Sundial(US:SNDL)2022-08-15 15:58Financial Data and Key Metrics Changes - SNDL achieved record net revenue of $223.7 million in Q2 2022, a 2,344% increase year-over-year from $9.2 million in Q2 2021 [9][27] - Gross margin grew to $43.1 million, up 1,627% from a loss of $2.8 million in Q2 2021, marking the highest gross margin since inception [10][27] - Net loss for Q2 2022 was $74 million, compared to a net loss of $52.3 million in Q2 2021 [27] - Adjusted EBITDA loss was $25.9 million for Q2 2022, compared to a loss of $0.2 million in Q2 2021 [28] Business Line Data and Key Metrics Changes - Liquor retail segment generated gross revenue of $148.6 million with a gross margin of $33.5 million, representing 22.6% of sales [32][41] - Cannabis retail segment gross revenue was $63.5 million, a 746% increase from $7.5 million in Q1 2021, with a gross margin of $13.9 million [33] - Cannabis cultivation and production segment reported gross revenue of $15.4 million, a 36% increase from Q1 2022, with adjusted EBITDA of $3.5 million, marking the first positive adjusted EBITDA quarter [35] Market Data and Key Metrics Changes - SNDL's cannabis retail market share reached approximately 9.8% in privatized provincial markets [14] - Liquor retail market share in Alberta was 17.6%, with Wine & Beyond representing 2.9% despite having only 11 stores [43] Company Strategy and Development Direction - SNDL aims to become a leader in the Canadian regulated products industry, focusing on vertical integration and enhancing retail operations [9][22] - The company is exploring expansion opportunities for the Wine & Beyond brand into British Columbia and Saskatchewan [43] - SNDL is committed to optimizing profitability and cash flow through cost discipline and margin-accretive products in the liquor retail segment [44] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macroeconomic challenges, including cost inflation and cannabis price compression, but remains focused on improving results [10][21] - The company expects to realize cost savings across all operating segments and continues to integrate Alcanna into its operations [21][22] - Management expressed confidence in the potential for SNDL to lead in the Canadian regulated products space, emphasizing a culture of continuous improvement [22] Other Important Information - SNDL's common shares were consolidated on a one-for-ten basis effective July 25, 2022, regaining compliance with NASDAQ requirements [30] - The company has $900 million in cash, marketable securities, and long-term investments with no outstanding debt as of June 30, 2022 [28] Q&A Session Summary Question: Details on the economics of the Wine & Beyond banner - Management indicated that Wine & Beyond attracts a larger customer segment with competitive pricing, and the build-out costs range from $1.5 million to $1.8 million [61][65] Question: Performance comparison between Spirit Leaf and Nova Cannabis - Management noted that Spirit Leaf operates a mix of corporate and franchise locations, while Nova focuses on discount retail, leading to different performance metrics [65][66] Question: International strategy and potential new markets - Management confirmed that while the focus remains on Canada, they are exploring opportunities in international markets like Germany and Australia [76][77] Question: Impact of OCS cyber attack on retail operations - Management does not expect material disruptions from the OCS cyber attack and noted ongoing regulatory improvements that could enhance security [81] Question: Details on Sunstream's asset write-down - Management explained that the write-downs were due to fair value adjustments across the portfolio, not specific to one credit [88] Question: Opportunities for equity investments in distressed companies - Management acknowledged the potential for equity investments but emphasized the need for prudent decision-making based on market conditions [92] Question: Breakdown of the $100 million Canadian credit portfolio - Management indicated that the credit exposure includes both retail and producer credits, with specific names not disclosed due to confidentiality [101]