RIV Capital Reports Financial Results for the Fiscal Quarter and Nine-Month Transition Period Ended December 31, 2023
RIV Capital Inc. reported financial results for the fiscal quarter and nine-month transition period ended December 31, 2023. Etain received approval to commence adult-use operations in New York, ending the year with $81.9 million in cash. The net loss was $47.3 million due to a non-cash impairment charge. Etain opened its first co-located dispensary in White Plains, NY. The company's strategic growth committee is focused on expanding its operations. Financially, revenue was $2.1 million for the quarter, with a gross loss of $0.6 million primarily due to an impairment charge of $48.7 million. The total comprehensive loss was $50.3 million for the quarter.
- None.
Net loss of $47.3 million primarily due to a non-cash impairment charge on goodwill and intangible assets
Gross loss of $0.6 million for the quarter
Impairment of goodwill and intangible assets amounting to $48.7 million
Operating loss of $54.7 million
Etain received New York Cannabis Control Board approval to commence adult-use operations in
Ended the year with
Reported net loss of
Subsequent to period end, Etain opened first co-located adult-use and medical dispensary in
Management Commentary
"During the quarter, RIV achieved a crucial milestone thanks to the years of dedicated efforts of the Etain team in a market we consider to be one of the most promising and significant in the country," said Mike Totzke, COO and interim CEO of RIV Capital. "As one of the inaugural legal operators in
Mr. Totzke added, "We started 2024 on the right footing following the launch of Etain's adult-use operations in
Eddie Lucarelli, CFO of RIV Capital, added, "As our adult-use rollout begins in
Strategic and Operational Update
New York Adult-Use Retail
On December 8, 2023, Etain received approval from the New York Cannabis Control Board (the "CCB") for transition to an adult-use operator. Etain's fully integrated license authorizes cultivation, processing, distribution and dispensing of adult-use and medical cannabis products (an "ROD License") in the state.
In connection with this transition, following its fiscal year end, the Company achieved another significant milestone with the opening of Etain's first co-located adult-use and medical dispensary in
Etain's ROD License permits opening two additional co-located adult-use and medical dispensaries in the state later this year, which it plans to do.
Marketing and Product Development
Etain's ROD License also permits wholesaling to other adult-use and medical dispensaries in
The Company is focused on utilizing the full capabilities of its new operational enhancements, technological improvements, and expanded customer base to identify opportunities to further diversify its product and brand portfolio to best serve its wide-ranging spectrum of customers and patients in the state.
Cultivation and Manufacturing Facility Updates
With the recent launch of adult-use operations in
Also, in 2023, Etain received regulatory approval from the Office of Cannabis Management (the "OCM") for its indoor flagship facility site located in Buffalo, for which construction continues to progress. This facility is expected to more than double Etain's current cultivation capacity with the addition of indoor grow rooms specifically dedicated to growing premium flower. Etain will require additional OCM approval before the commencement of commercial operations at the flagship facility in Buffalo.
New York Regulatory Environment
The state has also continued to ramp up enforcement efforts in a bid to combat ongoing issues related to the state's illicit cannabis market. These efforts include authorizing the OCM and authorities from counties and cities, including
The Company commends state officials for their continual effort toward displacing the illicit
Strategic Growth Committee
The Company's Strategic Growth Committee ("SGC") has continued its work to identify opportunities that it believes will best achieve its strategic goals of unlocking the full value of its
Financial Results for the Fiscal Quarter and Nine-Month Transition Period Ended December 31, 2023
The following is a summary of the Company's financial results for three months and nine-month transition period ended December 31, 2023, the three months ended December 31, 2022, and fiscal year ended March 31, 2023.
As noted above, the Company changed its fiscal year end from March 31st to December 31st. Accordingly, the Company is reporting "fiscal year end" results for the nine-month transition period from April 1, 2023, to December 31, 2023, and, as a result, the comparative figures for the prior fiscal year ended March 31, 2023, are not directly comparable. Furthermore, the comparative operating results reported by the Company for the year ended March 31, 2023, include the operating results for Etain from April 22, 2022, to March 31, 2023.
Unless otherwise indicated, all financial highlights summarized in tables in this press release are presented in thousands of dollars, except share and per share amounts. All references to "$" are to
Summary Operating Results | ||||
Three months Dec. 31, 2023 (unaudited) | Three months Dec. 31, 2022 (unaudited) | Nine-month Dec. 31, 2023 (audited) | Fiscal year ended Mar. 31, 2023 (audited) | |
Revenue | $ 5,876 | |||
Excise taxes | (107) | (123) | (328) | (443) |
Total revenue, net | 2,065 | 1,885 | 5,548 | 6,807 |
Cost of goods sold | 1,542 | 1,087 | 4,984 | 4,372 |
Gross profit excluding fair value items | 523 | 798 | 564 | 2,435 |
Unrealized loss on changes in fair value of biological assets | (1,150) | (13) | (739) | (31) |
Realized fair value amounts included in inventory sold | 53 | (2) | 45 | 2 |
Gross profit (loss) | (574) | 783 | (130) | 2,406 |
Selling, general, and administrative expenses | 5,524 | 4,801 | 15,634 | 20,502 |
Impairment of goodwill and intangible assets | 48,650 | - | 48,650 | 138,937 |
Operating loss | (54,748) | (4,018) | (64,414) | (157,033) |
Other loss | (6,784) | (6,305) | (14,858) | (25,142) |
Loss before taxes | (61,532) | (10,323) | (79,272) | (182,175) |
Income tax recovery | (14,216) | (432) | (15,428) | (2,916) |
Net loss | $ (47,316) | |||
Other comprehensive loss not subsequently reclassified to net loss Net change in fair value of financial assets at FVTOCI, net of tax expense or recovery | (2,281) | (3,073) | (2,286) | (2,813) |
Other comprehensive income (loss) subsequently reclassified to net loss Foreign currency translation adjustment | (737) | 299 | (598) | (5,248) |
Total comprehensive loss | $ (50,334) | |||
Net loss per share – basic | ||||
Net loss per share – diluted |
Summary Cash Flows and Financial Position Data | ||
Nine-month Dec. 31, 2023 | Fiscal year Mar. 31, 2023 | |
Net cash flows from operating activities | ||
Net cash flows from investing activities | 17,407 | (234,899) |
Net cash flows from financing activities | (1,831) | 18,892 |
Net increase (decrease) in cash | ||
Effect of foreign exchange rate movements on cash held | 403 | (1,873) |
Cash, beginning of fiscal period(1) | 77,468 | 318,706 |
Cash, end of fiscal period | ||
As at Dec. 31, 2023 | As at Mar. 31, 2023 | |
Current assets | ||
Non-current assets | 120,831 | 149,912 |
Total assets | ||
Current liabilities | ||
Non-current liabilities | 157,353 | 146,143 |
Total liabilities | ||
Total shareholders' equity |
(1) At the beginning of the fiscal period for the nine-month transition period ended December 31, 2023, the Company had |
- Revenue, net of excise taxes, was
for the three months ended December 31, 2023 ("CQ4 2023"), compared to$2.1 million for the three months ended December 31, 2022 ("CQ4 2022"). Retail revenue of$1.9 million was generated from Etain's medical dispensaries in$1.9 million Manhattan ,Kingston ,Syracuse , andYonkers , and wholesale revenue of was generated from sales of Etain-branded products to other medical dispensaries in$0.3 million New York . The Company's reported revenue for CQ4 2023 does not include any contribution from sales to adult-use retail or wholesale customers as the Company did not commence sales in the adult-use market until the first quarter of 2024. - Cost of goods sold (which excludes unrealized fair value changes included in biological assets and realized fair value changes included in inventory sold) was
for CQ4 2023, compared to$1.5 million for CQ4 2022. Cost of goods sold has increased as a percentage of net revenue as the Company has scaled operations at the expanded Chestertown Facility and not yet optimized its productive capacity.$1.1 million - The Company reported an unrealized loss on changes in fair value of biological assets of
for CQ4 2023, compared with a nominal amount for CQ4 2022. During CQ4 2023, Etain reduced its estimated selling price for wholesale bulk flower in its biological assets valuation analysis, which contributed to the unrealized loss described above.$1.2 million - Based on the foregoing, the Company reported a gross loss of
for CQ4 2023, compared to a gross profit of$0.6 million for CQ4 2022.$0.8 million - Selling, general, and administrative ("SG&A") expenses were
for CQ4 2023, compared to$5.5 million in CQ4 2022.$4.8 million - The most significant factor impacting the Company's reported net loss for CQ4 2023 was an impairment charge of
related to the goodwill and intangible assets that the Company had recognized in connection with its acquisition of Etain in 2022. The Company tests its goodwill for impairment annually and when indicators of impairment are present, and tests its finite-life intangible assets for impairment whenever indicators of impairment are present. The impairment charges, which were allocated to goodwill, cannabis license rights, and brands, were primarily driven by a reduction in the Company's projected cash flows for Etain's$48.7 million New York operations due to slower-than-expected market development and illicit market competition, among other factors. Upon the acquisition of Etain, the Company had recognized intangible assets and goodwill of and has since recognized cumulative impairment charges of$250.8 million .$187.6 million - Income tax recovery was
for CQ4 2023, compared with income tax recovery of$14.2 million for CQ4 2022. The income tax recovery for CQ4 2023 was largely driven by the deferred tax impact of the impairment charges.$0.4 million - Based on the foregoing, the Company reported a net loss of
, and a basic and diluted net loss per share of$47.3 million , for CQ4 2023, compared with a net loss of$0.35 , and a basic and diluted net loss per share of$9.9 million , for CQ4 2022. As noted above, the primary factor impacting the net loss for CQ4 2023 was the pre-tax impairment charge on goodwill and intangible assets of$0.06 .$48.7 million - The Company reported other comprehensive loss of
for CQ4 2023, compared with$3.0 million for CQ4 2022. Amounts included in other comprehensive loss generally relate to the Company's legacy portfolio and foreign currency items.$2.8 million - Total comprehensive loss was
for CQ4 2023, compared with$50.3 million for CQ4 2022. As noted above, the primary factor impacting the comprehensive loss for CQ4 2023 was the pre-tax impairment charge of$12.7 million .$48.7 million
An audio-only recording of RIV Capital's conference call will be available on the Company's website at www.rivcapital.com/investors.
This press release should be read in conjunction with the Company's audited consolidated financial statements and management's discussion and analysis ("MD&A") for the three months and nine-month transition period ended December 31, 2023, which are available under the Company's profile on SEDAR+ at www.sedarplus.ca and on the Company's website at www.rivcapital.com/investors.
About RIV Capital
RIV Capital is an acquisition and investment firm with a focus on building a leading multistate platform with one of the strongest portfolios of cannabis brands in key strategic
Forward Looking Statements
This news release contains statements which constitute "forward-looking information" within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of RIV Capital and its portfolio companies with respect to future business activities and operating performance. Forward-looking information is often identified by the words "may", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" or similar expressions and includes information regarding the Company's strategies, objectives, goals, opportunities and plans, including in respect of Etain and its product portfolio; the Company's expectations regarding the proposed regulations for the
Investors are cautioned that forward-looking information is not based on historical fact but instead reflects management's expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although RIV Capital believes that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of RIV Capital or its portfolio companies.
Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: the Company's ability to execute its go-forward strategy; stock market volatility; changes in the business activities, focus and plans of the Company, Etain and the Company's investees and the timing associated therewith; the timing of any changes to federal laws in the
Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although RIV Capital has attempted to identify important risks, uncertainties and factors that could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. RIV Capital does not intend, and does not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.
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SOURCE RIV Capital Inc.
FAQ
What was the net loss reported for the quarter ended December 31, 2023?
Why did the company report a gross loss of $0.6 million?