SNDL Reports Q2 Earnings – Liquor Slowing and Cannabis Strengthening

The TDR Three Key Takeaways on SNDL Q2 Earnings:

1. Cannabis is leading the growth; liquor is slowing
2. Cost-cutting and efficiencies are getting SNDL closer to profitability.
3. SNDL has an extremely strong balance sheet with no debt and excess working capital.

SNDL (NASDAQ: SNDL) has reported its Q2 2024 earnings, and the report has many highlights, as the business has many operations compared to traditional stand-alone cannabis companies. Here is the TDR Ten Quick Takeaway from the SNDL Earnings report:

1. Overall revenue is slower as a combined business than last year’s. Net revenue for the second quarter of 2024 was $228.1 million, compared to $231.9 million in the second quarter of 2023, a decrease of 1.6%. This decrease was driven by market softness in the Liquor Retail segment, while both Cannabis Retail and Cannabis Operations segments posted strong growth. There were some timing discrepancies for Easter, which did affect slower liquor sales, but still, there appears to be a softening in the liquor business.
2. SNDL has previously stated that it is focused on streamlining and efficiency, which has been reflected in its gross margin improvements. Gross margin of 25.5% in Q2 2024, up from 22.4% in Q2 2023. The Gross margin may seem low compared to US Cannabis MSOs; this is because of the liquor business, which has much lower margins than Cannabis. 
3. SNDL still is not cash flow positive but is making strong progress in this regard. Free Cash Flow improved to negative $5.6 million in Q2 2024 from negative $18.5 million in Q2 2023. A step in the right direction.
4. Reduced operating loss to $4.8 million in Q2 2024 from $29.6 million in Q2 2023, an 84% improvement primarily due to margin expansion and lower expenses.
5. Help is on its way for future free cash flow and net income; the company is working on its previously announced restructuring project, expected to deliver over $20 million in annualized savings, with some benefits already materializing in Q3 2024.
6. The cannabis retail segment saw a 5.8% year-over-year increase in net revenue and a 67.1% increase in operating income, driven by productivity improvements and new store openings.
7. The company is focused on growth via expansion and acquisition. SNDL completed the acquisition of Delta 9’s principal indebtedness.Entered into a stalking horse purchase agreement for Indiva Limited’s business and assets. Also launched the Value Buds brand in British Columbia.
8. International Expansion is progressing with the first international export contract of 2024, shipping bulk flower to Israel, and pursuing EU-GMP certification to expand its international export footprint.
9. The Balance Sheet remains strong, with $783.6 million in unrestricted cash, marketable securities, and investments with no outstanding debt.
10. Wall Street Analyst’s are still predicting that by the end of 2024 that SNDL can be fully profitable and have positive net earnings. The revenue consensus is holding at $689M for the full year. 

Overall, the company is making strong progress, and with the continued cost controls, Wall Street expects that SNDL will turn the corner into profitability by the end of the year. Regardless, SNDL has a solid balance sheet and has the time to work toward profitability.