VANCOUVER, BC – C21 Investments Inc., a vertically integrated cannabis company, FILED its interim unaudited financial statements and management discussion and analysis for THE third quarter ending December 31, 2024. 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.
Third Quarter Highlights
- Revenue of $7.9 million – up 5.3% from Q2; Retail Revenue up 7% quarter-over-quarter driven by continued growth in the South Reno dispensary; State of Nevada sales were down 4% from the comparative period1
- Gross Margin of 46.0% – up 250 basis points sequentially
- Income from Operations of $1.0 million – up 219% from Q2, driven by strong retail sales growth, improved gross margin, and the continued focus on cost management, with SG&A down 10% from Q2
- Earnings (Loss) Per Share of ($0.00) up from ($0.01) in Q2
- Adjusted EBITDA of $1.6 million[2] – up 21% quarter-over-quarter
- Free Cash Flow2 before working capital changes of $1.6 million – up 61% from Q2
- Liabilities reduced by $0.9 million in the quarter; Cash increased by $0.4 million
- Announced a Normal Course Issuer Bid under which the C21 may purchase common shares of the Company
Q3 Management and Operational Commentary
“Our strong performance again this quarter validates our stated strategy and demonstrates C21’s ability to execute and deliver results for shareholders,” stated CEO and President Sonny Newman. “We have added the right assets at the right price and are successfully scaling our business to deliver significant organic top-line revenue growth. With the sharp ramp-up in retail sales, 7% quarter-over-quarter and 22% over the past two quarters, we have seen a dramatic improvement in our margins despite continued industry compression. These results, combined with our relentless focus on cost management, have enabled us to generate a 61% increase in Free Cash Flow this quarter. The trending in the results we have delivered serves to reinforce the soundness of our strategy and our proven ability to execute. We intend to stay the course.”
Given the previously reported change in fiscal year end from January 31 to March 31, there is no equivalent time period to this Q3 report in the Company’s historical results. The comparative period in the interim financial statements for this third quarter ending December 31, 2024 is the 3 months ending January 31, 2024.
Q3 revenue of $7.9 million was up 5.3% compared to Q2, despite a 4% decline in Nevada sales over the comparative period. The 7% increase in retail sales was driven by the strong performance in the South Reno dispensary, with monthly sales of $518,000 in December, up from $273,000 in July. This represents a 90% increase in monthly sales over the second half of the calendar year. With this shift in business mix, wholesale revenue was down slightly quarter-over-quarter.
Gross Margin of 46.0% in the third quarter was up 250 basis points from Q2. The improvement was driven by increased retail revenues, and greater operational synergies and cost efficiencies associated with integrating the new dispensary.
C21 reported Income from Operations of $1.0 million in the third quarter, up 219% from Q2. This significant improvement was driven by the increase in retail sales, higher gross margins, and lower operating expenses, with SG&A 10% lower than Q2.
The Company reported a Net Loss of $0.1 million in the third quarter, or ($0.00) per share, an improvement from Q2’s Net Loss of $0.8 million or ($0.01) per share. Q3’s Net Loss was primarily due to a provision for Income Tax (as per 280E). The Company generated $0.6 million Net Income Before Tax.
Q3 Adjusted EBITDA was $1.6 million, up 21% from $1.3 million in Q2. The increase in Adjusted EBITDA was driven by the improvement in gross margins and lower SG&A expenses.
Cash provided by Operating Activities before taxes and changes in working capital was $1.7 million, up 65% over the previous quarter. Q3 Free Cash Flow2 before working capital changes was $1.6 million, up 61% from Q2.
Cash at the end of Q3 was up $0.4 million from Q2 despite $0.3 million in Income Tax paid, a $0.3 million debenture principal repayment, and a $0.4 million mortgage retirement from discontinued operations. Total Liabilities were reduced by $0.9 million in the quarter.
During the quarter, the Company announced that it intends to commence a normal course issuer bid, under which it may purchase up to 6,002,390 common shares of the Company, representing approximately 5% of the Company’s issued and outstanding Common Shares (see news release dated November 26, 2024).
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 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 liquidity.
About C21 Investments Inc.
C21 Investments Inc. cultivates, processes, and distributes 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.