Mr. Ziad Ghanem reports

TERRASCEND REPORTS FOURTH QUARTER AND FULL YEAR 2023 FINANCIAL RESULTS

Terrascend Corp. has released its financial results for the fourth quarter and full year ended Dec. 31, 2023. All amounts are expressed in U.S. dollars and are prepared under U.S. generally accepted accounting principles 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 through Sept. 30, 2023. All historical periods have been restated accordingly.

Fourth quarter 2023 financial highlights:

• Net revenue was $86.6-million, an increase of 25.5 per cent year over year.
• Gross profit margin was 48.2 per cent, compared with 44.6 per cent in Q4 2022.
• GAAP net loss from continuing operations was $41.8-million, inclusive of $57.7-million of non-cash impairment charges, compared with a net loss of $2.0-million in Q4 2022. The non-cash impairment charges were recorded against goodwill and intangibles for the company's Michigan and California businesses.
• EBITDA (earnings before interest, taxes, depreciation and amortization) from continuing operations was ($36.7-million), including the aforementioned non-cash impairment charges of $57.7-million, compared with $30.0-million in Q4 2022.
• Adjusted EBITDA from continuing operations was $19.6-million, an increase of 60.7 per cent year over year.
• Adjusted EBITDA margin from continuing operations was 22.7 per cent, compared with 17.7 per cent in Q4 2022.
• Cash flow provided by continuing operations was $9.4-million compared with $7.3-million in Q4 2022.
• Free cash flow was $7.9-million compared with $3.9-million in Q4 2022.

Full-year 2023 financial highlights:

• Net revenue was $317.3-million, an increase of 28.0 per cent year over year.
• Gross profit margin was 50.3 per cent compared with 41.0 per cent in 2022.
• GAAP net loss from continuing operations was $82.3-million, inclusive of $58.0-million of non-cash impairment charges, compared with a net loss from continuing operations of $299.4-million in 2022, inclusive of $311.1-million of non-cash impairment charges. The non-cash impairment charges were recorded against goodwill and intangibles for the company's Michigan and California businesses.
• EBITDA from continuing operations was ($3.3-million), compared with ($248.5-million) in 2022, including the aforementioned non-cash impairment charges of $58.0-million in 2023 and $311.1-million in 2022.
• Adjusted EBITDA from continuing operations was $68.8-million, an increase of 77.1 per cent year over year.
• Adjusted EBITDA margin from continuing operations was 21.7 per cent compared with 15.7 per cent in 2022.
• Cash flow provided by (used in) continuing operations was $31.1-million compared with ($21.8-million) in 2022.
• Free cash flow was $23.4-million compared with ($61.5-million) in 2022.

"We made substantial progress in 2023 across virtually all facets of our business, including significantly improving our margins, transforming our balance sheet, materially lowering our interest expense and delivering positive free cash flow, all while driving industry-leading revenue growth of 28 per cent. I am extremely pleased that, for the first time in our history, we generated positive cash flow for a full year, with $31.1-million in cash flow from continuing operations and $23.4-million in free cash flow," stated Jason Wild, executive chairman of Terrascend. "We have the right team, high performing assets, strong operating results and cash flow, and ample greenfield opportunities to pursue additional growth. Two thousand twenty-three was about operational excellence and strengthening the foundation. Two thousand twenty-four is about expansion by capitalizing on the current environment and entering into attractive states on accretive terms, which would not have been possible two years ago."

2023 business and operational highlights:

• First full year of positive cash flow provided by continuing operations and positive free cash flow in the company's history;
• In March, 2023, promoted Ziad Ghanem to the role of chief executive officer;
• Closed on private placements totalling $21.0-million, enabling qualification for Toronto Stock Exchange listing;
• Completed sale of Mississauga facility in Canada for $19.7-million (Canadian);
• 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 $43.0-million of Ilera senior secured term loan;
• Closed on the acquisition of four high performing retail dispensaries in Maryland;
• Commenced adult-use sales in Maryland with the maximum four retail dispensaries permitted and a state-of-the-art cultivation and manufacturing facility;
• Commenced trading on the Toronto Stock Exchange under the symbol TSND on July 4, 2023;
• Introduced Wana infused gummies in New Jersey and Maryland;
• Launched both Kind Tree and Legend in Michigan, as well as Legend and Valhalla in Pennsylvania;
• Scaled up production of non-flower tetrahydrocannabinol SKUs at Hagerstown, Md., facility;
• Opened 18th and 19th Michigan retail locations;
• Awarded Maryland best retail expansion strategy by Benzinga;
• Provided foundational support to the David Boies lawsuit filed against the U.S. attorney-general, seeking equal treatment for cannabis businesses.

Subsequent events:

• Paid down additional $9.8-million of debt;
• Acquired the remaining 50.1-per-cent equity in State Flower, a California cultivator, and three Apothecarium dispensaries in California, all of which were already previously consolidated into financial results;
• Expanded Valhalla product lineup to include one of the first 100-milligram edibles in Pennsylvania.

Conference call

Terrascend will host a conference call today, March 14, 2024, to discuss these results. Mr. Wild, Ziad Ghanem, president and chief operating 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.

Date:  Thursday, March 14, 2024

Time:  5 p.m. Eastern Time

A webcast will be available.

Dial-in number:  1-888-664-6392

Replay:  416-764-8677 or 1-888-390-0541 available until 12 a.m. midnight Eastern Time, Thursday, March 28, 2024

Replay entry code:  119971 followed by the number sign

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 through Terrascend Canada Inc. 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.

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