Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TerrAscend Corp (TSNDF, Financial) reported a year-over-year net revenue increase of 7.5% to $77.5 million and a 21.9% increase in adjusted EBITDA to $15.6 million.
- The company achieved its eighth consecutive quarter of positive cash flow from continuing operations, totaling $13.1 million.
- TerrAscend Corp (TSNDF) successfully refinanced its debt with a $140 million senior secured loan, providing financial flexibility and no material debt maturing until late 2027.
- The company holds the number one market share position in New Jersey, with top three positions in flower, vapes, edibles, and concentrates.
- TerrAscend Corp (TSNDF) is actively pursuing expansion opportunities in Ohio, aiming to leverage existing infrastructure in the Midwest for increased profitability.
Negative Points
- Retail revenue declined by 8.7% year-over-year, primarily due to new store openings in New Jersey and reductions in unprofitable revenue in Michigan.
- Gross profit margin decreased to 48.6% from 50.2% year-over-year, driven by channel mix shift and price compression in New Jersey.
- The company expects flat to slightly down performance across the P&L sequentially in Q3 2024.
- Despite positive financial performance, TerrAscend Corp (TSNDF)'s stock price remains significantly lower than five years ago, down 75% from its pre-revenue days in the US.
- Wholesale revenue in New Jersey was below internal expectations, despite a 100% year-over-year increase.
Q & A Highlights
Q: Can you provide more details on TerrAscend's market share in New Jersey and the competitive environment there?
A: Keith Stauffer, CFO, explained that TerrAscend has held the number one market share position in New Jersey throughout the first half of 2024, according to BDSA's improved methodology. Ziad Ghanem, CEO, added that despite the pressure from new store openings, TerrAscend's retail business has returned to growth, and they expect continued improvement and market share gains in Q3.
Q: What is the status of the tax refunds TerrAscend is expecting?
A: Ziad Ghanem, CEO, stated that TerrAscend is expecting a total of $30 million in tax refunds. They have received $8 million so far, with $22 million still pending. No refunds have been denied.
Q: Why did TerrAscend decide to expand the Boonton facility in New Jersey?
A: Ziad Ghanem, CEO, mentioned that after observing retail stabilization and growth, along with continued improvement in wholesale, TerrAscend decided to increase capacity to service additional accounts expected to come online over the next one to two years.
Q: How is TerrAscend approaching M&A, and what are the learnings from previous transactions?
A: Jason Wild, Executive Chairman, noted that TerrAscend is considering both single-state and multi-state acquisitions. They have learned to protect against surprises through long-term earn-outs and have developed a robust integration playbook to ensure seamless operations post-acquisition.
Q: What are TerrAscend's plans for Pennsylvania, and what gives you confidence in expanding there?
A: Ziad Ghanem, CEO, stated that TerrAscend is confident in Pennsylvania due to strong retail and wholesale performance. They plan to turn on additional cultivation rooms in anticipation of adult-use legalization in 2025, supported by healthy inventory levels and potential retail expansion.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
