Cannabis Stocks Forum & Discussion

Welcome to the Cannabis Investing Newsletter Forum. This is for the cannabis stocks forum & discussion. Feel free to find your favorite cannabis stocks and contribute content as you please; content that continues the discussion of, and analysis of, cannabis stocks. – D. H. Taylor

Notifications
Clear all

Goodness Growth Holdings Announces Fourth Quarter and Full Year 2021 Results

14 Posts
4 Users
7 Likes
352 Views
Isail4fun
(@rtimothyobrienhotmail-com)
Reputable Member
Joined: 11 months ago
Posts: 153
Topic starter  

Goodness Growth Holdings Announces Fourth Quarter and Full Year 2021 Results

- Full year 2021 GAAP revenue of $54.4 million increased 10.6% compared to 2020 -

- Excluding discontinued operations, full year revenue increased 30.8% YoY -

- Q4 GAAP revenue of $13.7 million increased 10.5% YoY and 23.8% excluding discontinued operations -

Goodness Growth Holdings, Inc. 

Mar 11, 2022, 07:30 ET

"Our fourth quarter results reflected continued growth across most of our markets, but we continued to experience the negative impact of crop loss in Arizona we've previously discussed which occurred during the third quarter," said Chairman and Chief Executive Officer, Kyle Kingsley, M.D. "Wholesale sales in Arizona increased sequentially as compared to Q3, but the loss of biomass continued to impact gross margin performance. Revenue increased across the rest of our operating markets in Q4, and we're looking forward to contributions from flower sales beginning in Minnesota in Q1 and adult use sales in New Mexico in Q2."

"Smokeable flower sales began in Minnesota's medical market on March 1, and early indications suggest Minnesota flower sales will be our strongest driver of revenue growth until adult use sales commence in the State of New York. We continue to focus on the development of our new dispensaries in New York, as well as the construction of our new indoor cultivation facility, and expect these activities to continue through the closing of the previously-announced, pending transaction to be acquired by Verano Holdings Corp. Finally, given this pending transaction, we no longer intend to provide frequent updates of our future performance expectations, and as a result are withdrawing our previous outlook at this time."

Summary of Key Financial Metrics

 

Three Months Ended

 

Year Ended

US $ in millions

December 31,

 

December 31,

 

2021

 

2020

 

Variance

 

2021

 

2020

 

Variance

                       

GAAP Revenue

$13.7

 

$12.4

 

10.5%

 

$54.4

 

$49.2

 

10.6%

Revenue (excl. PA, OH, and AZ dispensary)

$13.0

 

$10.5

 

23.8%

 

$49.3

 

$37.7

 

30.8%

GAAP Gross Profit

$2.2

 

$5.3

 

-58.5%

 

$19.8

 

$17.1

 

15.8%

Gross Profit Margin

15.8%

 

42.7%

 

-2,690 bps

 

36.4%

 

34.8%

 

160 bps

SG&A Expenses

$9.2

 

$6.7

 

37.3%

 

$33.7

 

$26.4

 

27.7%

SG&A Expenses (% of Sales)

67.2%

 

54.0%

 

1,320 bps

 

61.9%

 

53.7%

 

820 bps

Adjusted EBITDA (non-GAAP)

($4.4)

 

$0.1

 

NM

 

($9.1)

 

($5.2)

 

NM

Adjusted EBITDA Margin (non-GAAP)

(32.4%)

 

0.9%

 

-3,330 bps

 

(16.6%)

 

(10.6%)

 

-600 bps

Full Year 2021 Financial Summary

Total revenue of $54.4 million increased by 10.6 percent as compared to fiscal year 2020, including the Company's former subsidiaries in Pennsylvania and Ohio, and its former dispensary in Arizona. Excluding contributions from Pennsylvania, Ohio, and Arizona retail, full year revenue increased 30.8 percent. Retail revenue excluding Arizona and Pennsylvania increased 33.3 percent to $39.6 million in 2021 and reflected growth in each of the Company's retail markets. Wholesale revenue, excluding Pennsylvania and Ohio, increased by 21.3 percent to $9.7 million.

Gross profit was $19.8 million, or 36.4 percent of revenue, as compared to gross profit of $17.1 million or 34.8 percent of revenue in last year. The relative improvement in gross profit margin was driven by higher throughput and decreased fixed costs per unit across most markets, offset by increased costs and the previously disclosed impact of crop loss in Arizona due to weather during the third quarter.

Total operating expenses were $40.3 million, or roughly flat compared to $40.2 million in fiscal year 2020. Increases in salaries and wages, professional fees, general and administrative expenses, and amortization and depreciation expenses were offset by a reduction in share-based compensation as compared to the prior year. The increase in salaries and wages, and general and administrative expenses was driven by significant operational buildout across the Company's various operating markets, and the reduction in share-based compensation was driven by the non-recurrence of warrant vesting which occurred in fiscal year 2020.

Total other expenses were $9.1 million, compared to other income of $8.9 million during fiscal year 2020 which resulted primarily from the divestiture of the Company's former subsidiaries in Pennsylvania. The increase in other expense is primarily attributable to increased interest expense of $5.5 million in 2021 driven by the issuance of promissory notes, impairment charges of $5.2 million related to adjustments in the fair value of long-lived assets in Arizona and Nevada, and the non-recurrence of a gain on the sale of the Company's former subsidiaries in the state of Pennsylvania during the prior year, partially offset by a derivative loss in 2020 of $6.3 million.

EBITDA, as described in accompanying disclosures and footnotes, was a loss of $15.1 million, compared to a loss of $6.0 million in fiscal year 2020. Adjusted EBITDA was a loss of $9.1 million, as compared to a loss of $5.2 million in fiscal year 2020. Please refer to the Supplemental Information and Reconciliation of Non-GAAP Financial Measures at the end of this press release for additional information.

Net loss in 2021 was $33.7 million, compared to a loss of $22.9 million in fiscal year 2020. The variance compared to the prior year was driven by increased operating and other expenses and higher interest expenses, as well as the non-recurrence of the gain on disposition of assets in the prior year.

Fourth Quarter 2021 Financial Summary

Total revenue in the fourth quarter was $13.7 million, an increase of 10.5 percent as compared to Q4 2020. Excluding contributions from Pennsylvania, Ohio, and Arizona retail, total revenue increased 23.8 percent. Retail revenue excluding Arizona and Pennsylvania increased 33.8 percent to $10.8 million in Q4 2021 and reflected growth in each of the Company's other retail markets. Wholesale revenue, excluding Pennsylvania and Ohio declined by 5.6 percent to $2.2 million, with the decline primarily driven by continued impact of crop loss in Arizona which occurred during the third quarter, partially offset by growth in New York and Maryland.

Gross profit was $2.2 million, or 15.8 percent of revenue, as compared to gross profit of $5.3 million or 42.7 percent of revenue in Q4 last year. The decline in gross profit margin was primarily driven by the impact of previously disclosed crop loss in Arizona due to weather which occurred during the third quarter and continued to impact Q4 results, as well as increased production and fixed costs related to improvements in flower quality in New York, and lower market pricing in Maryland.

Total operating expenses in the fourth quarter were $10.1 million, an increase of $2.6 million as compared to $7.5 million in the fourth quarter of 2020. The increase in total expenses was attributable to increased general and administrative expenses driven by operational buildouts and dispensary openings across the Company's operational footprint as compared to the prior year quarter.

Total other expenses were $3.5 million during Q4 2021, compared to other income of $2.0 million in Q4 2020. The variance in other expenses was primarily attributable to increased interest expenses driven by the issuance of long-term debt and impairment charges related to adjustments in the fair value of long-lived assets in Arizona and Nevada, partially offset by a one-time gain on the disposal of assets of $6.5 million related to the sale of the Company's former dispensary and licenses in Arizona.

EBITDA, as described in accompanying disclosures and footnotes, was a loss of $5.9 million during Q4 2021, compared to a gain of $1.2 million in Q4 2020. Adjusted EBITDA was a loss of $4.4 million in Q4 2021, as compared to a gain of $0.1 million in Q4 2020. Please refer to the Supplemental Information and Reconciliation of Non-GAAP Financial Measures at the end of this press release for additional information.

Net loss in Q4 2021 was $12.7 million, as compared a loss of $2.3 million in Q4 2020. The variance compared to the prior year was driven by increased production costs, operating and other expenses, offset partially by the gain on the disposition of the Company's former dispensary in Arizona during the quarter.

Other Events

On October 28, 2021, the Company received regulatory approval of its previously-announced acquisition of a dispensary license and certain related assets in Baltimore, Maryland. The transaction closed during the fourth quarter, bringing the Company's total number of operating dispensaries in Maryland to two.

On October 30, 2021, the Company announced that its wholly-owned subsidiary, Vireo Health of New York began selling whole flower cannabis products at its dispensaries and via its home delivery service in New York.

On November 2, 2021, the Company announced that it had entered into an agreement to sell its Arizona cannabis licenses, all remaining inventory and equipment at its Phoenix dispensary, the Phoenix dispensary property lease and all revenue producing dispensary contracts in an all-cash transaction valued at approximately $15.0 million. The transaction closed during the fourth quarter. The Company continues to operate an 18-acre outdoor cultivation facility in Amado under a cultivation management agreement with the purchaser-licensee, at which the Company produces and sells cannabis flower through the wholesale sales channel in Arizona.

On December 7, 2021, the Company announced the launch of its new line of Hi-Color™ cannabis edibles in Maryland. Hi-Color gummies are now available in Maryland's wholesale and retail channels, selling in three different formulations and five gourmet flavors. The Company plans to introduce Hi-Color™ cannabis edibles across its various operating markets as regulations allow.

On February 1, 2022, the Company announced that it has entered into a definitive arrangement agreement with Verano Holdings Corp. pursuant to which Verano will acquire all of the issued and outstanding shares of the Company in an all-share transaction valued at the time of announcement of approximately US $413 million on a fully-diluted basis. Under the terms of the Arrangement Agreement, each holder of Goodness Growth subordinate voting shares will receive 0.22652 of a Verano Class A subordinate voting share for each Goodness Growth subordinate voting share held and each holder of Goodness multiple voting shares and Goodness Growth super voting shares will receive 22.652 Verano Shares for each Goodness Growth multiple voting share and Goodness Growth super voting share held, respectively. The transaction  is subject to the approval of shareholders; the approvals of the Supreme Court of British Columbia; receipt of U.S. regulatory approvals, including pursuant to the Hart–Scott–Rodino Antitrust Improvements Act and New York State regulatory requirements; and other customary conditions of closing.

On March 1, 2022, the Company began the sale of smokeable cannabis flower in Minnesota's medical cannabis program. At launch, the Company had six strains of flower available at all eight of its Green Goods™ dispensaries in Minnesota. Select strains of the Company's smokeable cannabis flower are also being distributed through the wholesale channel in Minnesota, and are available for purchase at all registered medical cannabis dispensaries in the state to help ensure that all Minnesotans have access to cannabis flower.

Balance Sheet and Liquidity

As of December 31, 2021, the Company had 128,111,328 equity shares issued and outstanding on an as-converted basis, and 155,733,615 shares outstanding on an as-converted, fully diluted basis.

As of December 31, 2021, total current assets were $41.6 million, including cash on hand of $15.2 million, which does not include $3.0 million in cash proceeds net of deferred financing costs from the upsizing of the Company's credit facility with Chicago Atlantic Group and its affiliates, which was received during the first quarter of fiscal year 2022. Total current liabilities were $16.4 million.


D. H. Taylor reacted
Quote
D. H. Taylor
(@dhtaylor)
Noble Member Admin
Joined: 2 years ago
Posts: 940
 

@rtimothyobrienhotmail-com

Adult-use sales begin in New Mexico starting in 2 weeks; April 1st (I'm in Santa Fe right now).  That should give a good push in revenues as the state is medical only right now.  But, it's New Mexico: Not the biggest state in the union.  

Still, Goodness Growth's $50M in rev. is solid.  I should expect they hit a solid number for 2022.  Maybe $75M?


ReplyQuote



Jeff Spahn
(@jeffspahn2011gmail-com)
Estimable Member
Joined: 9 months ago
Posts: 91
 

How do you think Verano and Goodness Growth came to the price of  $413 Million

I guess what I'm discussing is the breakdown of all the Assets (and of coarse the Valuation of the assets for future New York etc.) It's a Big number

What's everyone else's opinion?


ReplyQuote
Isail4fun
(@rtimothyobrienhotmail-com)
Reputable Member
Joined: 11 months ago
Posts: 153
Topic starter  

DH:  If you have time.

Goodness ($1.94 per share) stockholders receive .22652 of Verano ($9.35 per share).  Please explain the spread and the positive aspects of this transaction to Goodness stockholders and to your followers. 

At a buyout value of $2.64 a share, Is this situation "Free Money?" or just a "PUSH" based on the current values of Goodness and Verano Shares.

Thank you for your consideration.

This post was modified 5 months ago by Isail4fun

ReplyQuote



Jeff Spahn
(@jeffspahn2011gmail-com)
Estimable Member
Joined: 9 months ago
Posts: 91
 

@rtimothyobrienhotmail-com Was the Price LOCKED in or does it float as the Stock of Verona does before close of Merge approval?


D. H. Taylor reacted
ReplyQuote
Jeff Spahn
(@jeffspahn2011gmail-com)
Estimable Member
Joined: 9 months ago
Posts: 91
 

I think the VALUED AT THE TIME is the answer ?

On February 1, 2022, the Company announced that it has entered into a definitive arrangement agreement with Verano Holdings Corp. pursuant to which Verano will acquire all of the issued and outstanding shares of the Company in an all-share transaction valued at the time of announcement of approximately US $413 million on a fully-diluted basis. Under the terms of the Arrangement Agreement, each holder of Goodness Growth subordinate voting shares will receive 0.22652 of a Verano Class A subordinate voting share for each Goodness Growth subordinate voting share held and each holder of Goodness multiple voting shares and Goodness Growth super voting shares will receive 22.652 Verano Shares for each Goodness Growth multiple voting share and Goodness Growth super voting share held, respectively. The transaction is subject to the approval of shareholders; the approvals of the Supreme Court of British Columbia; receipt of U.S. regulatory approvals, including pursuant to the Hart–Scott–Rodino Antitrust Improvements Act and New York State regulatory requirements; and other customary conditions of closing.

What is your thoughts?


D. H. Taylor reacted
ReplyQuote



D. H. Taylor
(@dhtaylor)
Noble Member Admin
Joined: 2 years ago
Posts: 940
 

 

@jeffspahn2011gmail-com

So, the way this works is that when they make the deal, or lock it in, they pick a date. That is the conversion date & price. That price is typically a rolling 10-day price average, not necessarily the specific date (Could be more or less than 10 days).  Then, if acquiring stock price moves, the other stock should move in lock-step.  Should. Optimal word.  But, we are dealing with hyper inefficiencies that are typically translating into opportunities for savvy investors.  


ReplyQuote
Jeff Spahn
(@jeffspahn2011gmail-com)
Estimable Member
Joined: 9 months ago
Posts: 91
 

@dhtaylor 

Thanks for the information I understand this, But I can't seem to find the Defined dates on any websites

Do you know the Defined Dates ?

Thank you and I appreciate your work and wisdom


D. H. Taylor reacted
ReplyQuote



TheQueen
(@gtosali1967)
Reputable Member
Joined: 10 months ago
Posts: 150
 

@rtimothyobrienhotmail-com    is there a date of record you had to own Goodness by or as with some of these other longer taking transactions when the shares are converted to Verano is when it takes place no matter how long or short of a time you have owned them.


ReplyQuote
D. H. Taylor
(@dhtaylor)
Noble Member Admin
Joined: 2 years ago
Posts: 940
 

@jeffspahn2011gmail-com 

February 1st, 2022.  And, the conversion rate is 1:0.22652 of Goodness:Verano shares.  But, you really would no longer care about the date; it no longer matters.  that date only mattered because at that single moment, a price was determined and the share prices were coordinated at that specific time.  

Now, the only thing that matters is the conversion rate.  And, this is where money can be made.  What you do is you take the current price of VRNOF stock and divide that by the conversion rate of .22652. That should be the exact price of GDNSF.  As you can see above, it is not.  There is money to be made.

As an arbitrage trade, you would buy X amount of GDNSF and sell the converted amount of VRNOF stock.  You automatically lock in the difference between the current price and future conversion.  Since you are long the lower GDNSF stock and short the VRNOF stock, it is virtually guaranteed free money.  

But, after GDNSF stock comes off the exchanges, there is a delay in processing.  This could be negative for the trade.  The best way to do this is short-term trades where you wait until the arbitrage narrows then you exit.  

https://investors.vireohealth.com/news/news-details/2022/Verano-to-Enter-Coveted-New-York-Minnesota-and-New-Mexico-Markets-with-Proposed-Acquisition-of-Goodness-Growth-Holdings/default.aspx


ReplyQuote



Jeff Spahn
(@jeffspahn2011gmail-com)
Estimable Member
Joined: 9 months ago
Posts: 91
 

@dhtaylor  Thank you,

So the way I see it right now its about $2.34 effective price (GDNSF) is that about right?

It looks like every Director exercising their Options as of mid March

 


D. H. Taylor reacted
ReplyQuote
D. H. Taylor
(@dhtaylor)
Noble Member Admin
Joined: 2 years ago
Posts: 940
 

@jeffspahn2011gmail-com 

Yes... I think that price is about right.  It is off.  If you picked up Goodness, you would get a better price conversion getting in to Verano.  


ReplyQuote



Jeff Spahn
(@jeffspahn2011gmail-com)
Estimable Member
Joined: 9 months ago
Posts: 91
 

@dhtaylor:

I found this opinion on another post what do you think about his opinion 

 Keep in mind...the conversion sp of VRNOF is not the same as the day of the close...it'll be based upon the 15day vwap to-it's not something easily tracked/defined-but will provide a range)and a tip for future "situations" like this...i look for a Minimum arbitrage of 25-30%(this opened at 15%)leaves you 15% for any downside risk and 10-15% to profit(depending on short or longer timeline) the more complex the merger/buyout the longer govt takes to approve...govt is typically the "drag" to these deals...large shareholder pre-approval good to look at as well, to minimize "deal breaker" risk.

Welcome anyone's opinion


D. H. Taylor reacted
ReplyQuote
D. H. Taylor
(@dhtaylor)
Noble Member Admin
Joined: 2 years ago
Posts: 940
 

@jeffspahn2011gmail-com 

As I mentioned above, the conversion date is irrelevant.  They use the conversion date on that day and then forever may it rest in peace.  That gave the price at that time and allowed a conversion rate.  And, as I mentioned, sometimes it is not necessarily one day but a rolling 10-day average, or whatever gets agreed upon.  It is history once it is printed.  Then, you have a conversion amount for one share to another.  

As for arbitrage, time is money.  If you sell short VRNOF and buy GDNSF, you effectively have locked in the difference between the two.  But, and as mentioned, time is money.  If the government does drag its feet it may be that you are sitting on this arbitrage trade a little longer than other trades.  So, there is an opportunity cost as well as inflation & interest rate concerns.  You would want to make more than the cost of money because of inflation during the time you hold the arbitrage.  

This deal is yet another highlight of how inefficient the cannabis sector is right now. 25% on an arbitrage deal is pretty high.  Most arbs are hopeful to get about 5%, which beats inflation.  This tells you how sweet things are with this market and how one day we will be looking backward on these days and only wish we had many, many more decimal points in our investment accounts to take advantage of these opportunities.


Jeff Spahn reacted
ReplyQuote



Leave a reply

Author Name

Author Email

Title *

Maximum allowed file size is 10MB

 
Preview 0 Revisions Saved
Share:



Copyright Cannabis Investing Newsletter 2021 - 2022