Toronto, Ontario--(Newsfile Corp. - August 27, 2024) - SLANG Worldwide Inc. (CNSX: SLNG) (OTCQB: SLGWF) ("SLANG" or the "Company"), a cannabis consumer packaged goods (CPG) company, today released financial results for the three and six months ended June 30, 2024. All figures in this press release are stated in Canadian dollars unless otherwise noted.
John Moynan, Chief Executive Officer of SLANG, said, "This quarter we achieved reduced operating expenses year-over-year, increased wholesale sales in Vermont as well as increased sales in our leading Alchemy Natural CBD gummies. However, we continue to see increased competitive headwinds in our Core and Emerging Markets, which have led to a decline in sales revenue, gross profit and Adjusted EBITDA1. The reduction in retail sales, as well as limited cash available for general working purposes and rising public company corporate overhead costs, negatively impacted the Company's available cash from operations. As a result of these factors, SLANG continues to work with PGP Capital Advisors as our financial advisor as we pursue a full range of strategic and financial alternatives. The SLANG management team, as well as the Board of Directors, would like to thank our shareholders for their continued support and emphasize that we are committed to seeking an acceptable resolution. We will update our shareholders as we manage through this process."
Second Quarter 2024 Financial Summary
Revenue for the three months ended June 30, 2024 ("Q2 2024") was $6.28 million, compared with $8.44 million for the three months ended June 30, 2023 ("Q2 2023"), representing a 26% decrease year-over-year. The reduction was primarily driven by a decrease of $1.78 million in Core Market2 sales, a decrease of $0.20 million in Emerging Market3 sales, a decrease of $0.09 million in e-commerce sales, and a decrease of $0.09 million in our distribution sales. Within the Core Market segment, the Company experienced a reduction of $0.51 million and $1.27 million in sales in Colorado and in Vermont, respectively.
Gross profit of $2.69 million (43% gross margin) in Q2 2024, compared with $4.35 million (52% gross margin) in Q2 2023, representing a 38% decrease in gross profit and a 9% decrease in gross margin year-over-year. Gross profit before fair value of biological assets was $3.23 million (51% gross margin) in Q2 2024, compared with $4.54 million (54% gross margin) in Q2 2023, representing a 29% decrease in gross profit before fair value of biological assets, and a 3% decrease in gross margin before fair value of biological assets year-over-year.
Operating expenses of $5.47 million in Q2 2024, compared with $6.24 million in Q2 2023 and $5.54 million in the three months ended March 31, 2024 ("Q1 2024"), representing a 12% decrease year-over-year and 1% decrease quarter-over-quarter. The reduction year-over-year was primarily driven by a decrease in salaries and wages, consulting and subcontractors, general and administrative, share-based payments offset by an increase in depreciation and amortization expenses. The reduction quarter-over-quarter was primarily driven by a decrease in salaries and wages and share-based payments, offset by an increase in insurance expenses.
Total comprehensive loss of $11.50 million in Q2 2024, compared with $5.16 million in Q2 2023, representing a 123% increase year-over-year. The increase was primarily driven by an increase in impairment of $4.30 million, a decrease in gross profit of $1.66 million, an increase in financing cost and fair value adjustment of $1.62 million and an increase in other expenses of $0.43 million, offset by a decrease in operating expenses of $0.77 million a decrease in income tax of $0.27 million.
EBITDA1 of ($2.07 million) in Q2 2024, compared with ($1.17 million) in Q2 2023. The reduction in EBITDA is primarily attributable to a $1.72 million decrease in gross profit (excluding depreciation costs), offset by a reduction of $0.82 million in operating expenses (excluding depreciation) such as salaries and wages, consulting and subcontractors, general and administrative and share based payments.
Adjusted EBITDA1 of ($1.42 million) in Q2 2024, compared with ($0.76 million) in Q2 2023. The reduction in Adjusted EBITDA is primarily attributable to a decrease of $1.36 million in gross profit before fair value adjustments of biological assets (excluding depreciation costs), offset by a reduction of $0.70 million in operating expenses (excluding depreciation expenses, expected credit losses and share-based payments).
$6.75 million in cash and restricted cash on June 30, 2024, compared to $8.32 million on March 31, 2024 and $9.04 million on December 31, 2023. Additionally, for the six months ended June 30, 2024, cash flows used in operating activities was ($1.46 million), compared to cash flows used in operating activities of ($0.49 million) for the six months ended June 30, 2023, a reduction of $0.97 million. This reduction was primarily attributable to decreased revenue and gross profit, offset by a reduction of expenditures and an improvement associated with non-cash working capital balances.
Second Quarter 2024 Operational Highlights
Vermont Q2 2024 wholesale sales were $0.38 million, compared to $0.31 million in Q1 2024.
The Company's Alchemy Naturals CBD gummies continue to see growth as Alchemy Naturals contributed $0.83 million in e-commerce sales in the six months ended June 30, 2024, compared to $0.58 million in the six months ended June 30, 2023.
Second Quarter 2024 Financial Review
The consolidated financial statements were prepared in accordance with IFRS. The following is a selected presentation of the Income Statement for the three and six months ended June 30, 2024.
(In thousands of Canadian dollars except per share data and percentages)
For the three months ended
For the six months ended
30-Jun-24
30-Jun-23
30-Jun-24
30-Jun-23
Net Operating Revenue
6,282
8,436
13,311
19,259
Cost of goods sold
3,050
3,900
6,429
9,041
Gross Profit Before Fair Value Adjustment of Biological Assets
3,232
4,536
6,882
10,218
Realized fair value amounts included in inventory sold
(659
)
(609
)
(1,239
)
(1,032
)
Unrealized gain on changes in fair value of biological assets
113
419
405
876
Gross Profit
2,686
4,346
6,048
10,062
Gross Profit Margin
43%
52%
45%
52%
Operating expenses
5,469
6,235
11,011
12,015
Operating Loss
(2,783
)
(1,889
)
(4,963
)
(1,953
)
Other items (FV adjustment, FX, gains/losses, taxes, etc.)
(8,713
)
(3,275
)
(12,555
)
(5,542
)
Total Comprehensive Loss
(11,496
)
(5,164
)
(17,518
)
(7,495
)
Earnings Per Share
Basic
(0.05
)
(0.02
)
(0.08
)
(0.04
)
Diluted
(0.05
)
(0.02
)
(0.08
)
(0.04
)
(In thousands of Canadian dollars except percentages)
For the three months ended
For the six months ended
30-Jun-24
30-Jun-23
30-Jun-24
30-Jun-23
Net Operating Revenue
6,282
8,436
13,311
19,259
Cost of Goods Sold
3,050
3,900
6,429
9,041
Realized fair value amounts included in inventory sold
(659
)
(609
)
(1,239
)
(1,032
)
Unrealized gain on fair value of biological assets
113
419
405
876
Cost of Goods Sold
3,596
4,090
7,263
9,197
Gross Profit
2,686
4,346
6,048
10,062
Gross Profit Margin
43%
52%
45%
52%
Gross Profit before FV adjustment
3,232
4,536
6,882
10,218
Gross Profit Margin before FV adjustment
51%
54%
52%
53%
(In thousands of Canadian dollars)
For the three months ended
For the six months ended
30-Jun-24
30-Jun-23
30-Jun-24
30-Jun-23
Total Comprehensive Loss
(11,496
)
(5,164
)
(17,518
)
(7,495
)
EBITDA (Non-IFRS)
(2,065
)
(1,168
)
(3,546
)
(490
)
Adjusted EBITDA (Non-IFRS)
(1,422
)
(762
)
(2,485
)
(22
)
See the Company's management's discussion and analysis for the three and six months ended June 30, 2024 (the "Q2 2024 MD&A"), for a detailed reconciliation of EBITDA and Adjusted EBITDA to Operating Income / (Loss). SLANG's financial statements and the Q2 2024 MD&A are available on SEDAR+ at www.sedarplus.ca, and on the Company's Investor Relations website at www.slangww.com.
Non-IFRS Measures
EBITDA and Adjusted EBITDA are non-IFRS financial measures that the Company uses to assess its operating performance. EBITDA is defined as net earnings (loss) before net finance costs, income tax expense (benefit) and depreciation and amortization expense. Management defines Adjusted EBITDA as EBITDA adjusted for other non-cash items such as the impact of unrealized fair values, share based compensation expense, impairments, one-time gains and losses, and one-time revenues and expenses. This data is furnished to provide additional information and are non-IFRS measures and do not have any standardized meaning prescribed by IFRS. The Company uses these non-IFRS measures to provide shareholders and others with supplemental measures of its operating performance. The Company also believes that securities analysts, investors and other interested parties, frequently use these non-IFRS measures in the evaluation of companies, many of which present similar metrics when reporting their results. As other companies may calculate these non-IFRS measures differently than the Company, these metrics may not be comparable to similarly titled measures reported by other companies. We caution readers that Adjusted EBITDA should not be substituted for determining net loss as an indicator of operating results, or as a substitute for cash flows from operating and investing activities.
About SLANG Worldwide Inc.
SLANG Worldwide Inc. is a branded cannabis consumer packaged goods company, with five distinct brands and products distributed across the U.S., operating in 13 legal cannabis markets. The Company has over a decade of experience operating in the nascent and highly regulated cannabis sector, and its partners enjoy the benefits of that experience. Learn more at slangww.com.
To be added to SLANG's email distribution list, please email [email protected] with "SLNG" in the subject.
Forward-Looking Statements
This news release contains statements that constitute "forward-looking statements." Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements, or developments in the industry to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur.
Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management of SLANG at this time, are inherently subject to significant business, economic and competitive risks, uncertainties and contingencies that could cause actual results to differ materially from those expressed or implied in such statements. Investors are cautioned not to put undue reliance on forward-looking statements. Applicable risks and uncertainties include, but are not limited to regulatory risks, risks related to changes in laws, resolutions and guidelines, market risks, concentration risks, operating history, competition, the risks associated with international and foreign operations and the other risks identified under the headings "Risk Factors" in SLANG's Q2 2024 MD&A and other disclosure documents available on the Company's profile on SEDAR+ at www.sedarplus.ca. SLANG is not under any obligation, and expressly disclaims any intention or obligation, to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.
Reader Advisory
Neither the Canadian Securities Exchange nor the Market Regulator (as that term is defined in the policies of the Canadian Securities Exchange) accepts responsibility for the adequacy or accuracy of this release.
Company Contact Mikel Rutherford, CFO 833-752-6499
1 EBITDA and Adjusted EBITDA are non-IFRS financial measures that is further described under the section "Non-IFRS Measures" herein. 2 The Company's Core Market is comprised on Colorado and Vermont. 3 The Company's Emerging Market is comprised of states where the Company's branded products are produced and sold by the Company's third party license partners.
