Sundial(SNDL) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - SNDL reported record full year net revenue of $920 million, a 1.3$257.7 million, a 3.7% increase compared to Q4 of the previous year [11] - Gross profit for the full year was $240 million, reflecting a 26$8.9 million, exceeding guidance and representing a $70 million improvement compared to 2023 [16][14] Business Line Data and Key Metrics Changes - Cannabis operations segment achieved net revenue of$37.1 million in Q4 and $109.5 million for the full year, with growth rates of 42$83.2 million, a 10.7% increase year-over-year, driven by same-store sales growth of 6.3% [22][23] - Liquor retail segment experienced a decline of 3.4% in Q4 compared to the previous year, although gross margin improved to nearly 22% [21][12] Market Data and Key Metrics Changes - The liquor segment is expected to see flat revenue growth in 2025, with a long-term underlying growth rate of 1% to 1.5% [42][44] - The cannabis market continues to show strong momentum, with SNDL's cannabis segments growing well ahead of market averages [4][3] Company Strategy and Development Direction - SNDL is focused on long-term growth through strategic initiatives, including the acquisition of Endiva, positioning the company as the largest manufacturer of infused edibles in Canada [7][29] - The company is applying for a listing on the Canadian Stock Exchange to provide shareholders with additional flexibility and optionality [8][51] - SNDL aims to achieve $100 million in annualized free cash flow within the next three years [38] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a slowdown in liquor sales across North America, impacting the entire market, but anticipates a return to growth in the long term [42][44] - The company remains optimistic about its cannabis operations, citing significant improvements and new records in financial performance [27][25] - Management emphasized the importance of operational and financial discipline as a winning formula for sustainable value delivery to shareholders [6][3] Other Important Information - SNDL ended the year with$218 million in unrestricted cash and zero outstanding debt, providing a competitive advantage for capital allocation [8] - The company has implemented productivity improvements totaling $8 million in Q4, primarily from cannabis operations [32] Q&A Session Summary Question: Outlook for liquor retail segment given weak same-store sales - Management noted a slowdown in liquor sales across North America and anticipates flat revenue growth for 2025, with a long-term growth rate of 1% to 1.5% [42][44] Question: Performance of US investments and operational challenges - Management highlighted challenges in the US cannabis market, particularly in Florida, but remains optimistic about long-term potential and restructuring efforts [48][50] Question: Rationale behind CSE listing application - Management stated that the listing would create optionality for future growth opportunities, although no decisions regarding plant-touching activities have been made [53][51] Question: Growth in B2B orders and product performance - Management reported strong growth across all product categories, particularly in pre-rolls, vapes, and edibles, driven by increased distribution [60][62] Question: Importance of multiple banners in cannabis retail - Management indicated that both converting existing banners and adding new ones are part of the strategy to meet consumer preferences [66][67]