Mr. Jason Wild reports

TERRASCEND REPORTS SECOND QUARTER 2023 RECORD NET REVENUE OF $72.1 MILLION, AN INCREASE OF 12.7% YEAR OVER YEAR AND 3.9% SEQUENTIALLY, REPRESENTING ITS 7TH CONSECUTIVE QUARTER OF SEQUENTIAL REVENUE GROWTH

Terrascend Corp. has released its financial results for the second quarter ended June 30, 2023. All amounts are expressed in United States dollars and are prepared under U.S. generally accepted accounting principles (GAAP), unless indicated otherwise.

The following financial measures are reported as results from continuing operations due to the shutdown of the licensed producer business in Canada, which is reported as discontinued operations for all of 2022. All historical periods have been restated accordingly.

Second quarter 2023 financial highlights

• Net revenue was $72.1-million, an increase of 3.9 per cent sequentially and 12.7 per cent year over year.
• Gross profit margin was 50.2 per cent, compared with 48.8 per cent in Q1 2023 and 37.5 per cent in Q2 2022.
• GAAP (generally accepted accounting principles) net loss from continuing operations was $12.9-million, compared with $19.2-million in Q1 2023 and net income of $16.9-million in Q2 2022.
• EBITDA (earnings before interest, taxes, depreciation and amortization) from continuing operations was $6.5-million, compared with $6.1-million in Q1 2023 and $38.4-million in Q2 2022.
• Adjusted EBITDA from continuing operations was $12.8-million, compared with $12.2-million in Q1 2023 and $8.8-million in Q2 2022.
• Adjusted EBITDA margin from continuing operations was 17.8 per cent, compared with 17.6 per cent in Q1 2023 and 13.8 per cent in Q2 2022.
• Net cash provided by (used in) operating activities -- continuing operations was $1.8-million compared with $10.5-million in Q1 2023 and ($14.9)-million in Q2 2022.
• Cash and cash equivalents, including restricted cash, totalled $34.5-million as of June 30, 2023, of which $2.5-million was long term restricted, as compared with $33.5-million as of March 31, 2023.

Second quarter 2023 business and operational highlights

• Announced three dispensary acquisitions in Maryland to reach the four store limit in the state.
• Closed on the acquisitions of Blue Ridge Wellness and Peninsula Alternative Health dispensaries in Maryland.
• Closed private placements for total aggregate proceeds of $21.0-million
• Closed on a $25.0-million commercial loan with Stearns Bank carrying an interest rate of prime plus 2.25 per cent, equivalent to 10.5 per cent, with proceeds used to pay down higher-interest debt.
• Paid down $37.0-million of senior secured term loan in Pennsylvania.
• Completed sale of Mississauga facility for $14.3-million.
• Launched Legend brand in Michigan.
• Introduced Wana-infused gummies in New Jersey and Maryland.
• Opened fifth Cookies dispensary in Michigan.
• Expanded Cookies partnership into Maryland.
• Completed a reorganization of the company in order to list on the Toronto Stock Exchange.

Subsequent events

• Reached four dispensary limit in Maryland with the closing of the Herbiculture acquisition.
• Commenced trading on the TSX under the symbol TSND and announced symbol change on OTC markets to TSNDF.

"We are pleased to deliver results in the second quarter that exceeded our internal forecasts. We have made substantial progress over the last several months across virtually all facets of our business. We have significantly improved our margins, transformed our balance sheet, materially lowered our interest expense, delivered positive operating cash flow, acquired four dispensaries in Maryland and successfully listed on the TSX, all while driving sector leading revenue growth of 26 per cent in the first half of 2023," stated Jason Wild, executive chairman of Terrascend. "These achievements give us confidence in the remainder of the year, as evidenced by our full year revenue and adjusted EBITDA guidance. We expect to deliver significant growth in revenue and profitability as we realize the benefits of our now vertically integrated operations in Maryland as well as continued strong execution in our other geographies."

Second quarter 2023 financial results

Net revenue for the second quarter of 2023 was $72.- million as compared with $69.4-million in the first quarter of 2023 and $64.0-million in the second quarter of 2022, representing 3.9-per-cent growth sequentially and 12.7-per-cent growth year over year. The sequential growth was driven primarily by a full quarter of the Allegany dispensary acquisition in Maryland and same store sales growth in Michigan.

Gross margin for the second quarter of 2023 was 50.2 per cent as compared with 48.8 per cent in the first quarter of 2023 and 35.5 per cent in the second quarter of 2022. The 140-basis-point improvement in gross margin from the first quarter to the second quarter of 2023 follows a 420-basis-point sequential improvement in the first quarter of 2023. These improvements were driven by increased yields, optimization of mix and better utilization of capacity in New Jersey, Michigan and Maryland.

General and administrative (G&A) expenses for the second quarter of 2023 were $30.5-million as compared with $27.7-million in the first quarter of 2023 and $32.9-million in the second quarter of 2022. G&A expenses for the second quarter of 2023 included $2.5-million of one-time items including M&A (merger and acquisition) costs related to the acquisitions in Maryland, capital raising transaction costs, legal settlement fees and TSX listing related costs.

Net loss from continuing operations in the second quarter of 2023 was $12.9-million compared with $19.2-million in the first quarter of 2023 and a net income of $16.9-million in the second quarter of 2022.

Adjusted EBITDA from continuing operations for the second quarter of 2023, a non-GAAP measure, was $12.8-million, representing a 17.8-per-cent margin, compared with $12.2-million and a 17.6-per-cent margin in the first quarter of 2023, and $8.8-million and a 13.8-per-cent margin in the second quarter of 2022.

Balance sheet and cash flow

Cash and cash equivalents, including restricted cash, were $34.5-million as of June 30, 2023, compared with $33.5-million as of March 31, 2023. Net cash provided by continuing operations was $1.8-million for the second quarter of 2023, representing the fourth consecutive quarter of positive cash flow from operations. No cash income tax payments were made during the quarter. Capital expenditure spending was $2.2-million in the second quarter of 2023, primarily relating to store openings in Michigan. Free cash flow, a non-GAAP financial measure, was ($400,000) for the quarter.

During the quarter, the company completed the sale of its facility in Canada for $14.3-million, completed private placements for gross proceeds of $21.5-million, closed on a $25-million loan with Stearns bank at a rate of prime plus 2.25 per cent, paid down $43-million of higher-interest debt on its Ilera term loan, and made cash consideration payments totalling $4.9-million for two Maryland acquisitions which closed in the quarter.

As of Aug. 10, 2023, there were 363 million basic shares outstanding, including 287 million common shares, 13 million preferred shares as converted and 63 million exchangeable non-voting shares. Additionally, there are 51 million warrants and options outstanding at a weighted average price of $4.44.

Outlook for 2023

The company is reiterating its outlook for net revenue and adjusted EBITDA from continuing operations1 for 2023 to be at least $305-million and at least $58-million, respectively, representing year-over-year growth of 23 per cent in net revenue and 49 per cent in adjusted EBITDA from continuing operations.

Conference call

Terrascend will host a conference call today, Aug. 10, 2023, to discuss these results. Jason Wild, executive chairman, Ziad Ghanem, chief executive officer, and Keith Stauffer, chief financial officer, will host the call starting at 5 p.m. Eastern time. A question-and-answer session will follow management's presentation.

Conference call details

Date:  Thursday, Aug. 10, 2023

Time:   5 p.m. Eastern Time

Dial-in number:  1-888-664-6392

Conference ID:   98441769

Replay:   416-764-8677 or 1-888-390-0541 available until midnight Eastern Time on Thursday, Aug. 24, 2023

Replay entry code:   441769 followed by the pound key

Financial results and analyses are available on the company's website and SEDAR.

About Terrascend Corp.

Terrascend is a leading Toronto Stock Exchange-listed cannabis company with interests across the North American cannabis sector, including vertically integrated operations in Pennsylvania, New Jersey, Maryland, Michigan and California through Terrascend Growth Corp. and retail operations in Canada. Terrascend Growth operates The Apothecarium and Gage dispensary retail locations as well as scaled cultivation, processing and manufacturing facilities in its core markets. Terrascend Growth's cultivation and manufacturing practices yield consistent, high-quality cannabis, providing industry-leading product selection to both the medical and legal adult-use markets. The company owns or licenses several synergistic businesses and brands, including Gage Cannabis, The Apothecarium, Cookies, Lemonnade, Ilera Healthcare, Kind Tree, Legend, State Flower, Wana and Valhalla Confections.

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