VANCOUVER, BC – C21 Investments Inc., a vertically integrated cannabis company, reported interim unaudited financial statements and management discussion and analysis for its second quarter ending September 30, 2024, on SEDAR. The Company’s financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). All currency is reported in U.S. dollars. The Company recently changed its fiscal reporting period to a March 31st year-end (see news release dated August 1, 2024 for audited two-month stub period) and does not have traditional year-over-year comparable reporting periods.
Second Quarter Highlights
July 1, 2024 to September 30, 2024
- Revenue of $7.5 million, up 14% from Q1 driven by the new South Reno store; State of Nevada sales were down 4% over the comparative period
- Gross Margin of 43.5% – up from 31% in Q1
- Earnings (Loss) Per Share of ($0.01) unchanged from Q1
- Adjusted EBITDA of $1.3 million[2] – up from $0.3 million in Q1
- Free Cash Flow (before working capital changes) of $0.8 million versus Q1 of ($0.09) million
- Income taxes paid of $0.5 million during the second quarter
- New South Reno dispensary generated 50% sales growth in Q2 – from $273,000 in July to $416,000 in September
- Subsequent to quarter end, the new South Reno dispensary sales were up an additional 14% to $475,000 for the month of October
Q2 Management and Operational Commentary
“We are pleased with the strong performance and positive customer reception of our new dispensary during its first quarter of operations. These results have exceeded our expectations and we continue to see robust sales growth into the new quarter.” stated CEO and President, Sonny Newman. “Our double digit growth is a testament to the team’s hard work in executing on this significant growth initiative. We are beginning to realize efficiencies from scaling our operations as evidenced by the improved margins we reported in the second quarter. We intend to drive further growth and margin improvement in our existing operations going forward, while continuing to pursue accretive growth opportunities that further expand our retail footprint and build shareholder value.”
It is important to note that there is no equivalent time period to this Q2 report in the Company’s historical results due to the previously reported change in fiscal year end from January 31 to March 31.
Q2 revenue of $7.5 million was up 14% compared to Q1 despite a 4% decline in Nevada sales over the comparative period. The substantial 15% increase in retail revenues were driven by the results of the first operational quarter of Silver State Relief’s third dispensary which is located in South Reno (see news release dated June 10, 2024). C21’s two legacy dispensaries reported stable sales and brisk retail transaction volume during the quarter. Excluding the new store, revenues were down 3% versus Q1. The South Reno dispensary ramped up sales from $273,000 in July to $416,000 in September, a 53% increase in sales within the quarter. Wholesale revenue remained flat in Q2 versus the previous quarter.
Gross Margin of 43.5% in the second quarter was up significantly from Q1, which had been impacted by one-time factors (see MD&A). The improvement in second quarter margins was driven by operational efficiencies and increased retail revenues from the new dispensary, which resulted in cost synergies and beneficial throughput from the Company’s expanded production into its retail channels.
Q2 SG&A was relatively stable from Q1, up only 3%, which includes increased lease and labour costs from the new dispensary and an increase in audit and professional fees, offset by a decline in non-cash share-based compensation.
Free Cash Flow generated before working capital changes was $0.8 million for Q2 (versus $(0.09) million in Q1), before paying $0.5 million income tax and a one-time item relating to inventory build-up for the new store that opened June 26, 2024 of $0.7 million.
C21 reported a Net Loss of $0.8 million in the second quarter, or ($0.01) per share, an improvement from Q1. The Net Loss was primarily due to Income Tax provision, as the Company generated positive Net Income Before Tax.
Q2 Adjusted EBITDA was $1.3 million, up from $0.3 million in Q1. The increase in Adjusted EBITDA was driven by improvement in gross margins.
Cash at the end of Q2 was down to $2.1 million, driven by working capital items of $0.5 million Income Tax paid and $1.1 million inventory build. Total Assets increased by $3.3 million and Total Liabilities increased by $4.1 million compared to the March 31, 2024 year-end due to the dispensary acquisition and convertible debenture financing associated with the acquisition.
Subsequent the end of the second quarter, same stores sales at the new South Reno dispensary increased an additional 14%, with $475,000 in sales in October.
Non-GAAP Measures
C21 reports its financial results in accordance with GAAP and uses a number of financial measures when assessing its results and measuring overall performance. Some of these financial measures and ratios are not calculated in accordance with GAAP. The Company refers to certain Non-GAAP financial measures such as “Free Cash Flow”, “Adjusted EBITDA” and “same store sales”. These measures do not have any standardized meanings prescribed by GAAP and may not be comparable to similar measures presented by other issuers. The Company considers these measures to be an important indicator of the financial strength and performance of its business. The Company believes the adjusted results presented provide relevant and useful information for investors because they clarify the Company’s actual operating performance, make it easier to compare the Company’s results with those of other companies and allow investors to review performance in the same way as the management of the Company. Since these measures are not calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, the Company’s reported results as indicators of the Company’s performance, and they may not be comparable to similarly named measures from other companies. The tables below provide reconciliations of Non-GAAP financial measures to the most directly comparable GAAP measures.
“Free Cash Flow” is defined as Cash Provided by Operating Activities from Continuing Operations adding back income tax expense and before changes in working capital, minus capital expenditures. Management believes that Free Cash Flow, which measures our ability to generate cash from our continuing business operations, is an important financial measure for use in evaluating the Company’s financial performance. Free Cash Flow should be considered in addition to, rather than as a substitute for, consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity.
“Adjusted EBITDA” is defined as EBITDA (earnings before depreciation and amortization, depreciation and interest in cost of sales, income taxes, and interest) less accretion, loss from discontinued operations, one-time transaction costs and all other non-cash items. The Company has presented “Adjusted EBITDA” because its management believes it is a useful measure for investors when assessing and considering the Company’s continuing operations and prospects for the future. Furthermore, “Adjusted EBITDA” is a commonly used measurement in the financial community when evaluating the market value of similar companies.
About C21 Investments Inc.
C21 Investments Inc. is a vertically integrated cannabis company that cultivates, processes, and distributes quality cannabis and hemp-derived consumer products in the United States. The Company is focused on value creation through the disciplined acquisition and integration of core retail, manufacturing, and distribution assets in strategic markets, leveraging industry-leading retail revenues with high-growth potential multi-market branded consumer packaged goods. The Company owns Silver State Relief and Silver State Cultivation in Nevada, including legacy Oregon brands Phantom Farms, Hood Oil and Eco Firma Farms. These brands produce and distribute a broad range of THC and CBD products from cannabis flowers, pre-rolls, cannabis oil, vaporizer cartridges and edibles.
