EDMONTON, ALBERTA, November 10, 2021 – Nova Cannabis Inc. (TSX: NOVC) today released its unaudited condensed interim consolidated financial statements and management’s discussion and analysis for the three and nine months ended September 30, 2021. “Since our last quarterly report, we have been aggressively expanding our footprint adding stores at an average pace of one per week and now have 71 stores opened across Alberta and Ontario,” said Darren Karasiuk, CEO of Nova.
“The rate of our sales growth shows that our Value Buds format is resonating with consumers and capturing market share, and our operating performance in the third quarter demonstrates the Company’s progress toward its scaled financial model.”
FINANCIAL AND OPERATING HIGHLIGHTS
• Sales of $38.7 million, a 141.9% increase from the third quarter of 2020, and a 30.2% increase from the second quarter of 2021
• Gross profit of $6.5 million, or 16.9% of sales, a 21.8% increase from the third quarter of 2020 and a 26.0% increase from the second quarter of 2021
• Generated positive operating profit (pre-IFRS 16 adjustments) and cash flow across the portfolio of operating stores before pre-opening and other head office expenses
• Opened eleven (11) new Value Buds stores: six (6) in Ontario and five (5) in Alberta, approximately one per week since the release of our Q2 2021 financial results
• Nova now has seventy-one (71) stores operating and a pipeline of organic opportunities under development or active negotiation, the majority of which are in Ontario
The Company continues to be on track toward its objective of two hundred (200) stores in 2023. All but three (3) Alberta stores with the Nova banner remain and the Company expects them to be converted to Value Buds in Q4 2021. Management believes the Company’s current operating performance points to its growth and progress towards a profitable financial model at scale: • Nova’s total store count now sits at seventy-one (71) and the Company’s revenue continues to grow with the Value Buds stores generating $3 million in annual run rate sales1 on average across the portfolio, inclusive of stores only recently opened or converted. Improved operating leverage across the store portfolio as variable costs such as labour and store operating expenses declined as a percentage of sales from the second quarter of 2021 to the third quarter of 2021. • Fixed operating expenses, including head office costs, remained stable and consistent from Q2 2021 to Q3 2021.
FORWARD LOOKING STATEMENTS
This news release contains forward-looking statements or information (collectively “forwardlooking statements”) within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as “continue”, “anticipate”, “will”, “should”, “plan”, “intention”, and similar words suggesting future events or future performance. All statements and information other than statements of historical fact contained in this news release are forwardlooking statements. In particular, this news release contains forward-looking statements pertaining to: Nova’s average sales on an annual run-rate basis; Nova’s retail cannabis business strategy, including organic growth and strategic acquisitions; Nova’s discount pricing model; the conversion of Nova Cannabis stores to the Value Buds banner and the timing thereof; the Company’s objectives, including planned construction of new stores and target of two hundred (200) stores by 2023, timing of new store openings, evaluation of potential sites and sales growth, particularly in the Value Buds banner; the profitability of Nova’s financial model; and Nova’s gross margin as a percentage of sales and sales forecast for the balance of 2021. With respect to forward-looking statements contained in this news release, the Company has made assumptions regarding, among other things: the Company’s ability to identify locations for, construct and open new stores and the costs related thereto; the availability of hardware and equipment for those stores; government regulation and applicable laws will not change in a manner adverse to the Company; receipt of necessary regulatory approvals to open new stores; the Company’s ability to obtain leases for new sites and attract the necessary personnel to operate new stores; the cost of converting existing stores to the Value Buds banner; demand for the products the Company sells; other factors that will drive sales growth in the Value Buds banner; availability of acquisition opportunities; sustainability of competitors’ businesses and competition in the retail cannabis industry, including from the illicit cannabis market; consumer demands; and factors that influence consumer behavior. Although the Company believes that the expectations reflected in the forward-looking statements, and the assumptions on which such forward-looking statements are made, are reasonable, especially given the unprecedented uncertainty of the full extent and impact of COVID-19, there can be no assurance that such expectations and assumptions will prove to be correct. Readers should not place undue reliance on forward-looking statements included in this news release. Forwardlooking statements are not guarantees of future performance and involve a number of risks and uncertainties that may cause actual performance and financial results to differ materially from any estimates, forecasts or projections. These risks and uncertainties include, among other things, the duration and severity of the COVID-19 pandemic on the business, operations and financial condition of the Company; the risk that Nova will be unable to execute its strategic plan and growth strategy, as planned without significant adverse impacts from various factors beyond its control; dependence on suppliers; potential delays or changes in plans with respect to capital expenditures and the availability of capital on acceptable terms; risks inherent in the retail cannabis industry; competition for, among other things, customers, supply, capital and skilled personnel; changes in labour costs and markets; incorrect assessments of the value of acquisitions; general economic and political conditions in Canada (including Alberta and Ontario), and globally; industry conditions, including changes in government regulations; fluctuations in foreign exchange or interest rates; unanticipated operating events; failure to obtain regulatory and third-party consents and approvals when required; changes in tax and other laws that affect us and our shareholders; the potential failure of counterparties to honour their contractual obligations; stock market volatility; and the other factors described in the Company’s public filings available at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive. The forward-looking statements contained in this news release are made as of the date hereof. Except as expressly required by applicable securities legislation, Nova does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
(This information is primarily sourced from NOVA. Highly Capitalized has neither approved nor disapproved the contents of this news release. Read our Disclaimer here).