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SNDL Inc (market cap: $427.46M) reported its fourth-quarter 2024 earnings, showcasing a slight earnings per share (EPS) beat and a notable revenue outperformance. The company reported an EPS of -0.0184 against a forecast of -0.02, while actual revenue reached 257.68 million dollars, surpassing the forecast of 248.14 million dollars. Following the earnings release, SNDL’s stock rose by 4.19%, reflecting positive investor sentiment. According to InvestingPro analysis, SNDL appears undervalued based on its Fair Value calculation, presenting a potential opportunity for investors. Get access to 6 more exclusive ProTips and comprehensive valuation metrics with InvestingPro.
Key Takeaways
- SNDL reported record full-year net revenue of 920 million dollars, a 1.3% increase.
- The company achieved a record gross profit of 240 million dollars, marking a 26% growth.
- SNDL’s stock price increased by 4.19% post-earnings announcement.
- The company continues to expand its market share in cannabis retail.
- SNDL forecasts flat revenue growth in its liquor segment for 2025.
Company Performance
SNDL Inc demonstrated robust performance in Q4 2024, with a 3.7% increase in net revenue to 257.7 million dollars and a 20% growth in gross profit to 68.8 million dollars. The company has been actively expanding its distribution network, adding 78 new distribution points in the quarter, and strengthening its position in the cannabis retail market. Despite a global slowdown in the liquor market, SNDL has maintained strong financial health, with InvestingPro data showing an impressive current ratio of 5.61 and more cash than debt on its balance sheet. The company’s financial health score ranks as "GREAT" according to InvestingPro’s comprehensive analysis framework.
Financial Highlights
- Revenue: 257.68 million dollars (3.7% increase YoY)
- Earnings per share: -0.0184 (compared to forecast -0.02)
- Gross profit: 68.8 million dollars (20% growth YoY)
- Full-year gross margin: 26.1% (improvement of 520 basis points)
- Positive free cash flow: 8.9 million dollars
Earnings vs. Forecast
SNDL’s EPS of -0.0184 slightly exceeded the forecast of -0.02, marking a positive surprise. The revenue of 257.68 million dollars significantly surpassed the forecast of 248.14 million dollars, showcasing the company’s ability to outperform expectations. This performance is consistent with SNDL’s historical trend of steady growth and market expansion.
Market Reaction
Following the earnings release, SNDL’s stock price increased by 4.19%, closing at 1.55 dollars. This movement reflects investor confidence in the company’s growth trajectory and its ability to navigate market challenges. The stock’s performance is notable within its 52-week range of 1.4 to 2.93 dollars, indicating positive market sentiment. InvestingPro data reveals the stock’s high volatility with a beta of 3.38, suggesting significant potential for both gains and losses. Discover detailed stock analysis and 1,400+ comprehensive Pro Research Reports available on InvestingPro.
Outlook & Guidance
SNDL is targeting 100 million dollars in annualized free cash flow within three years. The company anticipates flat revenue in its liquor segment for 2025 but remains focused on expanding its cannabis operations and exploring opportunities in the U.S. market. SNDL’s strategic initiatives include store conversions and potential banner acquisitions.
Executive Commentary
Zack George, CEO of SNDL, expressed optimism about the company’s future, stating, "Records are meant to be broken and we know we will continue to do so in the future." CFO Alberto highlighted the company’s financial achievements, saying, "We exceeded our guidance by delivering positive free cash flow for the year."
Risks and Challenges
- Global slowdown in the liquor market may impact revenue growth.
- Market saturation in cannabis retail could limit expansion opportunities.
- Macroeconomic pressures could affect consumer spending and profitability.
- Supply chain disruptions may impact production and distribution.
- Regulatory changes in key markets could pose operational challenges.
Q&A
During the earnings call, analysts inquired about the challenges in the liquor market and SNDL’s U.S. investment strategy. The company also addressed questions regarding its Canadian Securities Exchange (CSE) listing application and highlighted growth in its cannabis operations.
Full transcript - SNDL Inc (SNDL) Q4 2024:
Conference Operator: Hello, everyone, and welcome to the SNDL Fourth Quarter twenty twenty four Results Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. Please be advised that today’s conference is being recorded. Now it’s my pleasure to turn the call over to Zack George.
The floor is yours.
Zack George, CEO/Executive, SNDL: Good morning, and welcome to SNDL’s Q4 and full year twenty twenty four financial and operational results conference call. Twenty twenty four has been a year of records for SNDL, and we are pleased to report record full year net revenue, gross profit, gross margin as well as positive cash flow and free cash flow. Our cannabis segments continue to show strong momentum, achieving steady revenue gains for the twelfth consecutive quarter and we continue to grow well ahead of market averages. Our liquor segment revenue was impacted by a market slowdown, although we are proud of how our team managed to improve margins and cost efficiencies to deliver record profitability and cash flow growth. In fact, despite volume headwinds, our Liquor segment has never performed better than under our stewardship.
We achieved all time high gross profit and gross margin for both the full year and the fourth quarter, driven by multiple productivity and cost optimization initiatives across all areas of the organization. It is worth mentioning the significant step up in margins and profitability from our Cannabis Operations segment that delivered four consecutive quarters of positive gross profit ending the year delivering a fourth quarter gross margin of 27.2%. Free cash flow was positive this quarter, driving the company’s first year of achieving positive free cash flow. We are pleased to have met our stated goal for the year, achieving a positive $9,000,000 This is the ultimate proof that our growth trajectory coupled with operational and financial discipline is a winning formula capable of delivering sustainable and improved value to our shareholders. During the last few months, we continue to announce additional strategic initiatives that we expect to drive SNDL towards long term growth and incremental profitability.
These include the privatization of Nova through the acquisition of the remaining minority equity interest and the acquisition of Endiva, which positions SNDL as the largest manufacturer of infused edibles in Canada. Additionally, we were happy to see the approval from the Florida Department of Health for the transfer of the parallel license, a key milestone to complete the restructuring process. We also acquired a 5.4% participation in High Tide’s equity and reactivated our share repurchase program, retiring 10,800,000.0 SNDL shares. And last but not least, we are announcing today our application for listing on the Canadian Stock Exchange, which will provide our shareholders additional flexibility and optionality as we continue to grow and evolve. Our balance sheet continues to be a key competitive advantage, enabling us to allocate capital thoughtfully across both organic and inorganic investments.
We ended the year with $218,000,000 in unrestricted cash and zero outstanding debt. Over to you, Alberto, to share more insights about our financial performance.
Alberto, CFO/Financial Executive, SNDL: Thank you, Zack. I want to remind everyone that the amounts discussed today are denominated in Canadian dollars unless otherwise stated. Certain amounts referred to during this call are non GAAP and non IFRS measures. For definitions of these measures, please refer to SMDL’s management discussion and analysis document. Reviewing our Q4 twenty twenty four financial highlights, we continue to see improvements in net revenue, gross profit, gross margin and free cash flow.
Net revenue in the fourth quarter of twenty twenty four reached a record $257,700,000 a 3.7% increase compared to Q4 of last year. This was driven by a combined cannabis business growth of 16.5%, which included contributions from our recent Indiva acquisition, partly offset by declines in our legal retail segment. Gross profit of $68,800,000 reflects an $11,500,000 increase or 20% growth year over year, resulting in three sixty basis point improvement in gross margin. This translates to another quarter of record gross margin reaching 26.7. Adjusted operating income for the quarter was impacted by a $65,700,000 noncash negative fair value adjustment to our Sunstream investment, driven by increased market risk following the unfavorable Florida vote and lower operational performance from the invested companies.
Excluding this impact, we will have delivered positive adjusted operating income for the first time in a quarter, highlighting our undeniable operational improvements. Free cash flow was positive for the quarter, reaching $11,600,000 This contributed to positive free cash flow for the full year, exceeding our guidance as mentioned by Zack. Our full year financial results show progress across all metrics year over year. Net revenue reached a record $920,000,000 representing 1.3% growth compared to the prior year. This was driven by our combined cannabis business growing a healthy 10.6%, partly offset by declines in our Liquor segment.
Gross profit reached $240,000,000 also a new record with a significant 26% growth compared to the prior year, resulting in a full year gross margin record of 26.1% or five twenty basis points improvement compared to 2023. Adjusted operating income, while positive when compared to 2023, shows the impact of the previously mentioned fourth quarter negative fair value adjustment. The biggest highlight is the positive $8,900,000 free cash flow in 2024, exceeding our breakeven guidance and representing a $70,000,000 improvement compared to 2023. Our historical quarterly performance evolution shows a clear upward trend, indicative of our continuous focus on growth and efficiency improvements. The only anomaly is the Q4 twenty twenty four adjusted operating income.
However, it is important to note that, excluding the Sandstream fair value adjustments, the bar will have turned positive for the quarter. Looking at the contributions from each segment to both Q4 and full year across our main financial KPIs, we can see how in both the fourth quarter and the full year, the net revenue decline in liquor is impacting the overall consolidated results despite the strong performance from cannabis. The corporate segment is related to the revenue elimination for cannabis operation sales into our own retail. This revenue elimination increased as a result of our cannabis business growth. In terms of gross profit, liquor retail shows a marginal decline in the fourth quarter and positive growth in the full year despite the larger revenue shortfall.
Cannabis retail contributes with improvements in both the quarter and the year. Finally, cannabis operations drives most of the growth with an impressive $11,000,000 improvement in Q4 and $42,000,000 in the full year. All of these elements adding up to a significant 2026% growth in gross profit in Q4 and full year respectively. When looking at adjusted operating income, we can see how liquor retail, cannabis retail and particularly cannabis operations contribute to important improvements, while the investment segment is impacted by the Q4 fair value adjustment to our Sandstream assets. Free cash flow is positive at $11,600,000 in the fourth quarter of twenty twenty four and $8,900,000 for the full year, both significant step ups compared to 2023, driven primarily by improvements in the quality of earnings, while working capital creates a year over year drag as we reported greater working capital reductions in 2023 than in 2024.
As we examine the drivers of free cash flow in the fourth quarter of twenty twenty four and the full year, we first noticed the negative Q4 net income of $67,200,000 primarily driven by the Sandstream fair value adjustment. Since this is a noncash item in our P and L, it is offset by noncash ad backs. Our inventory optimization initiatives enabled us to reduce inventory balances in the fourth quarter by $4,700,000 and by a total of $6,000,000 for the full year, contributing to the positive free cash flow generation in both periods. The full year increase in other working capital is driven by reductions in accounts payable as we have resolved some legacy liabilities strengthening our balance sheet position. Liquor retail net revenue in the fourth quarter was reaching the highest point in the year driven by seasonality is still impacted by continuous market headwinds, resulting in a decline of 3.4% compared to the fourth quarter of twenty twenty three.
Despite this revenue softness, gross margin expansion coupled with the store efficiency optimization initiatives contributed to a significant improvement in the bottom line, reaching nearly 22% in Q4 and 41% in the full year. In the case of the liquor segment, adjusted operating income and operating income are the same as we did not have any intangible impairments or restructuring costs in the segment. Cannabis retail reported record financial performance in both top and bottom lines for the fourth quarter and the full year. Net revenue in Q4 twenty twenty four reached $83,200,000 representing a 10.7% increase compared to the prior year. This growth was mainly driven by same store sales growth of 6.3, new store openings and incremental revenue from our Dutch Love stores acquired earlier in the year.
For the full year, net revenue reached $311,700,000 representing a 7.5% growth year over year and the same store sales growth of 3.5. In this segment, we’re making strategic investments in promo activity. While impacting gross margin, particularly in the fourth quarter, these investments are enabling us to strengthen our market position and capture incremental market share. Adjusted operating income increased significantly in both the quarter and the full year, driven by gross profit growth and our focus on driving cost efficiencies. Additionally, we’re lapping an unfavorable Q4 twenty twenty three fixed asset impairment.
Our cannabis operations segment has seen a massive transformation during 2024, resulting in significant improvements and new records in financial performance across all lines. With net revenue reaching $37,100,000 in the fourth quarter and $109,500,000 for the full year, we’re posting growth rates of 4226% compared to the prior year, respectively. This includes a 7,500,000 contribution from Endiva in the last two months of the year. Gross profit has been transformed by the incremental revenue and in particularly by our productivity pipeline. This is allowing us to report positive gross margin for four consecutive quarters, exiting the year with 27.2 in the fourth quarter and achieving a 19.9% for the full year.
Both operating income and adjusted operating income posted positive results in the fourth quarter and the full year, marking a significant milestone for the segment. In summary, we have achieved record numbers across multiple categories, showcasing dynamic growth in our cannabis business and significant improvements in profitability. We exceeded our guidance by delivering positive free cash flow for the year, while continuing to work on initiatives to further elevate our performance in 2025 and beyond. Now over to Zack for additional highlights from the quarter within our strategic framework pillars.
Zack George, CEO/Executive, SNDL: We think it is important to highlight several strategic priorities during the fourth quarter as we continue to build the foundation to enable long term success. Starting with growth, our cannabis retail segment is winning in the market with another 40 basis points of share gains. Key drivers include quality execution, new store openings and conversions to value buds and the expansion into British Columbia earlier in the year. We completed the acquisition of Endiva positioning SNDL as the largest manufacturer of infused edibles in Canada. We are also very well advanced in the integration of Endiva into the rest of the SNDL infrastructure, which will enable us to deliver incremental synergies during 2025.
In liquor retail, despite the market contraction in 2024, our private label offerings are growing to meet consumer demand for quality and affordability, while driving margin accretion. Our exposure to U. S. Product is minimal and we do not expect material supply disruptions from dueling tariff actions between The U. S.
And Canada. And our Cannabis Operations segment added 78 new distribution points in the fourth quarter, achieving 11% growth in distribution points for the full year. Shifting to profitability, we are pleased to see continued strong momentum leading to the $12,000,000 positive free cash flow in the quarter. That contributed to positive free cash flow for the full year. Productivity improvements totaled $8,000,000 in Q4, largely from our cannabis operations segment through procurement, manufacturing and cultivation efficiencies.
Data licensing in our cannabis and liquor retail segments reached $4,500,000 in Q4, contributing materially to gross profit accretion. We also achieved $5,000,000 in overhead savings in Q4, driven by efficiency gains across all segments, as well as restructuring actions that were initiated in July. We are once more highlighting the contributions from the restructuring program announced last July that delivered $5,000,000 of savings during 2024, equivalent to an annualized run rate of about $15,000,000 or 75 percent of our planned target. Finally, we know that our people are and will be our biggest competitive advantage and a key pillar to our long term success. In this regard, the strategic talent development process kicked off in 2024 is helping us to drive a performance based culture across the organization as well as identifying opportunities to invest in personal development to improve capabilities or succession plans.
During the fourth quarter, we completed our inaugural employee engagement survey, which provided valuable feedback from our team, establishing a baseline to continue to improve our employee value proposition. Our employee recognition program continues to gain traction with over 600 nominations and 160 awards being presented across our organization to date, celebrating amazing contributions from our team members. Last but not least, we continued the development of a total reward structure that aligns our compensation philosophy with both individual and company performance. I cannot be more proud of what my colleagues have achieved in 2024. This team continues to find ways to deal with the different challenges from our external environment and loves to smash records only to quickly move towards higher goals.
I am convinced more than ever of our potential and we are determined to unlock value for our shareholders. Records are meant to be broken and we know we will continue to do so in the future. We are convinced of our ability to unlock SNDL’s significant potential and this is why we are committed to continue growing and deliver $100,000,000 in annualized free cash flow within the next three years. Once more, I would like to thank our entire team for their contributions and our shareholders for their continued trust. I will now pass the call back to the operator for analyst Q and
Conference Operator: A. Thank you so much. And we’ll begin our analyst questions and answer session. You. And our first question comes from Federico Gomez with ATB Capital Markets.
Please proceed.
Federico Gomez, Analyst, ATB Capital Markets: Hi, good morning. Congrats on the great quarter, the free cash flow there. Thanks for taking my questions up. First question on liquor retail, you’ve been reporting improving margin in the segments, but same store sales have been fairly weak. I know that you talked a little bit about the headwinds there, but could you talk about your outlook for the segment?
What exactly is impacting that same store sales performance and whether we could see that reverting back to same store sales growth anytime soon?
Alberto, CFO/Financial Executive, SNDL: Good morning, Fred. Thank you for your question. This is Alberto. So yes, obviously, what we’re seeing across North America and actually on a global basis throughout 2024 was a slowdown in liquor sales. So it’s impacting pretty much the entire market.
For 2025, we’re anticipating revenue to be about flat. There are obviously different views from different manufacturers, different players in the industry, some of them thinking that it could be a couple of points positive, some others a couple of points negative. We’re taking the middle of the road estimate and anticipating that it would be close to 0% growth. On the longer term basis, all our analysis are pointing to there is an underlying growth rate in the industry of about 1% to 1.5%. We may be having one or two years where there is some favorability to that average, some others that is below that average, but that’s what we think that it’s going to be the sustainable value growth.
From a volume perspective, we’re still anticipating a certain decline on low single digits, although that would be theoretically on the long term compensated through pricing. So that’s a little bit how we’re seeing the overall outlook for the industry in the future.
Federico Gomez, Analyst, ATB Capital Markets: Great. Thanks for that, Alberto. A question on your U. S. Investments.
In your release and prepared remarks, you mentioned the worsening performance of those investments operationally given the challenging competitive environment in the West Cannabis market. So can you talk a bit more about that? I mean, the operating environment that these companies are facing and specifically whether the investments might need additional capital to continue operating? Thanks.
Zack George, CEO/Executive, SNDL: Sure. Fred, thanks for the question and good morning to you. A few things are going on here, but I would say the most important thing to keep in mind is that given our structure today, we are not able to engage in plant touching activities. So we actually from afar see quite a bit of low hanging fruit, an opportunity to dramatically improve performance. This package has a large exposure to the Florida market where Parallel and Sotera are top players.
Obviously, the failure of the A3 vote sort of pushes out some expectations on growth to the right. But we otherwise believe in these positions and the long term potential. To your question on whether investments will be made in the future, I would say that our two top priorities, which we’ve discussed at some length in terms of capital deployment will be continued build out of our infrastructure in Canada. And a close second behind that would be opportunities in core markets in The U. S.
So we are just getting close to the finalization of these restructuring processes. And once complete, I think you’ll see running room for some real change and improvement of performance and we’re looking forward to that.
Federico Gomez, Analyst, ATB Capital Markets: Okay. Thanks for that. And I guess last question for me. Just on your CSC listing application, could you maybe talk a little bit more about the rationale behind that? And specifically, could that have anything to do with plans to potentially engage directly in plant touching activity in The U.
S. In the future, given that all the MSOs are pretty much listed on the CFT? Thanks.
Zack George, CEO/Executive, SNDL: Yes. Thanks so much for the question. I’m going to disappoint on this without giving too much color. Again, our compliance culture is really critical to us and our current structure and capital deployment means that we’re not able to engage in plant touching activities. We are looking at means of growing not only in The U.
S. And internationally. And so having this second listing does create a lot of optionality. There are potential scenarios that would go down a path that you’re describing, but we’re not in a position today to discuss that and no corporate decision has been made.
Federico Gomez, Analyst, ATB Capital Markets: Perfect. Thanks for that. I’ll go back to queue. Thanks.
Alberto, CFO/Financial Executive, SNDL: Thank
Conference Operator: you. Our next question comes from Youn Kang with Canaccord Genuity. Please proceed.
Youn Kang, Analyst, Canaccord Genuity: Good morning. Thank you for the question. Just my first question is on the cannabis operations revenues. It seems without the $7,500,000 of Endiva contributions this quarter and also netting of the intercompany sales. It seems that you guys have seen a pretty healthy growth there in terms of sequentially.
And so just wanted to ask if there’s any kind of product that really stands out in fulfilling the B2B orders or any of the provincial boards that you’re seeing, if it’s base or any kind of special products that you guys have rolled out in the past? Thank you.
Alberto, CFO/Financial Executive, SNDL: Yes. Hello, Johan. Thank you for the question. Good morning. So actually, we’re seeing good growth across the board even if we were to take that contribution from Indriva.
We’ll see a strong double digit growth in the segment. It’s mainly driven by increased distribution across pretty much all of our product categories. So we particularly have a strong performance with our pre rolls, our vapes, our edibles, which are the portions of the market that first are growing the biggest. But as well, we benefit from the pull through that we have through our own retail and third party retail as well as we’re improving quality in our products. We that is allowing us to increase distribution points as well.
So overall, I wouldn’t highlight one specific brand or one specific product. I think we’re having good performance across. As well, we are seeing some good momentum. It’s obviously early days and the numbers are relatively small, but they are starting to add up to a few million on a quarterly basis. We’re seeing good momentum with our international sales and our B2B business.
So it’s the momentum is across the entire segment.
Youn Kang, Analyst, Canaccord Genuity: Great. Thank you. And just on my second question here is regarding cannabis retail. And obviously, I think over time, we’ve seen a lot of the other banners such as Supred and Spiritleaf kind of turn into more value buds focused. And so I just wanted to ask, given the continued focus on discount retail across the Canadian cannabis retail landscape, are you guys still seeing the importance of employing several different banners under your cannabis retail umbrella?
Or do you foresee that you guys are going to have to convert more of those stores into value buds to fit with the consumer preference towards just the discount retail banners?
Zack George, CEO/Executive, SNDL: Thank you. That’s a great question, Zack here. Both things can be true. I think it’s the right way to look at that, where we see great opportunities to improve returns with minimal investment. We have been converting banners.
Some of that work will continue, but we’ve also we also have a flexible model where our back of house management enables us to acquire additional banners if the opportunity were to arise. So we do believe in consolidation and we will be looking at opportunities. We do have a pipeline when it comes to retail development, both organic and inorganic. So you could see us potentially both add new banners in the future and continue to consolidate and convert our existing portfolio as the Value Buds banner increases in presence in the market.
Youn Kang, Analyst, Canaccord Genuity: Thank you for the color. I’ll hop back into the queue.
Conference Operator: Thank you. All right. This concludes the Q and A session. I would like to turn the conference back to Zack George for any closing remarks.
Zack George, CEO/Executive, SNDL: Thank you, Carmen, and thanks everyone for joining our call today. We look forward to updating you in the near future. Thank you.
Conference Operator: And this concludes today’s conference call. You may now disconnect your lines. Thank you for participating and have a pleasant day.
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