Mr. Jason Wild reports

TERRASCEND REPORTS RECORD THIRD QUARTER 2023 RESULTS AND RAISES FULL YEAR 2023 GUIDANCE

Terrascend Corp. has released its financial results for the third quarter ended Sept. 30, 2023. All amounts are expressed in U.S. 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 discontinuation of the licensed producer business in Canada, which is reported as discontinued operations for all of 2022. All historical periods have been restated accordingly.

Third Quarter 2023 Financial Highlights

• Net Revenue was $89.2 million, compared with $72.1 million in Q2 2023 and $66.2 million in Q3 2022, representing an increase of 23.7 per cent sequentially and 34.7 per cent year-over-year.
• Gross Profit Margin was 53.6 per cent, compared with 50.2 per cent in Q2 2023 and 47.0 per cent in Q3 2022.
• GAAP Net loss from continuing operations was $8.4 million, compared with $12.9 million in Q2 2023 and $300.6 million in Q3 2022.
• EBITDA from continuing operations 1 was $20.7 million, compared with $6.5 million in Q2 2023 and ($317.9) million in Q3 2022.
• Adjusted EBITDA from continuing operations 1 was $24.2 million, compared with $12.8 million in Q2 2023 and $12.8 million in Q3 2022.
• Adjusted EBITDA M argin from continuing operations 1 was 27.1 per cent, compared with 17.8 per cent in Q2 2023 and 19.3 per cent in Q3 2022.
• Net cash provided by operating activities - continuing operations was $9.4 million compared with $1.8 million in Q2 2023 and $2.3 million in Q3 2022.
• Free cash flow from continuing operations 2 was $7.7 million compared with ($0.2) million in Q2 2023 and ($9.5) million in Q3 2022.

"We are pleased to deliver yet another record quarter, exceeding our internal forecasts across virtually all of our financial metrics. This is our 8th consecutive quarter of sequential Net Revenue growth and 5th consecutive quarter of positive Cash Flow from Continuing Operations," stated Jason Wild, Executive Chairman of Terrascend. "Sequentially, revenue grew at an industry-leading rate of 23.7 per cent, gross margin expanded 340-basis points to 53.6 per cent and Adjusted EBITDA from continuing operations grew 89 per cent. Our free cash flow generation was driven by the conversion to adult-use in Maryland, increased market share in New Jersey, margin expansion in Michigan, and a return to retail and wholesale growth in Pennsylvania. This momentum gives us visibility and confidence to raise our full year revenue and Adjusted EBITDA from continuing operations guidance to $320 million and $73 million, respectively. We now have the right team, high-performing assets, strong operating results and cash flow, and a wide-open map to capitalize on the opportunities that lie ahead. While the industry continues to be under pressure, we are seeing compelling opportunities to enter additional geographies and believe that now is the time to expand the company's strategy from 'deep, not wide' to 'deep and wide', but only on our terms."

Third Quarter 2023 Business and Operational Highlights

• 8th consecutive quarter of sequential Net Revenue growth and 5th consecutive quarter of positive Cash Flow from Continuing Operations.
• Improved to #2 position in New Jersey, with 18.6 per cent market share, and is closing in on the #1 position of 18.8 per cent, according to BDSA for September 2023.
• Commenced adult-use sales in Maryland with four retail dispensaries and a state-of-the-art cultivation facility.
• Launched Wana brand into the Maryland market.
• Improved gross margin in Michigan by 800-basis points sequentially to 36 per cent in Q3 and exited the quarter at 40 per cent in September.
• Returned to retail and wholesale growth in Pennsylvania both year-over-year and sequentially.
• Commenced trading on the Toronto Stock Exchange ("TSX") under the symbol 'TSND' on July 4, 2023.

Subsequent Events

• Played an instrumental role in the recently filed David Boies lawsuit against U.S. Attorney General, seeking equal treatment for cannabis businesses.
• Awarded Maryland "best retail expansion strategy" by Benzinga.

Third Quarter 2023 Financial Results

Net revenue for the third quarter of 2023 was $89.2 million as compared with $72.1 million in the second quarter of 2023 and $66.2 million in the third quarter of 2022, representing 23.7 per cent growth sequentially and 34.7 per cent growth year-over-year. The sequential growth was driven primarily by adult use implementation and three acquisitions in Maryland, combined with an increase in wholesale sales in New Jersey and an increase in retail and wholesale sales in Pennsylvania. The year-over-year growth was broad based and driven by adult use implementation and acquisitions in Maryland, retail and wholesale sales growth in New Jersey, retail and wholesale sales growth in Pennsylvania, and wholesale sales growth in Michigan.

Gross margin for the third quarter of 2023 was 53.6 per cent as compared with 50.2 per cent in the second quarter of 2023 and 47.0 per cent in the third quarter of 2022. The 340-basis point sequential improvement was driven by improvements in efficiencies, costs, and yields across Michigan, Maryland and Pennsylvania. The 660-basis point improvement year over year was a result of lower costs, increased yields, improved utilization, and other efficiencies across Pennsylvania, Maryland, New Jersey and Michigan.

General & Administrative (G&A) expenses for the third quarter of 2023 were $29.3 million as compared with $30.5 million in the second quarter of 2023 and $27.4 million in the third quarter of 2022. G&A expenses as a percent of revenue, net declined to 32.8 per cent in the third quarter of 2023 from 42.3 per cent in the second quarter of 2023 and compared with 41.4 per cent in the third quarter of 2022. The declines as a percentage of revenue sequentially and year-over-year were driven by minimal spending increases combined with material revenue growth. G&A expenses as a percent of revenue, excluding stock based compensation, were 30.8 per cent for the third quarter.

Net loss from continuing operations in the third quarter of 2023 was $8.4 million compared with $12.9 million in the second quarter of 2023 and $300.6 million in the third quarter of 2022. The improvement sequentially was driven by higher revenue and gross margin. Net loss from continuing operations in the third quarter of 2022 included a non-cash impairment of goodwill and intangibles of $331 million.

Adjusted EBITDA from continuing operations for the third quarter of 2023 was $24.2 million, representing a 27.1 per cent margin, compared with $12.8 million, or a 17.8 per cent margin in the second quarter of 2023 and $12.8 million, or a 19.3 per cent margin in the third quarter of 2022. The significant sequential and year-over-year improvement in adjusted EBITDA margin from continuing operations was driven by improvement in gross margin and operating expense leverage.

Balance Sheet and Cash Flow

Cash and cash equivalents, including restricted cash, were $28.5 million as of Sept. 30, 2023, compared with $34.5 million as of June 30, 2023. Net cash provided by operating activities - continuing operations was $9.4 million for the third quarter of 2023, representing the fifth consecutive quarter of positive cashflow from continuing operations. Capital expenditure spending was $1.7 million in the third quarter of 2023, primarily relating to investments in automation. Free cashflow2 was $7.7 million for the quarter. During the quarter, payments were made related to $5.7 million of debt paydown, a $3.8 million success fee in New Jersey, and $3.0 million for dispensary acquisitions in Maryland. No cash income tax payments were made during the quarter.

As of November 8, 2023, there were 363 million shares outstanding, including 287 million common shares, 13 million preferred shares as converted, and 63 million exchangeable non-voting shares as well as 2 million RSUs. Additionally, there are 51 million warrants and options at a weighted average price of $4.22.

Outlook for 2023

The Company is raising its outlook for Net Revenue and Adjusted EBITDA from continuing operations for 2023 to $320 million and $73 million, respectively, representing year-over-year growth of 29 per cent in Net Revenue and 87 per cent in Adjusted EBITDA from continuing operations, respectively. The full year 2023 increase in guidance implies 2023 fourth quarter Net Revenue of $89 million and Adjusted EBITDA from continuing operations1 of $24 million.

Conference Call

Terrascend will host a conference call today, November 9, 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 6:00 p.m. Eastern time. A question-and-answer session will follow management's presentation.

CONFERENCE CALL DETAILS

Date: Thursday, November 9, 2023

Time: 6:00 p.m. Eastern Time

Dial-in Number: 1-888-664-6392

Replay: 416-764-8677 or 1-888-390-0541 Available until 12:00 midnight Eastern Time Thursday, November 23, 2023 Replay Entry Code: 997619#

Financial results and analyses are available on the Company's website ( www.terrascend.com ) and SEDAR ( www.sedar.com ).

About Terrascend

Terrascend is a leading TSX-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 through Terrascend Canada Inc. ("Terrascend"). Terrascend operates The Apothecarium, Gage and other dispensary retail locations as well as scaled cultivation, processing, and manufacturing facilities in its core markets. Terrascend'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. For more information visit www.terrascend.com.

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