In today’s Trade To Black podcast presented by Flowhub, Shadd Dales and Anthony Varrell kick off earnings season with SNDL’s mixed third-quarter results. ATB Capital Markets’ Fred Gomes breaks down why institutional money is creeping back into Canadian cannabis, and Michael Bronstein, president of the American Trade Association for Cannabis and Hemp, weighs in on the latest from Washington.
Off the top, Varrell shares an update on Germany. The market now has about 1.4 million medical patients, and the recent end of insurance reimbursement for flower affects only around 60,000 of them. The next federal election isn’t until 2029, and any conservative-led coalition would need a partner that has ruled out rolling back cannabis reform.
SNDL (NASDAQ: SNDL) reported revenue of $238.0 million, in line with ATB’s estimate. Adjusted EBITDA of $15.8 million beat ATB’s $11.3 million forecast. Same-store sales fell 3.8% in cannabis retail and 6.0% in liquor retail, and gross margin slipped to 24.3%. SNDL ended the quarter with mixed results, $141.1 million in cash and no debt, repurchased about 2% of its shares, and plans a Substantial Issuer Bid for up to C$50 million.
Gomes calls the quarter mixed but notes that retail margins hit records. The drop in cannabis operations revenue came from SNDL exiting the domestic dried flower category, and that segment is now under strategic review. He also points to the expected EU-GMP certification at the Atholville facility and an Ontario settlement that removes franchise stores from SNDL’s books. The settlement also lets SNDL resume opening stores in Ontario.
Gomes says Canadian stocks still trade at 3.5 to 6 times EBITDA. He cites new investments in Village Farms (NASDAQ: VFF) and Auxly (TSX: XLY), the Ewing Morris tender offer for Decibel Cannabis (TSXV: DB), and widespread buybacks across the sector. On Aurora Cannabis (NASDAQ: ACB), ATB considers the Curaleaf (TSX: CURA) bid fair value. Gomes says Aurora’s low valuation and medical-only business made it a better fit for Curaleaf than Village Farms. Whether Organigram (NASDAQ: OGI) steps in with a counteroffer remains unclear.
Bronstein says it would be shocking for the rescheduling hearing to turn against the government after the judge rejected opponents’ request to reopen it. Briefs are due October 29 and November 5. He says his coalition is ready to defend the rule in court.
On the indictment of Virginia state Sen. Louise Lucas, Bronstein notes the Justice Department separated the case from state-licensed businesses. The charges are allegations. He expects federal enforcement against products testing above the legal THC limit to tighten as reform advances.
Hear the full conversation as earnings season heats up.
