TRSSF earnings.
Solid improvements Q/Q but the overall environment is challenging. Given the current environment, the talk of incremental M&A seems premature until they prove the benefits/accretion of the Gage acquisition. It's time to focus on maximizing profitability in the core states of MI, PA, NJ, and MD.
Sales for 2Q22 were $64.8 million, an increase of 30.5% sequentially and 10.4% year-over-year. The sequential growth was driven by the start of adult-use sales in New Jersey and by a full quarter's worth of sales in Michigan. Wholesale revenue for 2Q22 was $16.8 million, a decline of 30% sequentially. This decline was driven by the decision to discontinue lower margin, non-branded wholesale business in Michigan. Wholesale sales were up 11% in Pennsylvania, and wholesale sales in Maryland were down quarter-over-quarter, driven by operational challenges at the Frederick facility, along with the planned transition to the new Hagerstown facility in Q3. Retail revenue for the quarter was $48 million, an increase of 87% sequentially, driven by a full quarter of retail sales in Michigan, combined with the beginning of adult-use sales in New Jersey. Retail sales in Pennsylvania and California were both stable quarter-over-quarter. The gross margin for 2Q22 was 35.5%, adjusted gross margin for the quarter was 47.1% as compared to 38.4% in the 1Q22, an improvement of 870 basis points sequentially (adjusted gross margin excludes one-time impacts, including reserves and write-downs for aged inventory in Pennsylvania). The sequential adjusted gross margin expansion in Pennsylvania was nearly 1,000bps, driven by volume improvement in both flower and vapes. In New Jersey, margin improved by over 800 basis points as the business scaled with the beginning of adult-use sales in late April (margins improve each quarter month sequentially.) In Michigan, margins recovered back to nearly 40% by discontinuing non-branded wholesale sales, and the new extraction facility coming online should benefit 3Q22. Capital ex was $12.3 in 2Q22 relating to the ongoing expansion at the Hagerstown, Maryland and Monitor Township, Michigan facilities. CapEx spending plans for the rest of the year mainly relate to the near-completed Hagerstown project and expansion plans for cultivation in New Jersey. TRSSF ended the quarter with a cash and cash equivalents balance of $49 million versus $88 million at the end of March. The company burned $16 million in CFFO, driven by tax payments of approximately $9.2 million and interest payments of $6.4 million.
New York - Yes, No, Maybe.
New York is reportedly going to accept cannabis dispensary applications in two weeks. This comes about a month after the Cannabis Control Board (CCB) approved the initial conditional adult-use licensing rules and accepted a mockup of the application form. Only social justice community members will get approved. “Today’s announcement brings us to the precipice of legal, licensed cannabis sales in New York State,” CCB Chair Tremaine Wright said in a press release. “With the Seeding Opportunity Initiative, New York has affirmed our commitment to making sure the first sales are conducted by those harmed by prohibition.”
AYR MA Expansion.
Ayr announced that the Massachusetts CCC had granted a final license for adult-use cannabis at its Sira Naturals dispensary in Somerville. The addition of adult use in Somerville is subject to the simultaneous opening of an Economic Empowerment licensed dispensary in Somerville, per local regulation. Ayr announced Sira had received a provisional license for its Somerville location on July 15, 2021. The company also received approval to open the first phase of its cultivation expansion in Milford, Massachusetts. The CCC voted to approve both measures during its meeting on Aug 11.
