- Record Q3 2021 revenue of $27.2 million , an increase of 119.6% YoY and 3.2% quarter over quarter
- Announced proposed arrangement pursuant to which TerrAscend Corp. will acquire all of the issued and outstanding subordinate voting shares of Gage
- Closed on a $55 million senior secured term loan
- Ended the quarter with $17.7 million of cash and $72.3 million of pro forma cash 1
- Gross margins of 36.5% compared to 34.2% in Q2 2021, sequential quarter growth of 230 basis points
- Q3 2021 average selling price of dried flower of approximately $4,900 /lb vs. Michigan average of approximately $3,400 /lb – 44% premium
- The state of Michigan posted $164 million of cannabis sales in October, which equates to approximately $1.96 billion when annualized, positioning Michigan as the third largest cannabis market in the United States based on this run-rate
- Eleven cultivation facilities in operation today (three Gage operated and eight contracted cultivation assets) compared to three cultivation facilities in Q3 2020
- The Company introduced Gage branded vape carts in October 2021 , which currently account for almost 80% of the overall vape cart sales so far in November
Gage Growth Corp. ("Gage" or the "Company") (CSE: GAGE) (OTCQX: GAEGF), a leading high-quality cannabis premium brand and operator in Michigan today reported its record financial results for the three and nine months ended September 30, 2021 . All currency references used in this press release are in U.S. dollars unless otherwise noted.
Financial Highlights for the quarter ended September 30, 2021
(in millions of US Dollars) | Q3-2021 | Q2-2021 |
Revenue | $27.2 | $26.4 |
Gross Profit | $9.9 | $9.0 |
Gross Margin % | 36.5% | 34.2% |
Adjusted EBITDA | ($1.8) | ($2.0) |
Net Loss | ($3.4) | ($9.4) |
Cash, End of Period | $17.7 | $32.8 |
Pro Forma Cash 1 | $72.3 | N/A |
See "Non-IFRS Financial Measures" below for more information regarding Gage's use of Non-IFRS financial measures and other reconciliations. |
1. Represents cash and cash equivalents at the end of Q3 2021, including the gross proceeds from the recently closed $55 million senior secured debt financing. |
Revenue increased to a record of $27.2 million in the third quarter of 2021, as compared to $26.4 million in the second quarter of 2021, a 3.2% increase. Gross margin, before impact of biological asset adjustments, was 36.5% in the third quarter of 2021 compared to 34.2% in the second quarter of 2021. The 230 basis point improvement quarter over quarter in gross margin to 36.5% is due to a greater mix of higher margin sales from retail locations and cultivation capacity expansion via Gage operated cultivation assets, contract grow partners and lower input costs from dedicated wholesale partners. The Company anticipates continuing its quarter over quarter margin expansion in Q4 2021 as in-house branded vape cart sales have recently accounted for over 80% of the category month-to-date in November.
Management Commentary
"In the third quarter of 2021, Gage had a record performance across all financial and operating metrics," said Fabian Monaco , CEO of Gage. "We will continue to invest while improving our margins. Moreover, as we further introduce our in-house branded concentrate products, we expect our gross margin to further improve over the next two quarters."
Mr. Monaco continued, "We are very pleased with the announcement of the proposed acquisition of Gage by TerrAscend. Our shared strategic and corporate values make this combination a strong fit, and I am extremely excited and looking forward to executing on our shared strategy of deep vertical integration and scale in our core markets. In addition, I am also very pleased with the closing of our recent debt financing which further strengthens our balance sheet."
Mr. Monaco concluded, "Overall, we will continue to execute on our growth strategy in the remaining months of 2021 and into 2022. With a strong balance sheet, we are well positioned to execute on our near-term acquisition opportunities that will fuel the overall growth of the Company."
Operational Updates and Developments
1. The Company closed on a senior secured term loan (the "Term Loan") for aggregate
gross proceeds of US$55 million
- Gage intends to use the proceeds (i) to finance the Company's retail acquisition strategy in Michigan , (ii) to support the Company's future growth, and (iii) for general working capital purposes.
- The Term Loan bears interest at a per annum rate equal to the greater of 7.00% plus prime rate and 10.25%, payable monthly in arrears, with a maturity date of November 30, 2022 .
2. Gage continues to execute on its retail expansion strategy
- In addition to 10 retail dispensaries in operation today, the Company is in active discussions with multiple retail operators in Michigan to potentially acquire over 10 retail locations in the coming months.
- The Company successfully acquired another dispensary located in Detroit . Moreover, Gage expects to close another proposed acquisition of a dispensary in Sturgis by the end of November. Both dispensaries are expected to be rebranded as Gage and Cookies stores, respectively. The Company now has 17 dispensaries in its portfolio with the inclusion of the Sturgis acquisition.
- The Company's second Kalamazoo dispensary is now fully built and expected to open in December.
3. Introduction of Gage branded concentrate products
- During the fourth quarter, the Company introduced in-house branded vape carts, which on average, are expected to more than double the Company's gross margin in this product category.
- Gage branded vape carts in the month of November thus far account for almost 80% of the category compared to a low single digit percentage in the same period a year ago.
- In the month of November, the Company has been averaging approximately 18,000 Gage vape carts sold per week.
4. Acquisition of Gage by TerrAscend on track to close in early 2022
- On November 12, 2021 , the Company announced that shareholders voted in favor of the special resolution, approving the previously announced plan of arrangement under Section 192 of the Canada Business Corporations Act pursuant to which TerrAscend Corp. ("TerrAscend") will acquire all of the issued and outstanding securities of Gage (the "Arrangement").
- On November 15, 2021 , the Company announced that the Ontario Superior Court of Justice (Commercial List) has issued a final order approving the Arrangement.
Conference Call
The Company will host a conference call on Monday, November 29, 2021 at 8:30 a.m. ET to review its operational and financial results, and provide an update on current business trends.
To join the call, dial 1-833-366-1123 toll free from the United States or Canada or 1-412-317-5786 if dialing from outside those countries.
The call will be available for replay until Monday, December 13, 2021 . To access the telephone replay, dial 1-877-344-7529 toll free from the United States , 1-855-669-9658 from Canada or 1-412-317-0088 if dialing from outside those countries, and use the following replay pin number: 2622301.
Please call the conference telephone number 5-10 minutes prior to the start time.
A live audio webcast of the call will also be available at https://services.choruscall.com/mediaframe/webcast.html?webcastid=PMJIguj7 .
About Gage Growth Corp.
Gage Growth Corp. is innovating and curating the highest quality cannabis experiences possible for cannabis consumers in the state of Michigan and Canada , and bringing internationally renowned brands to market. Through years of progressive industry experience, the firm's founding partners have successfully built and grown operations with federal and state licenses, including cultivation, processing and retail locations. Gage's portfolio includes city and state approvals for 19 "Class C" cultivation licenses, three processing licenses and 17 provisioning centers (dispensaries).
For more information about Gage Growth Corp., visit www.gagecannabis.com .
Instagram: @gagemichigan
Facebook: @gageusa
Twitter: @gagecannabisco
Explanatory Note Regarding the Company's Operations
References in this news release to the Company and its operations and assets are inclusive of the operations and assets of certain licensed cannabis operators that operate under the Gage brand pursuant to contractual arrangements with the Company. For additional information, please refer to the Company's long form prospectus dated March 26, 2021 and other disclosure documents available on the Company's profile at www.sedar.com .
Non-IFRS Financial Measures
The Company has provided certain non-IFRS financial measures including "Gross Margin" and Adjusted EBITDA. These non-IFRS financial measures do not have a standardized definition under IFRS, nor are they calculated or presented in accordance with IFRS and may not be comparable to similar measures presented by other companies. The Company defines "Gross Margin" as Gross Profit before fair value of inventory and biological assets divided by Revenue. The Company calculates Adjusted EBITDA as net income as reported adjusted to exclude the impact of the following items: fair value adjustment of sale of inventory, fair value adjustment on growth of biological assets, provision for income taxes, foreign exchange (gain)loss, change in fair value of investments, interest expense, share based compensation, depreciation and amortization, costs associated with public listing, impairment loss, loss on financial instruments and gain on sale of fixed assets.
The Company has provided these non-IFRS financial measures as supplemental information and in addition to the financial measures that are calculated and presented in accordance with IFRS. The Company believes that these supplemental non-IFRS financial measures provide a valuable additional measure to use when analyzing the operating performance of the business. 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. These supplemental non-IFRS financial measures should not be considered superior to, as a substitute for or as an alternative to, and should only be considered in conjunction with, the IFRS financial measures presented herein.
See the Company's management's discussion and analysis for the three and nine months ended September 30, 2021 (the "Q3 2021 MD&A") for a detailed reconciliation of Adjusted EBITDA to Net Income / (Loss). The Company's financial statements for the three and nine months ended September 30, 2021 and the Q3 2021 MD&A are available on SEDAR at www.sedar.com .
Caution Regarding Cannabis Operations in the United States
Investors should note that there are significant legal restrictions and regulations that govern the cannabis industry in the United States . While legal in certain states, cannabis remains a Schedule I drug under the U.S. Controlled Substances Act, making it illegal under federal law in the United States to, among other things, cultivate, distribute or possess cannabis. Financial transactions involving proceeds generated by, or intended to promote, cannabis-related business activities in the United States may form the basis for prosecution under applicable U.S. federal money laundering legislation.
Cautionary Note Regarding Forward-Looking Information and Statements
This press release contains certain "forward-looking information" within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only Gage's beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of Gage's control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or may contain statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "will continue", "will occur" or "will be achieved". The forward-looking information and forward-looking statements contained herein may include, but are not limited to, statements about the anticipated expansion of the Company's operations and growing capacity in Michigan , the Company's prospects and the cannabis market generally in Michigan , the use of proceeds and the potential benefits of the Term Loan, the completion of the Arrangement and potential benefits thereof, the completion of proposed acquisitions in Michigan , the impact of the Company's in-house branded vape carts on margins in the vape category.
By identifying such information and statements in this manner, Gage is alerting the reader that such information and statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from those expressed or implied by such information and statements. In addition, in connection with the forward-looking information and forward-looking statements contained in this press release, Gage has made certain assumptions. Although Gage believes that the assumptions and factors used in preparing, and the expectations contained in, the forward-looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements. Among others, the key factors that could cause actual results to differ materially from those projected in the forward-looking information and statements are the following: unexpected costs or delays in the completion of the Company's proposed dispensaries and other operations; negative results experienced by the Company as a result of general economic conditions or the ongoing COVID-19 pandemic; delays in the ability of the Company to obtain certain regulatory approvals; unforeseen delays or costs in the completion of the Company's construction projects; adverse changes to demand for cannabis products; ongoing projects by competitors that may impact the relative size of the Company's operations; adverse changes in applicable laws; adverse changes in the application or enforcement of current laws, including those related to taxation; increasing costs of compliance with extensive government regulation; changes in general economic, business and political conditions, including changes in the financial markets; and the other risks disclosed in the Company's long form prospectus dated March 26, 2021 and other disclosure documents available on the Company's profile at www.sedar.com .
The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and Gage does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws.
Third Party Information
This press release includes market and industry data that has been obtained from third party sources, including industry publications. The Company believes that the industry data is accurate and that its estimates and assumptions are reasonable, but there is no assurance as to the accuracy or completeness of this data. Third party sources generally state that the information contained therein has been obtained from sources believed to be reliable, but there is no assurance as to the accuracy or completeness of included information. Although the data is believed to be reliable, the Company has not independently verified any of the data from third party sources referred to in this press release or ascertained the underlying economic assumptions relied upon by such sources.
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