Q3 2023 SNDL Inc Earnings Call
[music].
Speaker 1: Good morning and welcome to SNDL's 3rd Quarter 2023 Financial Results Conference Call.
Good morning, and welcome to S. N D L. <unk> third quarter 2023 financial results Conference call.
Speaker 1: This morning, SNDL issued a press release announcing their financial results for the third quarter ended on September 30, 2023. This press release is available on the company's website at sndl.com and filed on EDGAR and CDAR as well. The webcast replay of the conference call will also be available on the sndlgroup.com website. SNDL has also posted a Supplemental Investor Presentation on its website.
This morning S. N D L issued a press release announcing their financial results for the third quarter ended on September 30th 2023. This press release is available on the company's website at S. N D. L Dot com and filed on Edgar and SEDAR as well the webcast replay of the conference call will also be available on that.
S N deal group Dot Com website.
S. N deal has also posted a supplemental investor presentation on its website presenting on this morning's call we have Zach George Chief Executive Officer Alberto.
Speaker 1: Presenting on this morning's call, we have Zach George, Chief Executive Officer, Alberto Paradero, Chief Financial Officer and Chief Executive Officer.
Part of Darrow Chief Financial Officer.
Speaker 1: Hank Vander, President Liquor Retail and Tyler Robson, President Cannabis.
Thank sander president.
Our retail and Tyler Robson President cannabis before we start I would like to remind investors that certain matters discussed in today's conference call or answers that maybe given to questions could constitute forward looking statements actual results could differ materially from those anticipated.
Speaker 1: Before we start, I would like to remind investors that certain matters discussed in today's conference call or answers that may be given to questions could constitute forward-looking statements.
Speaker 1: Actual results could differ materially from those anticipated. Risk factors that could affect results are detailed in the company's financial reports and other public filings that are made available on CDAR and EDGAR. Additionally, all financial figures mentioned are in Canadian dollars unless otherwise indicated. We will now make prepared remarks and then we'll move on to analyst questions. I will now turn the call over to
Risk factors that could affect results are detailed in the company's financial reports and other public filings that are made available on SEDAR and Edgar. Additionally, all financial figures mentioned are in Canadian dollars unless otherwise indicated we will now make prepared remarks, and then we'll move on to analyst questions. I will now turn the call over to Zack.
George.
Speaker 2: Good morning all, and thank you for joining us on our third quarter 2023 financial and operational results conference call.
Good morning, all and thank you for joining us on our third quarter 2023 financial and operational results conference call.
Speaker 2: I want to begin by acknowledging an important milestone for the SNDL team as this is the first quarter since inception that we have generated both positive net cash from operating activities and free cash flow.
I want to begin by acknowledging an important milestone for the SMB team. As this is the first quarters since inception, we have generated positive net cash from operating activities and free cash flow.
Speaker 2: This milestone is a testament to the dedication of our team in driving positive change and the resilience and adaptability of our business segment.
This milestone is a testament to the dedication of our team and driving positive change and the resilience and adaptability of our business segments. We.
Speaker 2: We are building the foundation of an important regulated product company with international potential that does not have a close peer in Canada.
We are building the foundation of an important regulator products company with international potential that does not have a close here in Canada.
Speaker 2: We are finding attractive opportunities for operational improvement in an industry where capital is scarce and many competitors are starved for liquidity amidst price compression driven by persistent oversupply and over-licensing.
We are finding attractive opportunities for operational improvement and an industry, where capital is scarce and medical Petters our star for liquidity.
Price compression driven by persistent oversupply and over licensing.
Speaker 2: Our goals are a far climb from where we stand today. We still have a lot of work to do, but we are making tremendous progress against a challenging macro backdrop.
Our goals are a far cry from where we stand today.
We still have a lot of work to do but we're making tremendous progress against a challenging macro backdrop.
Speaker 2: Although much of our regulated product business has shown recession resistance, we take nothing for granted given the likely duration of the current rate environment and are aggressively seeking efficiencies to improve profitability.
Although much of our regulated product business has shown recession resistance.
Nothing for granted given the likely duration of the current rate environment and are aggressively seeking efficiencies to improve profitability.
Speaker 2: SNDL has equipped itself with the flexibility to navigate market uncertainties and preserve our growth trajectory.
<unk> is equipped itself with the flexibility to navigate market uncertainties and preserve our growth trajectory.
Speaker 2: Our platform structure creates strategic optionality and our debt-free balance sheet helps us focus on delighting consumers without the burden of material cash interest obligations.
Our platform structure create strategic Optionality in our debt free balance sheet helps us focus on delighting consumers without the burden of material cash interest obligations.
Speaker 2: Tank will provide further color on the liquor retail segment, but I wanted to highlight some key initiatives that we have recently undertaken.
Hank will provide further color on the liquor retail segment, but I wanted to highlight some key initiatives that we have recently undertaken.
Speaker 2: We recently finalized the structure of our Liquor Retail Data Program, and we expect to see results in the first quarter of 2020.
We recently finalized the structure of our liquor retail data program and we expect to see results in the first quarter of 2024.
Speaker 2: Its launch is expected to strengthen our supplier partnerships, enhance revenue, and contribute to margin expansion within our liquor retail segment.
Its launch is expected to strengthen our supplier partnerships enhanced revenue and contribute to margin expansion within our liquor retail segment.
Speaker 2: In the third quarter of 2023, SNDL's cannabis retail segment demonstrated substantial growth and operational progress.
In the third quarter of 2023 S. N deals cannabis retail segment demonstrated substantial growth and operational progress.
Speaker 2: Net revenue saw a 14 percent increase compared to Q3 2022, marking a record for the segment since the company's diversification into cannabis retail in 2021.
Net revenue saw a 14% increase compared to Q3 2022, marking a record for the segment since the company's diversification into cannabis retail in 2021.
Speaker 2: Enhancements to our proprietary data licensing program significantly contributed to this success, with revenues climbing to $4 million in the third quarter, a significant increase over the previous year's $1.4 million, and up 50% from the preceding quarter.
Enhancements to our proprietary data licensing program significantly contributed to the success with revenues climbing to $4 million in the third quarter, a significant increase over the previous year's $1 4 million and up 50% from the preceding quarter.
Speaker 2: We are committed to refining our cannabis retail operations, enhancing partnerships, and delivering superior products to consumers.
We are committed to refining our Canada retail operations, enhancing partnerships and delivering superior products to consumers.
Speaker 2: This strategy includes expansion into markets where our presence is currently limited to reinforce SNDL's position as a leading cannabis retailer.
This strategy includes expansion into markets, where our presence is currently limited to reinforce <unk> position as a leading cannabis retailer in Canada.
Speaker 2: We've taken significant strides in our cannabis operations segment to streamline operations and reduce costs. The rationalization of our facility footprint and procurement processes sets the stage for significant financial improvements and further demonstrates our commitment to operational excellence.
We've taken significant strides in our cannabis operations segment to streamline operations and reduce costs the rationalization of our facility footprint and procurement processes sets the stage for significant financial improvements and further demonstrates our commitment to operational excellence, our president Tyler.
Speaker 2: Our president, Tyler, will provide further details on our cannabis operation shortly.
I'll provide further details on our cannabis operations shortly.
Speaker 2: As of the end of Q3 2023, S&DL's financial position in Canadian dollars included $785 million in unrestricted cash, marketable securities, and long-term investments.
As of the end of Q3 2023 person deals financial position in Canadian dollars included $785 million in unrestricted cash marketable securities and long term investments.
Speaker 2: Our robust liquidity profile stands in contrast to our current market capitalization of approximately $500 million.
Our robust liquidity profile stands in contrast to our current market capitalization of approximately $500 million.
Speaker 2: a figure that we believe does not fully reflect the intrinsic value of our energy.
A figure that we believe does not fully reflect the intrinsic value of our enterprise.
Speaker 2: Said another way, the market is currently ascribing a materially negative value to our expanding operating.
Said another way the market is currently ascribing a materially negative value to our expanding operating segments. These segments, our position with the potential to yield more than $1 billion in annual revenue underscoring our perspective that SMB al remains undervalued in the marketplace.
Speaker 2: These segments are positioned with the potential to yield more than $1 billion in annual revenue, underscoring our perspective that S&DL remains undervalued in the market.
Speaker 2: In a climate where managing cost is more crucial than ever, our ability to streamline our investment portfolio by divesting of equity securities and certain credit exposures is integral to our strategy.
In a climate, where managing cost is more crucial than ever our ability to streamline our investment portfolio by divesting of equity securities and certain credit exposures is integral to our strategy.
Speaker 2: As of the close of Q3 2023, SNDL had deployed capital into credit investments with a carrying value of $583.2 million.
As of the close of Q3, 2023, <unk> and deployed capital into credit investments with a carrying value of $583 2 million.
Speaker 2: The lion's share of this value, approximately 550.5 million, has been committed to the Sunstream Bank Corp joint.
The Lions share of this value approximately $555 million has been committed to the sunscreen Bancorp joint venture.
Speaker 2: Sunstream is a joint venture sponsored by SNDL and has directed the formation of Sunstream USA with the aim of restructuring certain Sunstream controlled loans.
Sunscreen as a joint venture sponsored by S. N D L and as directed the formation of sunscreen USA with the aim of restructuring certain sunscreen control loans.
Speaker 2: This development is poised to create a dedicated U.S. platform designed to attract independent third-party investors, offering independent management and governance.
This development is poised to create a dedicated U S platform designed to attract independent third party investors offering independent management and governance.
Speaker 2: Most importantly, the structure of Sunstream USA is set to undergo review by NASDAQ, aligning with all U.S. compliance and governance.
Importantly, the structure of sunscreen USA is set to undergo review by NASDAQ aligning with all U S compliance and governance standards.
Speaker 2: Since acquiring Valens in January of 2023, the company has realized approximately $22 million in annualized savings, exceeding our initial
Since acquiring <unk> in January of 2023, the company has realized approximately $22 million in annualized savings.
Exceeding our initial target of $10 million in.
Speaker 2: In 2023 alone, we achieved cost savings of approximately $18 million.
In 2023 alone, we achieved cost savings of approximately $18 million.
Speaker 2: These savings have largely been driven by reduction in SG&A expenses.
These savings have largely been driven by reduction in SG&A expenses.
Speaker 2: supply chain consolidation, and enhanced operational efficiency.
Fly chain consolidation.
And enhanced operational efficiencies.
Speaker 2: Looking ahead to 2024, we anticipate that run rate synergies will surpass $40 million annually, with expected proceeds from asset sales potentially contributing more than $9 million in additional cash proceeds.
Looking ahead to 2024, we anticipate that run rate synergies will surpassed $40 million annually with expected proceeds from asset sales potentially contributing more than $9 million in additional cash proceeds.
Speaker 2: Investors may not realize that as we start 2024, none of the assets that SNDL held just over three years ago following its deep financial restructuring and flirtation with CCAA will be in operation.
Investors may not realize that as we start 2024, none of the assets that <unk> held just over three years ago, following with deep financial restructuring and flirtation with TCE to play will be in operation.
Speaker 2: S&DL's leadership has driven a 100% complete transformation of a business that continues to evolve and change. This is not
S N Deal's leadership has driven a 100% complete transformation of a business that continues to evolve and change.
This is not the team to underestimate.
Speaker 2: SNDL's performance metrics from the third quarter provide a clear affirmation of our strategy.
<unk> performance metrics from the third quarter provided a clear affirmation of our strategy are.
Speaker 2: Our confidence is increasing and we are building a culture focused on accountability and performance.
Our confidence is increasing and we are building a culture focused on accountability and performance.
Speaker 2: Our commitment to the consistent delivery of well-priced, high-quality products and superior retail experiences has never been stronger.
Our commitment to the consistent delivery of well priced high quality products and superior retail experiences has never been stronger we.
Speaker 2: We are excited to continue to update investors on our performance as we work to deliver strong, fundamental, unadjusted results.
We are excited to continue to update investors on our performance as we work to deliver strong fundamental unadjusted results.
Speaker 2: Once again, I thank you for your continued support of SMDL. I will pass the call to Alberto to provide further details on our financial...
Once again I. Thank you for your continued support of <unk> I will pass the call to Alberto to provide further details on our financial results.
Speaker 3: Thank you, Zach. I want to remind you all that amounts discussed today are denominated in Canadian dollars unless otherwise stated. Please note that certain amounts referred to on this call are non-GAAP and non-IFRS measures. For definitions of these measures, please refer to SMBL's Management Discussion and Analysis document.
Thank you Scott I want to remind you all that amounts discussed today are denominated in Canadian dollars unless otherwise stated. Please note that certain amounts referred to on this call are non-GAAP and non <unk> measures or definitions of these measures. Please refer to let somebody else management discussing or another.
Stocking.
Speaker 3: As we dive into our financials, it is great to report that for the first time in our history, we have reached positive free cash flow in the quarter. To be precise, in Q3 2023, we achieved $16.5 million of positive free cash flow, compared to negative $67.1 million in Q3 2022.
As we dive into our financials. It is great to report that for the first time in our history, we have great positive free cash flow in the quarter.
To be precise in Q3, 2023, we achieved $16 5 million a positive free cash flow.
It's a negative $67 1 million in Q3 2022.
Speaker 3: Our cash flow from operations grew $27.5 million in Q3 2023, up from $8.6 million in Q3 2022.
Our cash flow from operations grew $27 5 million in Q3 2023.
From $8 6 million in Q3, I want to point that to them.
Speaker 3: Achieving this castle of milestones is a clear indicator of our operational improvements and reinforces the focus on our strategic initiatives as a path to deliver on much higher ambition.
He will discuss the milestones is a clear indicator of our operational improvements and reinforces the focus on our strategic initiatives as a path to deliver a much higher base in the future.
Speaker 3: Our unrestricted cash balance tells a similar story of growth from $185.5 million on June 30, 2023 to $202 million on September 30, 2020.
Our unrestricted cash balance tells a similar story of growth from 185 5 million at June 32023 to 202 million at September 32023.
Speaker 3: This increase speaks volumes about our targeted efforts to optimize operational efficiency, particularly working capital.
This is pre the speaks volumes about our targeted efforts to optimize operational efficiency, particularly when their working capital.
Speaker 3: Revenue growth remains steady, registering at $237.6 million for this quarter, a 3.1% increase from Q3 2022.
Revenue growth remains a steady registering.
$237 6 million for the quarter up three 1% increase from Q3 2022.
Speaker 3: Our reported gross margins revealed a slight decrease to 48.6 million in Q3 2023, down 3.4% from the same period last year.
Our reported gross margin reveals a slight decrease to $48 6 million in Q3.
Right.
Down three 4% from the same period last year.
Speaker 3: While we're seeing operational improvements, the reported growth margin has been impacted this last quarter by non-cash inventory experiment charges.
What it was in operational improvements the reported gross margin has been impacted this last quarter by noncash inventory impairment charges.
Speaker 3: to a large extent triggered by our efforts to simplify our portfolio and operations.
While our system figure by our efforts to simplify our portfolio and operations.
Speaker 3: For perspective, if we were to exclude the impact of inventory impairments on our collections charges in Q3 2023 and Q3 2022, our growth margin will have grown over 20% year-on-year.
Perspective, if we work with the impact of inventory impairments in obsolescence charges. In Q3 23 in Q3 2022, our gross margin would have grown over 20% year on year.
Speaker 3: In terms of adjusted EBITDA, we achieved $16.1 million for the quarter, slightly down from the Q3 2022 results of $18.3 million.
In terms of adjusted EBITDA with 56 important 1 million for the quarter slightly down from the Q3 2022 result.
$18 3 million.
Speaker 3: A better growth profit in 2023 has been offset by higher sales and marketing and DNA expenses in 2023 and higher investment segment income in 2022.
As better gross profit and put it towards the pre has been upset by higher sales and marketing and G&A expenses in 'twenty three on high investments segment income.
Thank you.
Speaker 3: I will let Stan and Tyler provide more details on the Q3-23 results for the liquor retail and cannabis operation segments, but I would like to comment about the results for our cannabis retail.
I will let tanked and Pilar provide more details on the Q3 23 result for the liquor retailing cannabis operational segments, but I would like to comment about the result, what are kind of as retail segment.
Speaker 3: Revenues for the segment have reached $75.5 million, which is 14.1% growth from Q3 2022.
Revenues for the segment had a $75 5 million, which is 14, 1% growth from Q3, just wanted to do.
Speaker 3: This record-high revenue for the cannabis retail segment was supported by a healthy increase in same-store sales of 3.9% year-over-year across all banners, as well as.
This record high revenue for the kind of just break those segments all supported by a healthy increase in same store sales of three 9% year over year.
Across all banners as well as opening up new stores.
Speaker 3: Growth margin reached $20 million in Q3 2023, a 38% growth versus the same period last year.
Gross margin reached $20 million in Q3 2003.
38% growth versus the same period of last year.
Speaker 3: As a percentage of net revenue, growth margin expanded from 21.9% in Q3 2022 to 26.5% in Q3 2023. An improvement of 4.6 percentage points driven by continuous efficiency improvements and expansion of our proprietary data licensing program.
As a percentage of net revenue gross margin expanded from 21, 9% in Q3 2020 to 26, 5% in Q3, 2023 an improvement of four six percentage points driven by continuous efficiency improvement and expansion of our appropriate target date the licensing for the.
Speaker 3: This data program delivered revenue for the third quarter of 2023 of $4 million, compared to $1.4 million in the third quarter of 2022.
Data program deliver revenue for the third quarter of 2023 of $4 million compared to $1 4 million in the third quarter of 2022.
Speaker 3: This represents an increase of 54% versus the second quarter of 2023, showcasing the success of the programs optimization introduced earlier.
This represents an increase of 54% versus the second quarter of 2023 showcasing the success of the programs optimization introduced earlier in the year.
Speaker 3: Finally, looking at our investments and equity positions in Q3 2020.
Finally, looking at our investments and equity positions in Q3 2023.
Speaker 3: At the end of the third quarter of 2003, the company had deployed capital into cannabis-related credit investment with a carrying value of $583 million.
At the end of the third quarter of two or three.
Company has deployed capital as economies related credit investments with a carrying value of $583 million.
Speaker 3: including 550.5 million through the Sunstream Jordan.
Including $555 million through the <unk> joint venture.
Speaker 3: The revenue generated by our investment portfolio in the third quarter stands at $10 million.
The revenue generated by our investment portfolio in the third quarter was 10.
$10 million.
Speaker 3: This is mainly attributed to interest and fee revenues of $3.3 million in addition to a $6.6 million increase in the estimated fair value of our U.S. credit.
This is mainly attributed to interest and fee revenues of $3 3 million. In addition to a $6 6 million increase in the estimated fair value of our U S credit investments.
Speaker 3: The company's financial health is strong, supported by $785 million in unrestricted cash, marketable securities, and investments, leading to a net book value of $1.3 billion.
The company's financial health is strong.
<unk> by 785 million and our restricted cash marketable securities and investments leading to a net book value of $1 3 billion.
Speaker 3: It is also important to highlight that we have not raised any cash to share offerings since June 2021, and today the company has no debt.
It is also important to highlight that we have not raised any cost with their offerings since June 2021 and today the company has no debt.
Speaker 3: S&DL's force of directors approved extending the company's share worth purchase program to November 2020.
And somebody else board of directors approved extending the companys share repurchase programs to November 2021 before.
Speaker 3: The company's share repurchase programs continue to be available to lower our outstanding share flow.
The company's share repurchase program continues to be available to lower our outstanding Saslow manner.
Speaker 3: Management will continue to assess opportunities to utilize the program to the extent we believe it is in the best interest of our shareholders.
Management will continue to assess opportunities to utilize the program to the extent, we believe it isn't the best interests of our shareholders.
Speaker 3: For the three months aimed at September 30th, 2023, the company did not purchase common shares for cancellation.
For the three months ended September 32023, the company is not for taste common shares for cancellation.
Speaker 3: We also remain deeply committed to regulatory diligence and compliance.
We also remain deeply committed to regulatory compliance.
Speaker 3: Our dedication to pay and excise taxes on time reflects our strong focus on responsible business practices.
Compliance.
Our dedication to pay an excise taxes on time reflects our strong focus on responsible business practices. So.
Speaker 3: So far this year, we have already paid $35.6 million in excise funds.
So far this year, we have already paid $35 6 million in excise taxes.
Speaker 3: Since the company's inception, we have paid a total of $80,000.
Since the company's inception, we have paid a total of $80 million.
Speaker 3: Even though these high protection levels create obvious challenges in the cannabis sector, we believe that meeting our financial obligations is essential for responsible business conduct and positive impact in communities we are part of.
Even though this heightened excellent levels grade obvious challenges in the cannabis sector will be submitting our financial obligations is a central core responsible business conduct and positively impacting communities where parcel.
Speaker 3: In summary, our resources quarter represents another solid step towards the execution of our business strategy, our culture of financial rigor and continuous improvement, as well as the relentless passion and dedication of our nearly 3,000 employees.
In summary, our results this quarter represents another solid step towards the execution of our business strategy, our culture of financial rigor and continuous improvement.
The relentless passion and dedication of our nearly 3000 employees.
Speaker 3: While we're pleased with the progress we have made, we're setting our target on much bigger goals, as we're working on several initiatives to generate additional growth, further solidify our operational efficiency, and improve our financial rigor.
While we're pleased with the progress we have made we're setting our targets on much bigger goals.
We're working on several initiatives to generate additional growth further solidified our operational efficiency and improve our financial rigor.
Speaker 3: I'm confident that through these initiatives and the determination of our organization, our future is bright.
I am confident that through this initiative under the termination of our organization our future is bright.
Speaker 3: I will now pause the call to tank to provide an update on our liquor results.
I will now pass the call to tank to provide an update on our lead car read those results.
Speaker 4: Thank you, Alberto. Our liquor retail results this quarter reflect our successful margin growth initiatives, which are not only delivering their intended results, but also guiding our strategy for future innovations and expansion.
Thank you Alberto.
Our liquor retail results this quarter reflect our successful margin growth initiatives, which are not only delivering their intended results, but also guiding our strategy for future innovations and expansions.
Speaker 4: Our retail footprint remains stable with 170 locations primarily in Alberta and one store in British Columbia.
Our retail footprint.
<unk> stable with 170 locations, primarily in Alberta, and one store in British Columbia.
Same store sales have remained steady year over ear Cros all liquor banners.
We are in the process of finalizing new lineup beyond store in Alberta.
Which is located in one of <unk> fastest growing mismatch.
Speaker 4: This new store is projected to generate approximately 7.6 million in analyzed sales in the first year, emphasizing the success of the Banners destination shopping approach.
This new store is projected to generate approximately seven 6 million in annualized sales in the first year emphasizing the success of the banners destination shopping approach.
Speaker 4: It is scheduled to open in the first quarter of 2024.
It is scheduled to open in the first quarter of 2024.
Speaker 4: Despite economic headwinds, our quarterly revenue stood strong at $152 million with stable basket value and customer count, despite a downturn in national retail spending.
Despite economic headwinds our quarterly revenues stood strong at 252 million with stable basket value and customer count.
A downturn in national retail spending.
Speaker 4: In response to consumer spending trends and macroeconomic factors, we continue to optimize our operations to ensure we are meeting the needs of our customers by prioritizing value, quality, and digital experience.
In response to consumer spending trends and macroeconomic factors, we continue to optimize our operations to ensure we are meeting the needs of our customers by prioritizing value.
Entity and digital experiences.
Speaker 4: This approach has not only maintained our stability, but also driven growth and key metrics, which is reflected in our year-over-year and sequential margin growth.
This approach has not only maintained our stability, but also driven growth in key metrics, which is reflected in our year over year and sequential margin growth.
Speaker 4: Our growth margin reached $37.3 million, representing 24.5% of our sales in Q3 2023.
Our gross margin reached $37 3 million, representing 24, 5% of ourselves in Q3 2023.
Speaker 4: This is a meaningful improvement compared to Q3 2022, where gross margin was $35.6 million or 23.3% of sales.
This is a meaningful improvement compared to Q3 2022.
Gross margin was $35 6 million or 23, 3% of sales.
Speaker 4: The 4.8% gross margin growth is mainly driven by procurement productivity, product mix management initiatives, and the success of our private label program.
The four 8% gross margin growth is mainly driven by procurement productivity.
Product mixed management initiatives and the success of our private label program.
Speaker 4: Private label sales, a significant driver of gross margin growth, increased 33% compared to Q3 2022 and 7% sequentially.
Private label sales significant driver of gross margin growth increased 33% compared to Q3, 2022 and 7% sequentially.
Speaker 4: Private label as a percentage of sales increased from 7.3% of sales to 9.7% from the comparative period in the year prior, representing growth of over 3.5 million.
Private label as a percentage of sales increased from seven 3% of sales to nine 7% from the comparative period in the year prior.
Presenting growth of over $3 5 million.
Speaker 4: To further capitalize on the success of our private label program, we are currently developing a private label for wine with plans to launch in the first quarter of 2024. Our private label will feature various wine varietals from different regions, showcasing notable winemakers at accessible prices.
To further capitalize on the success of our private label program.
We are currently developing a private label for wine.
Plans to launch in the first quarter of 2024 are.
Our private label will feature various wind varietals from different regions showcasing notable winemakers assessable prices.
Speaker 4: This initiative is designed to build on our margin growth strategies and continue to drive differentiation through SNDL's Liquor Retail Bank.
This initiative is designed to build on our margin growth strategies and continue to drive differentiation through SMB Els liquor retail banners.
Speaker 4: Looking to new initiatives, we are pleased to announce we have built out the framework for our proprietary data licensing program.
Look into new initiatives, we are pleased to announce we have built out the framework for our proprietary data licensing program.
Speaker 4: We anticipate reporting initial revenue in Q1 2024 and scaling this program through the upcoming year.
We anticipate reporting initial revenue in Q1, 2024 and scaling this program through the upcoming year.
Speaker 4: This will not only support all our stakeholders, but also boost our efforts to increase profit.
This will not only support all our stakeholders, but also boosts our efforts to increase profits.
Speaker 4: In September , SNBL launched an e-commerce platform for its liquor retail banner Wine & Beyond.
In September <unk> launched an e-commerce platform for its liquor retail banner, one and beyond.
Speaker 4: The company observed a 121% increase in the average online basket spend compared to in-store purchases during the initial four weeks post launch.
The company observed 121% increase in the average online basket spend compared to in store purchases.
The initial four weeks post launch.
Speaker 4: highlighting the significant basket growth opportunity through e-commerce.
Highlighting the significant basket growth opportunity through <unk>.
Commerce.
Speaker 4: The current site supports click and collect, however, we are currently looking into different options to enhance customer conversion and accessibility.
The current site supports click and collect Oliver we are currently looking into different options.
<unk> customer conversion and accessibility.
Speaker 4: We anticipate strong results in the seasonally busy Q4 and look forward to observing how the e-commerce platform further drives sales during this key period.
We anticipate strong results in the seasonally busy Q4 and look forward to observing how the E Commerce platform further drive sales during this period.
Speaker 4: We remain committed to achieving continuous and incremental growth throughout 2023.
We remain committed to achieving continuous and incremental growth throughout 2023.
Speaker 4: Our focus remains on expanding our customer reach and exceptional product offerings to ensure we created tailored in-store and digital experience.
Our focus remains on expanding our customer reach and exceptional product offerings to ensure we created tailored in store and digital experiences.
Speaker 4: Thank you, and I will now turn the call over to Tyler to cover our cannabis operation segment.
Thank you and I will now turn the call over to Tyler to cover our cannabis operations segment.
Thank you Henk.
Speaker 5: In Q3, we have implemented significant strategic initiatives to strengthen our cannabis segment.
In Q3, we have implemented significant strategic initiatives to strengthen our Canada segment.
Speaker 5: This included the centralization of all production, manufacturing, processing, and testing activities to Kelowna.
This included the centralization of all production manufacturing processing and testing activities to colonial.
Speaker 5: Following the quarter's end, we saw the streamlining of all cultivation activities at our facility in Atherville, New Brunswick.
Following the quarter than we saw the streamlining of all cultivation activity at our facility in Alphaville, Nebraska.
Speaker 5: We have also completed the bulk of our portfolio rationalization to focus on top performing SKUs and make way for innovation, including 41 new offerings this past quarter.
We have also completed the bulk of our portfolio rationalization to focus on top performing skus and make way for innovation, including 41, new offering this past quarter.
Speaker 5: These pivotal maneuvers solidify our position to drive top-line growth and set us on the course to achieve profitability within cannabis operations.
These pivotal maneuvers solidify our position to drive top line growth and set us on a course to achieve profitability within Canada operation segment.
Speaker 5: This quarter, our cannabis segment generated $21 million in net revenue, marking a healthy 77% increase from the same period in 2022. This substantial growth is primarily attributed to the acquisition of alcohol.
This quarter, our Canada segment generated $21 million and net revenue, marking a healthy 77% increase from the same period in 2022. This substantial growth is primarily attributed to the acquisition about.
Speaker 5: Gross margin for the quarter was negative 8.7 million compared to 0.2 million in the 3rd quarter of 2022, largely due to inventory impairment associated with the company's strategic changes at all. This quarter's outcome reflects the impact of our facility footprint reorganization, causing material constraints in our adult recreation set.
Gross margin for the quarter was negative $8 7 million compared to <unk> 2 million in the third quarter of 2022, largely due to inventory impairment associated with the company's strategic changes. It holds this quarter's outcome reflects the impact of our facility footprint reorganization, causing material constraints in our adult recreation side.
Speaker 5: This was a transitional phase essential for operational and financial efficiency. These vital steps laid the groundwork to achieve positive cash flow and expand margins in the cannabis segment. I'm happy to report the majority of these constraints are now behind.
This was a transitional phase with central for operational and financial efficiency.
These vital steps laid the groundwork to achieve positive cash flow and expand margins in the cannabis segment I'm happy to report the majority of these constraints are now behind us.
Speaker 5: SNDL expects by optimizing its facility footprint to result in over $10 million in annual savings from its cannabis operation segment through reduced fixed overhead, power costs, labor costs.
Cindy I would expect by optimizing its facility footprint to result in over $10 million in annual savings from its cannabis operations segment through reduced fixed overhead power cost labor efficiency.
Speaker 5: Moving our cultivation to Apoville has cut our production costs per gram by nearly 80% compared to the old facility, which will materially increase our margin moving forward. The team at Apoville has also made immense improvements in both yield and average THC, which we expect to continue those improvements through 2024.
Moving our cultivation to Alphaville had cut our production cost per gram by nearly 80% compared to the old facility, which will materially increase our margin moving forward. The team enough to vote has also made immense improvements in both yield and average THC, which we expect to continue those improvements through 2024.
Speaker 5: With our facility reorganization in place, we are prepared to scale capacity and drive stability in key categories to increase total revenue in forthcoming quarters. Following this heavy lift, we can.
With our facility reorganization in place we are.
We're prepared to scale capacity and drive stability in key categories to increase total revenue in forthcoming quarters.
Volume is heavy lift we can better focus on product growth.
Speaker 5: Looking to product innovation. In Q3, SNDL optimized brand portfolio by streamlining nearly 50% of its total offerings across all brands.
Looking to product innovation in Q3, F&B, all optimize brand portfolio by streamlining nearly 50% of its total offerings across all brand.
Speaker 6: This tactical move enables us to be hyper-focused on high-performance...
This tactical move enables us to be hyper focused on high performance teams.
Speaker 5: key consumer categories in meeting market innovations, focusing on depth versus breadth.
Key consumer categories, and meeting market innovations focusing on depth versus breadth.
Speaker 5: The primary goal of the portfolio rationalization is to enhance revenue and margin growth, elevating the profitability of the cannabis operations segment and capturing increased market share.
The primary goal of the portfolio rationalization is to enhance revenue and margin.
Elevating the profitability of cannabis operations segment, and capturing increased market share.
Speaker 5: Through a rigorous tightening of our demand planning processes and a substantial increase in production capacity in the coming quarters, we are well positioned to fully leverage our vertical integration process.
Through a rigorous tightening of our demand planning processes and a substantial increase in production capacity in the coming quarters, we are well positioned to fully leverage our vertical integration problem.
Speaker 5: Finally, to provide an update on our international and B2B opportunities.
Finally to provide an update on our international and <unk> opportunities.
Speaker 5: Our B2B segment is healthy. We are already exceeding our targets for Q4. We are focused on a fewer, bigger, better approach for our B2B partnerships to ensure we deliver exceptional and consistent quality to our partners. This refined focus empowers us to scale with our most reliable partners while not compromising total output.
Our <unk> segment is healthy we are already exceeding our targets for Q4, we're focused on fewer bigger better approach for our <unk> partnerships to ensure we deliver exceptional and consistent quality to our partners.
This refined focus empowers us to scale with our most reliable partners, while not compromising total up.
Speaker 5: We are committed to expanding internationally, looking to emerging markets like the UK and Germany, where we see growth opportunities potentially matching or exceeding our domestic B2B opportunities.
We are committed to expanding internationally looking to emerging markets like the UK, and Germany, where we see growth opportunities potentially matching or exceeding our domestic mi to be opportunities.
Speaker 5: We are confident that the decisive strategic measures we have implemented will firmly establish our cannabis segment for growth and sustained profitability in the quarters ahead. Our streamlined operations, in tandem with our robust production capabilities, deep consumer insights, and cost-effective operating platforms, place FNDL in a strong position to realize our objectives in 2024 and beyond. I will now pass the call back to Zach for closing.
We are confident that the decisive strategic measures we have implemented will firmly establish our cannabis segment for growth and sustained profitability in the quarters ahead.
Streamlined operations in tandem with our robust production capabilities deep consumer insights and cost effective operating platform places us.
In a strong position to realize our objective in 2024 and beyond I will now pass the call back to Zach for closing remarks.
Speaker 2: Reflecting on the past quarter, I want to acknowledge the dedication and effort of my colleagues that has been essential to our progress.
Reflecting on the past quarter I want to acknowledge the dedication and effort of my colleagues that has been essential to our progress.
Speaker 2: We know that considerable work lies ahead as we strive towards realizing sustainable free cash flow and increased shareholder value. Our strong balance sheet and improved operations
We know the considerable work lies ahead as we strive towards realizing sustainable free cash flow and increase shareholder value.
Our strong balance sheet and improved operations.
This apart in a competitive market.
Speaker 2: Enabling SNDL to focus on long-term strategic growth rather than short-term fixes or aspirational claims.
Enabling <unk> to focus on long term strategic growth rather than short term fixes or aspirational claims.
Speaker 2: I want to thank our team for their commitment and our shareholders for their trust and support.
I want to thank our team for their commitment and.
And our shareholders for their trust and support.
Thank you.
Speaker 1: We will now begin the analyst question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. We will pause for a moment as callers join the queue.
We will now begin the analyst question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request. If you are using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.
We will pause for a moment as callers join the queue.
Speaker 1: Our first question comes from Frederico Gomez of ATB Capital Markets. Please go ahead.
Our first question comes from Frederico Gomez of ATB capital markets. Please go ahead.
Speaker 7: Good morning. Thank you for taking my questions. Congrats on the cash flow generation this quarter.
Hi, good morning. Thank.
Thank you for predicting my questions Congrats on the.
Free cash flow generation this quarter.
Speaker 7: First question is on your liquor retail segment, so obviously very strong margins in the segment this quarter, and you mentioned sales mix, procurement, the private label program. I'm curious, do you think you have a lot of
My first question is on your liquor retail segment. So obviously very strong margins in the segment. This quarter and you mentioned you know sales made procurement the private label program.
I'm curious you know you think you have a you know.
Speaker 7: A material against efficiency to be achieved from those three areas going forward. You know that could support even higher margins.
A lot of.
Material I guess, our efficiency to be achieved from those three areas going forward.
That could support even higher margins.
Speaker 7: And then to that point as well, on the data licensing program that you're launching next year, what impact could that have in those margins going forward, just taking as a base your cannabis retail segment? And that seems very substantial, so just curious on the magnitude of that data licensing program for liquor retail. Thank you.
And then to that point as well on the data licensing program that youre launching next year.
What impact could that have those margins going forward just thinking of debate you organic retail segment and you know that that seems very substantial so just curious on the magnitude of that data licensing program for him. He can retail thank you.
Speaker 2: Morning, Fred, and thanks for the question. We are really heads down right now in the midst of our 2024 budgeting process. So we're not going to give too much detail on guidance for individual programs. But I would say that when it comes to the liquor segment, we are seeking margin improvement north of 100 basis points. And we'll be able to get more granular on that as we finalize our process and have our 2024 budgets approved by our board.
Good morning, Brian and thanks for the question.
Sure.
Heads down right now in the midst of our 2020 for budgeting process.
So we're not going to give too much detail on guidance for individual programs, but I would I would say that when it comes to the liquor segment.
We are seeking margin improvement north of a 100 basis points.
And we'll be able to get more granular on that as we finalize our process and have our 'twenty to 'twenty four budgets are approved by our board.
Speaker 7: Perfect, thank you. Looking at your US investments and exposure and just thinking about how you have that news about the potential risk catching of cannabis. So just curious, how does that impact your strategy in that market? Does it change your thesis and your willingness to allocate more capital there?
Perfect. Thank you.
Looking at your against your you asked investments and exposure.
And just thinking about how you know had that means about the potential risk catching up Canada. So just curious how how how does that in fact, our strategy in that market.
Does it change our thesis and and your willingness to allocate more capital there.
Speaker 2: It's a great question. In terms of the impact of rescheduling, it will have a material impact on the free cash flow being generated by those entities.
It's a great question in terms of the impact of rescheduling It will have a material impact on the.
The free cash flow being generated by those entities.
Speaker 2: But in terms of our willingness to deploy more capital, we've got a lot on our plate right now and we're really focused on ensuring that we're bringing efficiencies and optimizing current operations.
But in terms of our willingness to deploy more capital.
Got a lot on our plate right now and we're really focused on ensuring that we're bringing efficiencies and optimizing current operations.
Speaker 2: We're also cognizant of the cash on our balance sheet. So I would never say never, but we have a lot of work to do in terms of what's on our plate today.
We're also cognizant of the cash on our balance sheet. So I would never say never but we have a lot of work to do in terms of what's on our plate today.
Speaker 7: Thank you. And then finally, just the last one for me, the same thing with USA structure, is that already being under review by the NASDAQ, or how long do you think that process could take? And then meanwhile, while that's not complete, does that have any impact on your day-to-day operations of the Parallel and SkyLink assets?
Thank you and then finally, just the last one for me.
Same thing with USA structure Ah is that already you know being under review by the NASDAQ or how long do you think that process could take and then Meanwhile, Y vital that's not complete.
Does that have any impact on your day to day operations, you know what the parallel screening assets.
Speaker 2: So all of my comments here are going to be subject to.
So all of my comments youre going to be subject to.
Speaker 2: review and support by NASDAQ. We've stated publicly that we expect both of these transactions while the restructuring terms have been completed. There are still a few minor conditions precedent and both license transfer and exchange approvals that are required. So we believe that we'll be able to bring this to resolution sometime in Q1.
Review and support by NASDAQ. We've stated publicly that we expect both of these transactions while the restructuring terms has been completed there are still a few minor conditions precedent and.
Both license transfer on exchange approvals that are required. So we believe that we will be able to.
Bring this to resolution sometime in Q1, and we don't expect that process to have any material negative impact in terms of.
Speaker 2: and we don't expect that process to have any material negative impact in terms of day-to-day operations. Both businesses are being transformed currently, and a lot of progress has been made to improve their operations.
Day to day operations.
Both both businesses are.
<unk>.
Are being transformed currently and a lot of progress has been made to improve their operations.
Thank you very much I'll hop back in the queue. Thanks.
Speaker 1: Our next question comes from Yuan Kang of Canaccord Genuity. Please go ahead.
Our next question comes from <unk> of Canaccord Genuity. Please go ahead.
Speaker 8: Hi, good morning. Thanks for the question. This is Yellen King on behalf of Matt Bottomley. I wanted to ask about the $11 million charge under corporate operations under consolidated net revenue. Could you provide more color or granularity behind what was in relation to that $11 million charge in terms of which business operations it was related to and what specific events happened throughout the quarter that led to this?
Hi, good morning, Thanks for the question that you'll be launching on behalf of Matt Bottomley.
I wanted to ask about $11 million tightened our Quebec operations.
So I'll give you that revenues could you provide more color or granularity behind what was what wasn't relationship 11 million times.
In terms of which business operations that was related to specific events.
Hop into the quota I thought like today. Thanks.
Alberto do you want to take this one.
Speaker 3: Yeah, absolutely. Thank you for the question, Dale. So actually the chart is related to the revenue that we have in our cannabis operations and our cannabis retail, where there is an overlap between the two of them.
Yeah, absolutely. Thank you for the question Dale.
So absolutely the charges related to.
On the revenue that we have in our cannabis operations on our kind of as retail where there is an overlap between the two of them.
Speaker 3: We just noticed as we were stepping into the third quarter.
We just noticed US we were stepping into the third quarter.
Speaker 3: that the size of those revenues being produced in cannabis operations that end up being as well sold in our retail business after they go through the provincial boards was vain in size as what is found in our business. And as we reached a certain level of materiality, we decided to start eliminating that intercompany, we could call it intercompany
The size of those revenues.
Being producing cannabis operations Doug.
And that being as well as sold in our retail business after.
They go through the provincial boards.
Was gaining size is what is funding our business.
And as we reach a certain level of materiality, we decided to start eliminating that inter company, we could call. It in the company.
Speaker 3: double count of revenue. So this is the first quarter that we're doing that entry. We will continue doing it going forward. And we have provided as well in our financial statements, a table that shows by how much would be the amounts that we have adjusted as well for Q1 and Q2 of this year.
Double Council revenue.
So this is the first quarter that were doing data entry, where we'll continue doing that going forward.
And we have provided us well in our financial statements.
Well that shows by how much would be the amounts, but we have adjusted as well for Q1 and Q2 of this year.
Speaker 3: And as I said, it's purely related to the volumes and the revenue that goes through our cannabis operations segment that end up being as well sold through our cannabis retail segment after they go through the board.
And I've said it is purely related to the the volumes on the revenue that goes through our cannabis operations segment that ends up being as well as sold through our kind of its retail segment. After they go through the boards.
Speaker 8: Got it. Thank you. And just to add on to that.
Got it thank you and just to add on to that.
Speaker 8: same under cannabis operations segment and it's specifically related to the asset rising initiatives and other operational efficiency initiatives that you guys have been implementing there. Those margins seem to be continuing to remain in the negative territory up until Q3 but with now all of these initiatives kind of being completed, could we expect these margins to show improvement going forward in Q4 and into 2024?
Same.
Qantas operation segment.
Specifically related to be I'll say rising initiatives and other operational efficiency initiatives that you guys have been implementing their gross.
Gross margin seem to be continuing to remain in the negative territory up until Q3, but with now all of these initiatives kind of being completed.
Could we expect these margins to show improvement going forward in Q4 and into 2024.
Speaker 2: Yes, so you're still seeing the impact of biomass revaluations, and with the rationalization of our cultivation and processing footprint, we're expecting to be in a position to have those reduced materially, if not eliminated in 2024. And so we'll still likely see some noise impacts our Q4 results.
Yes, so youre still seeing the impact of biomass.
Revaluations and with the rationalization of our cultivation and processing footprint, we're expecting to be in a position to.
Have those reduced materially if not eliminated in 2024, and so we will still likely see some noise impacts our Q4 results.
Speaker 2: But we're trying to leave as much of that noise behind in 2023 and are looking forward to presenting a much cleaner view on operations in 2024.
We're trying to leave as much of that noise behind in 2023 and are looking forward to a much presenting a much cleaner view of our operations in 'twenty 'twenty four.
Thank you.
Speaker 1: Once again, if you have a question, please press star, then 1.
Once again, if you have a question. Please press Star then one.
Speaker 1: Our next question comes from Pablo Zoenick of Zoenick & Associates. Please go ahead.
Our next question comes from Pablo Sonic <unk> Associates. Please go ahead.
Thank you good morning, everyone.
Speaker 9: Just first on the liquor segment, Zach, when you look at, you know, some of your Canadian LP peers, one of them has been very acquisitive in the U.S., right, in terms of buying beer brands and liquor assets.
Just first on the legal segment.
When you look at some of your Canadian there'll be peers.
One of them has been very acquisitive in the U S right in terms of buying beer brands in liquid assets.
Speaker 9: As you continue to build the liquor business, I understand right now it's retail, but now you're going to start producing your own wines, I suppose, for the private label. Would buying beer brands or wine brands outside of Canada or in Canada be part of a strategy as you grow that business?
As you continue to build the <unk> business I understand right now it's retail, but now you are going to position you don't why does it seem sort of buying I suppose for the private label would be with buying beer brands I would say oh.
Or wine brands outside of kind of owning kind of that'll be part of a strategy issue would own that business.
Speaker 2: Good morning, Pablo, and thanks for the question. Look, it's a possibility if we were outside of Canada, given Tidehouse and other regulations that would restrict us from doing so inside of Canada, but we're very focused on owning the consumer and creating strong retail experiences. And so there's nothing on our plate today that would suggest that we're taking a hard look at acquiring liquor brands in the U.S. or abroad.
Good morning, Pablo and thanks for the question.
It's a possibility if we were outside of Canada, given tight house another.
Regulations that would restrict us from doing so inside of Canada, but we're very focused on owning the consumer and creating.
Strong retail experiences.
And so there's nothing on our plate today that would suggest that we're taking a hard look at acquiring liqueur brands.
In the U S or abroad.
Speaker 9: Okay, thank you. And then just moving on to cannabis operations, right? You're talking about becoming a major player. Obviously, you have the balance sheet to do so. I don't know if you want to give an update in the need to scale up their BIM&A. I couldn't tell from the filings where you still own the stake in Village Farms, but you know, outside of VFF, I mean, it just seems to me that you need to scale up, especially if you're talking about trying to become a relevant player in international. Any comments on that?
Okay. Thank you and then just moving onto kind of abuse operations right Youre talking about becoming a major player. Obviously you have the balance sheet to do so I don't know if you want to give an update and the need to scale up the RBA M&A.
I couldn't tell from the filings whether you still own the stake in village farms, but outside there'll be a fifth I mean, it just seems to me that you need to scale up, especially if you are talking about about.
Trying to become a relevant player in international any comments on that.
Speaker 2: Yeah, it's a great question. I think the long-term requirements for SMDL in terms of ownership or contracting to acquire quality, reasonably priced biomass is still somewhat up in the air. You see a lot of volatility in the Canadian market. Price compression has made procurement a very attractive opportunity for us.
Yes, it's a great question.
I think the the long term requirements for SMB al in terms of ownership or contracting to acquire quality reasonably priced biomass is still somewhat up in the air you see a lot of volatility in the Canadian market price compression has made procurement a very attractive opportunity for us.
Speaker 2: We're certainly committed to eliminating any exposure to high cost cultivation.
We're certainly committed to.
Eliminating any exposure to high cost cultivation.
Speaker 2: and may look at other opportunities. We have disclosed that we've exited all of our material equity investments.
And may look at other opportunities, we have disclosed that we've exited all of our material equity investments.
Speaker 2: But we will continue to look at strong, low-cost, high-quality producers for potential opportunities in the future.
But we will continue to look at.
Strong low cost high quality producers for potential opportunities in the future.
Speaker 9: Got it. Thank you. And then just one last one in terms of Sunstream USA, if I hear right, I think you mentioned.
Got it. Thank you and then just one last one in terms of a sense of team USA.
If I heard right I think you mentioned.
Speaker 9: that Sunstream is sponsored by SNDL, but I mean, obviously SNDL still owns 50% of Sunstream, right, so.
It sounds to me sponsored by yes, and deal, but I mean, obviously, it's in the upstate almost 50% of sunstone right. So.
Speaker 9: So the question would be, I guess, of the $550.5 million.
So the question would be I guess of the 555 million. How many are in assets that you are taking ownership of right its bottling and sky them in but not all of the portfolio you had equity Deicing I suppose.
Speaker 9: how many are in assets that you're taking ownership of, right? It's parallel in Skymin, but not all of the portfolio you are equitizing, I suppose.
Speaker 9: And if you can give some color there, that would be helpful in terms of 550.5, but more important than that.
If you're going to if you can give some color there that would be helpful. In terms of 555.
But more important than that.
Speaker 9: If in the end, you know, when we look at, you know, how canopy growth has gone back and forth in terms of their own plans for Canopy USA, if in the end you hit a wall in terms of trying to be in asset listed, equitizing those assets and having them in your books.
In the end when we look at how kind of the growth is going back and forth in terms of their own plans for kind of USA.
In the end you hit a wall in terms of trying to being NASDAQ listed if with Dyson dose assets and having them in your books would you would you consider just selling them to comply with it with the NASA fronts. Thank you.
Speaker 9: Would you consider just selling them to comply with the NAFTA?
Speaker 2: Thanks, Pablo. Obviously, we're all working through an environment that is not a seller's market. Okay, so let's just start with that, regardless of the scenario.
Thanks Pablo.
Obviously were.
Working through an environment that is.
Not a sellers market. Okay. So, let's just start with that.
Regardless of the scenario.
Speaker 2: But in this case, we are highly confident we have.
But in this case, we are highly confident we have.
Speaker 2: We have very reputable counsel that has worked on these issues with NASDAQ and sought and received approval under similar structures.
We are very reputable counsel that has worked on these issues with NASDAQ and sought and received approval on.
They're similar structures.
Speaker 2: I just want to remind you and the audience that our Sunstream joint venture is structured such that SNDL as required, you know, does not engage in any plant touching activities in the United States.
I just wanted to remind you in the audience that are Sun stream joint venture is structured such that <unk> as required does not engage in any plant touching activities in the United States and we are a non control participant in Sunshine, So think of it as a conventional sort of GP.
Speaker 2: and we are a non-control participant in Sunstream. So, you know, think of it as a conventional sort of GPLP, general partner, limited partner arrangement where both staff and SNDL.
The general partner and limited partner arrangement, where both SaaS and <unk>.
Speaker 2: or owners of the general partnership, but SNDL is the sole LP in that scenario. And so, we report based on a structure that would be similar to any alternative credit portfolio that you would see in the marketplace, and for that reason, we haven't broken out of that.
Our owners of the general partnership, but <unk> is the sole LP in that scenario.
And so we report based on a structure that would be similar to any alternative credit portfolio that you would see.
In the marketplace and for that reason, we havent broken out.
Speaker 2: a ton of detail on individual positions. If you look at the filings that are available in the U.S., you'll see that of that total balance, which, again, has also been adjusted for the fair market value where we have written it down, over half of that balance would be dedicated to positions that are going through requisition processes.
What kind of detail on individual positions.
If you look at the filings are available in the U S. You'll see that.
Of that total balance, which again has also been adjusted for the fair market value, where we have written that down over half of that balance would be dedicated to.
Positions that are going through reconciliation processes and as you as you accurately point out we will likely see resolution in the other cases, where we have large principal.
Speaker 2: And as you aptly point out, we will likely see resolution in the other cases where we have large principal balances that should be coming back to us over the next 24 months. Some of these things are amortizing principal back to us today.
Principal balances that should be coming back to us over the next 24 months. Some of these things are amortizing principal back to us today.
Speaker 2: So that will be a source of cash for us in the future. And we don't really, we don't see a scenario where we aren't able to get this done. I would just point to some of the differences between your reference to Canopy. The types of businesses that Canopy is acquiring is very different than the exposure that we have, right? So if you take Skymin and Parallel, for example, these are two
So that will be a source of cash for us in the future.
And we don't really we don't see a scenario, where we arent able to.
Get this done I would just point to some of the differences between your reference to canopy. The types of businesses. The county is acquiring is very different than the exposure that we have right. So if you take the time and in parallel for example, these are too.
Speaker 2: One's an SSO, one's an MSO, both started their lives as vertically integrated operators.
One is in <unk> and <unk>, both started up their lives as vertically integrated operators so not the same as.
Speaker 2: So not the same as tackling a product brand or producer in vapor edible categories, which has been a focus for Canopy as well. So the path is one that has been well trodden and we believe that we will have all the requisite
Tackling.
Product brands.
Or.
Our producer.
In vapour edible categories, which has been a focus for us.
Canopy as well so the path is one that has been.
Well trodden.
We believe that we will have all the requisite.
Speaker 2: support and consents from regulators, and that would include our exchange, Nasdaq. So again, look forward to wrapping this up and closing in Q1. But we still have some wood to chop and a few more steps to take to close these transactions and finalize support from the Nasdaq.
Our support and consents from regulators and including that would include.
Our exchange NASDAQ so.
We look forward to wrapping this up in closing in Q1, but we still have some some wood to chop and a few more steps to take to to close these transactions and finalized.
From an asset.
Speaker 9: Thank you, that's very helpful, good color there. If I may, I'm going to ask, add one in terms of NOVA. I mean, the outside aid keeps on being extended, but obviously that's more a regulatory issue. I mean, the parties have agreed to do the deal, right? But is this more about, you know, you being plant-touching in Canada and now, you know, owning a retail chain? Is that the issue and how are you going to deal with that? That's the last one.
Thank you that's very helpful. Good good quarter, there if I may I'm going to ask I'd want to anoint us with Nova.
It keeps them being extended but obviously, that's what a regulatory issue I mean, the parties have agreed to do the deal right. But is this more about you know youll be implant touching kind of now owning at retail chain is that the issue and then how do you want to deal with that that's the last one thank you.
Speaker 2: Pablo, it's a great question. Look, in terms of both parties, our tolerance for further delays is reaching its limits. Anyone who studies this industry or operates within it understands just how frustrating the state-by-state and province-by-province sort of regulatory ground game can be. So we're not going to make additional comments at this time, but we are looking forward to updating investors in the near future.
Pablo it's a great question.
Yeah.
In terms of both parties our tolerance for further delays.
Is reaching its limits.
Anyone who studied this industry or operates within it understands just how frustrating the state by state and province by Province sort of regulatory ground game can be.
So we're not going to make additional comments at this time, but we are looking forward to updating investors in the near future.
Thank you.
Speaker 1: This concludes the question and answer session. I would like to turn the conference back over to Zach George for any closing remarks.
This concludes the question and answer session I would like to turn the conference back over to Zach George for any closing remarks.
Speaker 2: Thanks to all for attending our third quarter conference call. Look forward to updating you in the future. Thanks.
Thanks to all for attending our third quarter conference call look forward to updating you in the future. Thanks.
Speaker 10: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day. ??
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
[music].
Speaker 10: The.