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3rd qrt unaudited profitability report
$3.3 million Net Income highlights sustained profitability
VANCOUVER, BC, Dec. 16, 2021 /CNW/ - C21 Investments Inc. (CSE: CXXI) (OTCQX: CXXIF) ("C21" or the "Company"), a vertically integrated cannabis company, today announced unaudited results for its third quarter ended October 31, 2021. All currency reported in U.S. dollars (unless otherwise noted).
Financial Highlights (period ending October 31, 2021):
-- Revenue of $8.2 million; Year-to-Date Nevada revenue up 3% over last year -- Gross Profit of $4.4 million; Gross Margin of 43% before fair value adjustments -- Adjusted EBITDA1 of $2.2 million (a 27.4% EBITDA Margin) and $8.6 million year-to-date -- Nevada EBITDA of $3.8 million, up 14% over Q2; Nevada EBITDA of $11.5 million Year-to-Date -- Net Income of $3.3 million; Earnings Per Share of $0.03 for Q3 and $0.09 year-to-date -- Cash Flow from Operations of $5.5 million Year-to-Date which includes $3.1 million Income Tax paid -- Total Liabilities reduced by $4.2 million from Q2; $14.7 million in reductions Year-to-Date
Revenue for the third quarter was $8.2 million, down 9% from Q2, in line with industry trends for the period. Comparatively, the State of Nevada reported a 17% decline in cannabis sales from July to September 2021(2) . Recognizing market conditions, C21 remained vigilant in sustaining the profitability of its operations. The Nevada segment continued to deliver strong results, including $3.8 million in EBITDA for the third quarter -- up 14% over Q2 -- and $11.5 million Nevada EBITDA year-to-date (see Nevada EBITDA table in MD&A and below).
"C21 continues to deliver positive free cash flow and profitable bottom-line performance. Despite challenging markets in the quarter, our focus on efficiency delivered $0.03 in Earnings per Share, and allowed us to make further significant reductions to Total Liabilities," stated Sonny Newman, President and CEO of C21. "The first harvest from our expanded cultivation facility was completed in the third quarter, which delivered an 18% average increase in flower yields. As planned, we are now selling flower in the Nevada wholesale market, which we expect will drive topline growth moving forward. While the consolidation environment in the industry remains highly competitive, we continue to weigh strategic opportunities for the Company to maximize shareholder value."
Gross Profit for the quarter was $4.4 million, with Gross Margin of 43.0% before fair value adjustments down from 52% in Q2. This was impacted primarily by a decline in sales and weaker margins in Oregon. Nevada operations continued to deliver strong Gross Margin of 52.0% before fair value adjustments, up 100 basis points over Q2. The Company delivered $2.2 million of Adjusted EBITDA(1) for the quarter, a 27.4% EBITDA Margin. Year-to-date adjusted EBITDA was $8.6 million, a 32.6% EBITDA Margin. SG&A expenses were relatively flat at $1.9 million (23% of revenue) for Q3.
Cash Flow from Operations was $1.0 million for Q3 -- the tenth consecutive quarter of positive Cash Flow from Operations -- and totals $5.5 million year-to-date after $3.1 million in Income Tax paid (see Statement of Cash Flows). Q3 Cash Flow from Operations was impacted by pay down of accrued Income Tax of $1.4 million as well as Special Project costs of $0.2 million.
The Company reported Net Income of $3.3 million for Q3, or $0.03 Earnings Per Share and $11.4 million Net Income ($0.09 EPS) year-to-date. This included changes in fair value of derivative liabilities (see MD&A). Excluding the changes in derivative liabilities, Adjusted Net Income(1) was $1.0 million for Q3.
Cash position at end of the third quarter was $3.3 million, down $0.9 million from Q2 reflecting the aforementioned accrued Income Tax payments and other one-time costs. The Company's Senior Secured Note was reduced by $1.5 million in the quarter. As a result, Total Liabilities for Q3 were reduced by $4.2 million from last quarter and $14.7 million year-to-date (see Balance Sheet summary provided).
Subsequent to the quarter end, the Company announced plans to transition to U.S. GAAP accounting for the fourth quarter and current fiscal year ending January 31, 2022 (see news release dated November 18, 2021).
(1) See non-IFRS Measures below for "Adjusted EBITDA" and "Adjusted Net Income" (2) State of Nevada cannabis sales: https://tax.nv.gov/uploadedFiles/taxnvgov/Content/TaxLibrary/NV-Cannabis-R evenue-FY22(3).pdf (1) See non-IFRS Measures below for "Adjusted EBITDA" and "Adjusted Net Income"
"Adjusted EBITDA" and "Adjusted Net Income" are supplemental, non-GAAP financial measures. The Company defines EBITDA as earnings before depreciation and amortization (excluding rent classified as lease amortization), income taxes, and interest. Additionally, the Company's Adjusted EBITDA presented above excludes fair value adjustments, accretion, impairment charges, one-time transaction costs and all other non-cash items. The Company has presented "Adjusted EBITDA" and "Adjusted Net Income" because management believes these are useful measures for investors when assessing and considering the Company's continuing operations and prospects for the future. Furthermore, "Adjusted EBITDA" is a commonly used measurement in the financial community when evaluating the market value of similar companies. "Adjusted EBITDA" and "Adjusted Net Income" are not measures of performance calculated in accordance with IFRS, and these metrics should not be considered in isolation of, or as a substitute for, the measurement of the Company's performance prepared in accordance with IFRS. "Adjusted EBITDA," as calculated and reconciled in the table above, may not be comparable to similarly titled measurements used by other issuers and is not necessarily a measure of the Company's ability to fund its cash needs.
Fiscal Year End January 31, 2022 (US$) Q3 FYE 2022 Q4 FYE 2021 October 31, 2021 January 31, 2021 Assets Cash 3,278,993 6,237,182 Biological and Inventory 7,640,308 6,758,508 Other current 1,239,385 2,584,431 Current Assets 12,158,686 15,580,121 Fixed Assets / Goodwill / Intangibles 53,597,650 53,229,388 Total Assets 65,756,336 68,809,509 Liabilities Accounts payable 2,965,462 2,680,996 Other notes, current lease etc. 1,852,287 3,585,546 Promissory note 6,080,000 6,080,000 Income tax 2,508,835 3,378,299 Current Liabilities 13,406,584 15,724,841 Other 492,908 517,294 Promissory note 3,546,667 8,106,667 Lease Liabilities 9,307,292 9,691,215 Derivative Liability 2,055,227 9,430,991 Total Liabilities 28,808,678 43,471,008 Equity 36,947,658 25,338,501 Total Liabilities and Shareholder's Equity 65,756,336 68,809,509 Working Capital Deficit (1,247,898) (144,720) Fiscal Year End January 31, 2022 (US$) Q3 Q2 Revenue $ 8,156,586 $ 8,975,731 Cost of Sales 4,653,131 4,281,788 Gross Profit (before FV adjustments) 3,503,455 4,693,943 GM% (BFVA) 43.0% 52.3% Gross Profit 4,394,239 4,541,567 Total Expenses 2,415,964 2,353,378 SG&A% of Revenue 23.3% 20.0% Income (Loss) from Operations 1,978,275 2,188,189 Net Income (Loss) 3,349,585 3,654,832 Earnings Per Share 0.03 0.03 Adjusted EBITDA1 2,235,434 3,275,465 EBITDA Margin% 27.4% 36.5%
Nine Months ended Three months ended October 31 October 31 Q3 2022 Q3 2021 FYE 2022 FYE 2021 Income from operations $ 1,978,275 $ 2,225,729 6,625,428 4,502,326 Net impact, fair value on biological assets (890,784) (1,394,419) (1,122,404) (970,586) Depreciation and amortization 444,839 557,985 1,373,536 1,653,979 Depreciation/amortization in COGS 106,686 52,044 264,958 175,157 ROU amortization/interest in COGS 299,953 325,838 887,938 741,991 Share based compensation 67,396 334,307 321,567 397,108 One-time Special Project costs 229,069 - 229,069 - Inventory impairment - 1,042,874 - 1,384,922 Adjusted EBITDA $ 2,235,434 $ 3,144,358 8,580,092 7,884,897
2021-12-16 12:00:00 GMT C21 Investments Announces Q3 Results -2-
Nevada EBITDA (see MD&A):
Fiscal Year End January 31, 2022 Q3 Q2 31-Oct-21 31-Jul-21 Revenue $ 7,938,188 8,592,872 Cost of Sales 3,837,958 4,247,586 Gross Margin before fair value adjustments 4,100,230 4,345,286 52% 51% Gross Profit 4,764,760 4,366,201 60% 51% Expenses General and Administration 938,337 1,016,288 Sales, Marketing and Promotion 7,339 11,795 Depreciation and Amortization 401,819 402,066 Total Expenses 1,347,495 1,430,149 Income from Operations 3,417,265 2,936,052 43% 34% Add back -- Depreciation and Amortization 401,819 402,066 NEVADA EBITDA 3,819,084 3,338,118 Nevada EBITDA Margin% 48% 39%
About C21 Investments Inc.
C21 Investments is a vertically integrated cannabis company that cultivates, processes, and distributes quality cannabis and hemp-derived consumer products in the United States. The Company is focused on value creation through the disciplined acquisition and integration of core retail, manufacturing, and distribution assets in strategic markets, leveraging industry-leading retail revenues with high-growth potential multi-market branded consumer packaged goods. The Company owns Silver State Relief and Silver State Cultivation in Nevada, and Phantom Farms and Eco Firma Farms in Oregon. These brands produce and distribute a broad range of THC and CBD products from cannabis flowers, pre-rolls, cannabis oil, vaporizer cartridges and edibles. Based in Vancouver, Canada, additional information on C21 Investments can be found at http://www.sedar.com and http://www.cxxi.ca.
@gtosali1967 Solid news here. The income tax increase from earlier was due to the delays in taxation allowed for by COVID changes to defer taxes. So, taxes will decline on a relative basis. The $3.3M net earnings likely would have been closer to $4M. The decrease in revenue is off and what I'd been watching for. The whole industry is showing signs that people are no longer sitting at home smoking flower but, heading out to bars/restaurants with friends. They dipped a little in EBITDA/Revenue percentage but, that is something I think they will overcome quickly.