Sundial Growers Inc. (SNDL) 2021 Q1 Earnings. Should you Buy, Hold or Sell?

 

Sundial Growers Inc. (NASDAQ: SNDL) reported its financial and operational results for the first quarter ended March 31, 2021. All financial information in this press release is reported in millions of Canadian dollars and represents results from continuing operations, unless otherwise indicated.

FIRST QUARTER 2021 FINANCIAL AND OPERATIONAL HIGHLIGHTS

  • Earnings from operations of $1.7 million compared to a loss from operations of $32.7 million in the prior quarter.

  • Net loss of $134.4 million as a result of $130.0 million of non-cash amounts reflecting the impact of share price volatility on accounting valuation of derivative warrants.

  • Achieved first quarter of positive adjusted EBIDTA in Sundial’s history, at $3.3 million compared to an adjusted EBIDTA loss of $5.6 million in the prior quarter.

  • $969.5 million unrestricted cash, marketable securities and long-term investments on hand at March 31, 2021 and $1.08 billion at May 7, 2021 with no outstanding debt.

  • Investment balance of $96.0 million at March 31, 2021 in cannabis-related loans and marketable securities generated income of $15.7 million for the quarter.

  • Gross cannabis revenue was $11.7 million, a decrease of 30% from the prior quarter.

  • Subsequent to the quarter end, announced an agreement to acquire Inner Spirit Holdings and Spiritleaf retail cannabis network.

 

Sundial’s investment strategy could be the bright spot for investors to hang their hats on going forward. George stated, “I am pleased with our investment track record, which began with our internal program and is evolving to include partnership with third party capital.”  He added, “Our strong financial position, unique cultivation facility and focus on premium inhalables have positioned us for improved performance in the second half of 2021 and beyond.”

The company remains focused on making operational improvements. It’s also continuing to developing even higher potency cannabis strains. Sundial plans to begin marketing some of these new strains beginning in the fourth quarter of this year.

  • Sundial continued to invest in its evolving library of strains, utilization of data insights and continuous improvement in the Olds facility to achieve higher potency and more consistent quality metrics. Sundial received its first laboratory results for its new extended library of genetics and will prioritize the strains with higher THC potency results. The Company plans to commercialize these new strains in Q4 2021.
  • Following the cultivation restructuring efforts commenced in mid-2020, potency and quality metrics have continued to be a focus in 2021. In February 2021, Sundial harvested its highest potency flower since the Olds facility’s inception with Top Leaf’s LA Kush Cake initial lots producing potency in excess of 28% THC. The product has seen strong velocity in sales during the first quarter with some stores selling out in two days. Sundial has seen higher potency, yields and terpenes through the first quarter, increasing its average potency results by approximately 15%, year over year.
  • Sundial’s commitment to premium products remains steadfast, and the Company will become more selective and limit accessibility of its discount segment products to select customers, where the economics are attractive. The price dynamics of the discount segment are not sustainable for Sundial’s portfolio and assets. The Company will focus on its most profitable and higher margin SKUs, while continuing to further simplify its supply chain and rationalize SKUs across all brands and formats to help better position and optimize its products.
  • Sundial continues to work on research and development and a purposeful and robust innovation pipeline focused on inhalable products. Sundial launched two concentrates SKUs in the first quarter of 2021 and the Company implemented an approach targeted on the most profitable segments of its portfolio including Sundial’s new partnerships with Simply Solventless Concentrates Ltd. and Stigma Grow, in the development of additional concentrates offerings.
  • While continuing to focus on branded sales, Sundial has seen an increased sales trend in the wholesale market due to its focus on cultivation excellence and other licensed producers divesting from cultivation practices.
  • Sundial’s cultivation and production costs were reduced to an average of $4 million per month in the first quarter 2021 from $10 million per month in the first quarter of 2020 through efficiencies and cost reduction initiatives. Cultivation and production costs have stabilized through the first quarter of 2021.
  • Sundial’s facility in Olds amended its licence for standard processing authorizing the activity of sale for cannabis extract, cannabis topical and edible cannabis products, in addition to the previously granted licences for standard cultivation and for sale for medical purposes.

 

CWEB Analyst’s have initiated a BUY Rating for Sundial Growers Inc. (NASDAQ: SNDL) and potential upside of $6-$8 in 2021. The fundamentals of the company are to strong and cash on hand is unrestricted cash balance of approximately $752.7 million without any debt. We believe Q2 and Q3 will be the real break for the company with more positive cash flow and new contracts. Sundial (NASDAQ: SNDL) recorded its first-ever adjusted EBITDA of $3.3 million in Q1 2021 compared to an adjusted EBITDA loss of $5.6 million in the prior quarter. The significant increase was mainly due to realized investment gains and income from the company’s strategic cannabis-related portfolio investments. Sundial Growers’s Q2 earnings are confirmed from now on August 12, 2021.

  • Oh, ye of little faith. Better get in while you can to enjoy the long-awaited rocket ride to the moon.


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