | Cannabis Operations | 34,319 | 9,211 | (486) | | Investments | — | — | (1,601) | | Corporate | — | — | (17,108) | | Total (after eliminations) | 204,914 | 56,641 | (12,053) | - The company has non-current assets related to credit investments in the United States totaling $407.6 million as of March 31, 2025, held through its equity-accounted investees[36] Note 5: Biological Assets The fair value of biological assets increased to $3.0 million at March 31, 2025, from $1.2 million at year-end 2024, with 6,736 kilograms of dry cannabis harvested during the quarter and an estimated future yield of 13,059 kilograms Change in Biological Assets (in thousands of CAD) | As at | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Balance, beginning of period | 1,187 | 429 | | Balance, end of period | 3,049 | 1,187 | - The company harvested 6,736 kg of dry cannabis in Q1 2025, compared to 1,145 kg in Q1 2024[39] - As of March 31, 2025, it is estimated that the company's biological assets will yield approximately 13,059 kilograms of dry cannabis, up from an estimate of 4,500 kilograms at the end of 2024[39] Note 7: Assets Held for Sale The company's assets held for sale decreased significantly from $19.1 million to $0.3 million due to the reclassification of the Olds, Alberta facility back to property, plant, and equipment, as it no longer met the criteria for assets held for sale - The Olds facility, previously valued at $18.8 million and classified as held for sale, was reclassified back to property, plant and equipment during Q1 2025[43] Note 9: Property, Plant and Equipment The net book value of property, plant, and equipment increased to $158.1 million from $145.8 million, largely due to the reclassification of the Olds facility, while the company recorded a $2.7 million impairment on certain production facilities and equipment related to the consolidation of its edible facilities - The net book value of PP&E increased to $158.1 million, primarily due to an $18.8 million transfer from assets held for sale[46] - An impairment charge of $2.7 million was recorded in the cannabis operations segment due to the consolidation of edible facilities[47] - The company recorded a net impairment reversal of $0.3 million on retail property, plant and equipment related to an improved performance of a previously impaired cannabis retail store[48][50] Note 12: Investments Total investments decreased from $36.0 million to $12.7 million, mainly due to the repayment of a $28.1 million loan to Delta-9 Cannabis Inc., while the company acquired $9.0 million of new investments in listed common shares designated as Fair Value Through Other Comprehensive Income (FVOCI) - The company received full payment for its $28.1 million loan to Delta-9 Cannabis Inc. during Q1 2025[55][56] - SNDL acquired $9.0 million of investments in listed common shares, which were marked to market at $11.8 million, with a corresponding $5.2 million unrealized loss recognized in other comprehensive income[57] Note 13: Equity-Accounted Investees The carrying amount of the company's interest in its joint venture, SunStream, decreased to $407.6 million from $413.1 million, as SNDL recorded its 50% share of SunStream's net loss, amounting to $4.5 million, a significant reversal from a $9.1 million profit share in Q1 2024 - SunStream is a 50/50 joint venture that invests in the U.S. cannabis sector through secured debt and other instruments[58][60] Change in Carrying Amount of SunStream JV (in thousands of CAD) | Description | Carrying Amount | | :--- | :--- | | Balance at December 31, 2024 | 413,124 | | Share of net loss | (4,457) | | Share of other comprehensive loss | (348) | | Distributions | (719) | | Balance at March 31, 2025 | 407,600 | Note 15: Share Capital and Warrants During Q1 2025, SNDL repurchased and cancelled 5.8 million common shares for a total cost of $15.0 million, reducing the number of issued and outstanding shares to 257.3 million and decreasing the carrying amount of share capital from $2.35 billion to $2.30 billion - The company purchased and cancelled 5.8 million common shares at a weighted average price of $2.57 per share[65] Change in Issued and Outstanding Shares | Description | Number of Shares | | :--- | :--- | | Balance, Dec 31, 2024 | 263,021,847 | | Share repurchases | (5,761,735) | | Employee awards exercised | 33,748 | | Balance, Mar 31, 2025 | 257,293,860 | Note 16: Share-Based Compensation Total share-based compensation expense for Q1 2025 was $1.4 million, a significant decrease from $4.8 million in Q1 2024, comprised of $2.5 million for equity-settled RSUs and a recovery of $1.1 million for cash-settled DSUs, with 4.0 million new RSUs granted during the quarter Share-Based Compensation Expense (in thousands of CAD) | For the three months ended March 31 | 2025 | 2024 | | :--- | :--- | :--- | | Equity-settled expense (RSUs) | 2,459 | 2,441 | | Cash-settled (recovery) expense (DSUs) | (1,071) | 2,402 | | Total | 1,388 | 4,843 | - The number of outstanding Restricted Share Units (RSUs) increased from 9.4 million to 13.3 million, primarily due to 4.0 million new grants[73] - The liability for cash-settled Deferred Share Units (DSUs) decreased to $6.0 million from $7.1 million at year-end 2024[75] Note 17: Net Revenue Total net revenue for Q1 2025 was $204.9 million, up from $197.8 million in Q1 2024, driven by growth in Cannabis Retail revenue to $77.5 million and Cannabis Operations revenue to $30.1 million, despite a slight decline in Liquor Retail revenue to $109.5 million Net Revenue by Segment (in thousands of CAD) | For the three months ended March 31 | 2025 | 2024 | | :--- | :--- | :--- | | Liquor retail revenue | 109,472 | 116,054 | | Cannabis retail revenue | 77,540 | 71,306 | | Cannabis operations revenue (net) | 30,125 | 20,598 | | Gross revenue | 217,137 | 207,958 | | Excise taxes | (12,223) | (10,208) | | Net revenue | 204,914 | 197,750 | Note 24: Subsequent Events On April 9, 2025, SNDL announced an agreement to acquire 32 cannabis retail stores from 1CM Inc. for $32.2 million in cash, with the transaction expected to close by the end of Q3 2025, pending customary approvals - SNDL entered into an agreement to acquire 32 cannabis retail stores from 1CM Inc. for $32.2 million in cash[92][93] - The acquisition includes 27 stores in Ontario, 3 in Saskatchewan, and 2 in Alberta[93] - The transaction is structured as an arrangement and is expected to close by the end of Q3 2025, subject to shareholder and regulatory approvals[94]