TerrAscend Corp. (CSE: TER) (OTCQX: TRSSF) reported financial results for its first quarter ending March 31, 2021 with sales increasing 106% year-over-year to $53.4 million versus last years $25.9 million for the same time period. TerrAscend attributed the increase to cultivation capacity expansions in Pennsylvania, New Jersey, and California as well as five new dispensaries opened during 2020. Sales jumped 8% sequentially as a result of capacity expansion in Pennsylvania and the initial ramp-up of the operations in New Jersey. This slightly missed consensus estimates according to Seeking Alpha which was $54.4 million.
Net losses were cut significantly in the first quarter to $12.7 million from last year’s net loss of $87 million or the same time period. The company said that the net losses were largely impacted by a loss on the fair value of warrants of $5 million and an unrealized foreign exchange loss of $3 million, along with income tax expense of $10 million, financing, and other expenses of $7 million, share-based compensation of $4 million and depreciation and amortization, inclusive of depreciation and amortization in cost of goods sold, of $4 million. The net loss per share increased to ($0.08) from last year’s ($0.07).
“In Q1, we drove strong revenue growth, margin expansion, and cash generation by continued focus on operational excellence, disciplined cost control, and effective allocation of capital,” said Jason Wild, Executive Chairman of TerrAscend. “I’m pleased with the strong results our team has delivered to begin the year.”
In addition to cutting losses, TerrAscend also reduced its expenses. In the first quarter, G&A expenses were $15.8 million, representing 30% of revenue, a decrease from 42% of revenue for the same time period last year. Sequentially though, G&A expenses increased from 23% in the fourth quarter of 2020. The company said that approximately half of the increase was related to one-time legal and severance costs while the remainder was related to planned investments in personnel, systems, and other capabilities to enable future growth. The company is comfortably sitting on Cash and cash equivalents of $234 million as of March 31, 2021, versus $59 million as of December 31, 2020, demonstrating the strong balance sheet position to support its growth initiatives.
Mr. Wild added, “Looking ahead to the rest of the year, there are strong operational tailwinds helping our business as we continue to see the benefits from recently completed cultivation expansions, and the addition of retail locations in New Jersey, Pennsylvania, and Maryland.”
TerrAscend is raising its full-year guidance to $300 million versus the previous guidance of $290 million and Adjusted EBITDA is expected to exceed $128 million versus previous guidance of $122 million. The outlined its state by state plans for the year as follows:
- In Pennsylvania, TerrAscend said it will benefit from increased cultivation capacity completed in late 2020, as well as, the recent acquisition of KCR, which increased its dispensary footprint to six locations.
- In New Jersey, sales from its 40,000 square foot greenhouse and 80,000 square foot indoor cultivation facilities are expected to ramp up throughout 2021. TerrAscend’s Phillipsburg, New Jersey dispensary achieved its first full quarter of sales in the first quarter of 2021, a second dispensary opened in Maplewood, and the company plans to open a third dispensary later this summer.
- In Maryland, sales will benefit from the contribution of the recently acquired HMS Maryland business.
- In California, TerrAscend will benefit from a full quarter of sales from the recently expanded State Flower cultivation facility which has increased the annual production capacity of super-premium craft flower by 500%. The Company’s California retail footprint will benefit from the two Apothecarium locations in Berkeley and Capitola which opened in the second half of 2020. Both locations continue to ramp up and the overall business continues to recover from the easing of COVID restrictions in the state.
- In Canada, the company expects to see positive contributions to sales and profits with its newly streamlined product portfolio and optimized cost structure.
Finally, the company remains on track to become a U.S. filer with the United States Securities and Exchange Commission (SEC) by the end of 2021 and is preparing to meet the requirements necessary for its securities to be traded on a national U.S. exchange should such an event become permissible by U.S. law.
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