RIV Capital Reports Fourth Quarter and Fiscal Year 2021 Financial Results
RIV Capital reported a comprehensive income of $67.3 million for fiscal year 2021, driven by a successful transaction with Canopy Growth that brought in $118.4 million in cash and shares. The company shifts focus to the U.S. cannabis market after monetizing key assets, enhancing its financial position. Their net loss for Q4 2021 was $21.5 million, while operating income decreased to $0.7 million. RIV Capital aims for significant future growth despite challenges, such as a anticipated delisting from TSX to pursue U.S. investments.
- Comprehensive income of $67.3 million for FY 2021.
- Successful CGC transaction generated $118.4 million in cash and shares.
- Positioned for strategic pivot to U.S. cannabis market.
- Net loss of $21.5 million for Q4 2021.
- Operating income decreased to $0.7 million.
- Anticipated delisting from TSX may hinder shareholder confidence.
Comprehensive income of
Strong balance sheet following successful monetization of three portfolio assets
Closing of milestone transaction with Canopy Growth positions Company to execute strategic pivot to U.S. cannabis market
Company fully settles obligations pursuant to PharmHouse Credit Facility
TORONTO, June 3, 2021 /PRNewswire/ - RIV Capital Inc. ("RIV Capital" or the "Company") (TSX: RIV) (OTC: CNPOF) today released its financial results for the fourth quarter ("Q4 2021") and fiscal year ended March 31, 2021 ("FY 2021").
"Our quarter and fiscal year were highlighted by the closing of our milestone transaction with Canopy Growth, paving the way for RIV Capital to launch into the U.S. market," said Narbé Alexandrian, President and CEO, RIV Capital. "This transaction returned several multiples on invested capital and provided us with the strategic flexibility needed to pivot our business model. With a revitalized balance sheet and our new strategy in place, we have been actively sourcing opportunities in the world's largest and most exciting cannabis market, and continue to believe that this next chapter will create significant value for our shareholders in the quarters to come."
CGC Transaction
On February 23, 2021, the Company closed its previously-announced milestone transaction with Canopy Growth Corporation ("Canopy Growth"), in which the Company disposed of certain financial assets held in TerrAscend Corp. ("TerrAscend"), TerrAscend Canada Inc. ("TerrAscend Canada"), The Tweed Tree Lot Inc. ("Tweed Tree Lot"), and Les Serres Vert Cannabis Inc. ("Vert Mirabel") in exchange for
The proceeds received from the CGC Transaction represented a substantial return on invested capital for the Company. The total fair value of the consideration received was measured at
As previously communicated, upon completion of the CGC Transaction, RIV Capital formally shifted its strategic focus to pursue potential material investments in, or acquisitions of, operating businesses in the U.S. cannabis market. The Company believes that as a result of the relative size of the addressable market and favourable industry trends, as well as unique current regulatory and capital markets conditions, deploying capital in the U.S. cannabis sector represents the greatest value creation opportunity for its shareholders. As the Company's potential future investments in, or acquisitions of, U.S. cannabis businesses may be inconsistent with the policies of the Toronto Stock Exchange (the "TSX"), the Company anticipates that it will de-list its securities from the TSX and list its securities on a stock exchange that does not prohibit such investments or acquisitions. The Company expects to provide an update on the de-listing in due course.
Since the announcement of the CGC Transaction in December 2020, the Company has aimed to maximize its available cash on hand in order to enhance its relative advantage in pursuing potential opportunities in the U.S. cannabis market, where access to capital continues to be constrained relative to more mature sectors with fewer regulatory obstacles. Accordingly, during Q4 2021, the Company commenced the process of divesting the Canopy Growth shares received as consideration in the CGC Transaction. As of the date of this press release, the Company has sold all 3.65 million Canopy Growth shares for net proceeds of approximately
Q4 2021 Financial Results[1]
1 The financial highlights in this summary are presented in CA$ thousands, unless otherwise noted. |
Select Summary of Quarterly Results | Three months | Three months |
31-Mar-21 | 31-Mar-20 | |
Operating income (before equity method investees and fair value changes) | $ 748 | $ 2,589 |
Operating expenses | 7,890 | 3,484 |
Net operating loss (before equity method investees and fair value changes) | (7,142) | (895) |
Equity method investees and fair value changes(1) | (19,857) | (29,656) |
Other PharmHouse-related charges | 2,800 | (1,015) |
Net operating loss | (24,199) | (31,566) |
Net loss | (21,478) | (30,515) |
Other comprehensive income (loss) (net of tax) | 86,324 | (6,280) |
Total comprehensive income (loss) | 64,846 | (36,795) |
Basic earnings (loss) per share ("EPS") | $ (0.13) | $ (0.16) |
Diluted EPS | $ (0.13) | $ (0.16) |
Cash flows used in operating activities | (5,278) | (686) |
Cash flows provided by (used in) investing activities | 94,142 | (2,335) |
Cash flows provided by financing activities | 1,023 | 67 |
Twelve | Twelve | |
31-Mar-21 | 31-Mar-20 | |
Operating income (before equity method investees and fair value changes) | $ 618 | $ 11,922 |
Operating expenses | 15,505 | 19,303 |
Net operating loss (before equity method investees and fair value changes) | (14,887) | (7,381) |
Equity method investees and fair value changes(1) | (16,874) | (32,323) |
Other PharmHouse-related charges | (118,681) | (2,253) |
Net operating loss | (150,442) | (41,957) |
Net loss | (133,880) | (40,566) |
Other comprehensive income (loss) (net of tax) | 201,201 | (77,560) |
Total comprehensive income (loss) | 67,321 | (118,126) |
Basic EPS | $ (0.72) | $ (0.22) |
Diluted EPS | $ (0.72) | $ (0.22) |
Cash flows used in operating activities | (8,093) | (7,666) |
Cash flows provided by (used in) investing activities | 88,232 | (50,755) |
Cash flows provided by financing activities | 1,019 | 962 |
(1) Excludes the Company's share of loss on its investment in PharmHouse common shares, which is reflected in "PharmHouse-related charges" |
"Throughout the fourth quarter, we maintained a dual focus on successfully closing our milestone transaction with Canopy Growth, while managing our liability exposure on PharmHouse," said Eddie Lucarelli, Chief Financial Officer, RIV Capital. "With the CGC Transaction complete and the PharmHouse Credit Facility fully settled, our rejuvenated balance sheet puts us in an advantageous position to capitalize on the growing momentum in the U.S. cannabis market."
Operating Income and Expenses
Three months | Three months | |
31-Mar-21 | 31-Mar-20 | |
Royalty, interest, and lease income (before provisions) | $ 844 | $ 2,858 |
Provision for credit losses on interest and royalty receivables | ||
PharmHouse | - | - |
Other | (96) | (269) |
Operating income | $ 748 | $ 2,589 |
General and administrative expenses | $ 1,972 | $ 1,330 |
Consulting and professional fees | 685 | 866 |
Share-based compensation | 500 | 1,246 |
Depreciation and amortization expense | 46 | 42 |
Restructuring costs | 4,687 | - |
Operating expenses | $ 7,890 | $ 3,484 |
Net operating loss | $ (7,142) | $ (895) |
Twelve | Twelve | |
31-Mar-21 | 31-Mar-20 | |
Royalty, interest, and lease income (before provisions) | $ 13,430 | $ 12,191 |
Provision for credit losses on interest and royalty receivables | ||
PharmHouse | (8,939) | - |
Other | (3,873) | (269) |
Operating income | $ 618 | $ 11,922 |
General and administrative expenses | $ 5,582 | $ 6,630 |
Consulting and professional fees | 1,853 | 3,470 |
Share-based compensation | 934 | 9,033 |
Depreciation and amortization expense | 183 | 170 |
Restructuring costs | 6,953 | - |
Operating expenses | $ 15,505 | $ 19,303 |
Net operating loss | $ (14,887) | $ (7,381) |
The Company reported operating income (before equity method investees and fair value changes) of
Operating expenses were
Equity Method Investees and Fair Value Changes
Three months | Three months | |
31-Mar-21 | 31-Mar-20 | |
Share of loss from equity method investees | ||
PharmHouse | $ - | $ (1,015) |
Other | (47) | (2,183) |
Impairment of equity method investees | - | (11,162) |
Net change in fair value of financial assets at FVTPL | (19,810) | (16,311) |
Other PharmHouse-related charges | ||
Provision for credit losses on loans receivable | (1,700) | - |
Provision for credit losses on financial guarantee liability | 4,500 | - |
Equity method investees and fair value changes | $ (17,057) | $ (30,671) |
Twelve | Twelve | |
31-Mar-21 | 31-Mar-20 | |
Share of loss from equity method investees | ||
PharmHouse | $ (37,025) | $ (2,253) |
Other | (892) | (3,902) |
Impairment of equity method investees | - | (11,162) |
Net change in fair value of financial assets at FVTPL | (16,444) | (17,259) |
Other PharmHouse-related charges | ||
Provision for credit losses on loans receivable | (53,656) | - |
Provision for credit losses on financial guarantee liability | (28,000) | - |
Gain on disposition of equity method investee | 462 | - |
Equity method investees and fair value changes | $ (135,555) | $ (34,576) |
The Company's share of loss from equity method investees was nominal for the quarter, compared to
The Company also reported a net decrease in the fair value of financial assets that are reported at fair value through profit or loss ("FVTPL") of
Net Change in Fair Value of Financial Assets at FVTOCI
Three months | Three months | |
31-Mar-21 | 31-Mar-20 | |
TerrAscend | $ 109,412 | $ (5,500) |
Vert Mirabel | (7,629) | (88) |
Nova Cannabis | 468 | (272) |
Headset | - | 415 |
Zeakal | (100) | 1,214 |
BioLumic | (100) | - |
Other | - | (2,862) |
Gross change in fair value of financial assets at FVTOCI | $ 102,051 | $ (7,093) |
OCI income tax expense (recovery) | 15,727 | (609) |
Net change in fair value of financial assets at FVTOCI(1) | $ 86,324 | $ (6,484) |
Twelve | Twelve | |
31-Mar-21 | 31-Mar-20 | |
TerrAscend | $ 247,912 | $ (56,500) |
Vert Mirabel | (11,029) | (14,586) |
Nova Cannabis | 195 | (2,721) |
Headset | (500) | 297 |
Zeakal | (1,600) | 713 |
BioLumic | (139) | - |
Dynaleo | 835 | - |
Other | (976) | (14,823) |
Gross change in fair value of financial assets at FVTOCI | $ 234,698 | $ (87,620) |
OCI income tax expense (recovery) | 33,475 | (9,959) |
Net change in fair value of financial assets at FVTOCI(1) | $ 201,223 | $ (77,661) |
(1) In addition to the fair value change noted above, net change in fair value of financial assets at FVTOCI also includes FX gains/losses related to equity method investees denominated in USD currency |
The Company reported total comprehensive income of
Financial Position
As at | As at | |
Period ended | 31-Mar-21 | 31-Mar-20 |
Cash | $ 127,882 | $ 46,724 |
Loans receivable | - | 42,450 |
Equity method investees | 7,366 | 50,543 |
Financial assets at FVTPL | 164,030 | 80,170 |
Financial assets at FVTOCI | 23,218 | 64,599 |
Other assets | 12,866 | 15,899 |
Total assets | $ 335,362 | $ 300,385 |
Financial guarantee liability | $ 3,000 | $ - |
Other liabilities | 20,902 | 2,107 |
Total shareholders' equity | 311,460 | 298,278 |
Total liabilities and shareholders' equity | $ 335,362 | $ 300,385 |
PharmHouse Update
On March 3, 2021, the Company announced that PharmHouse had entered into an asset purchase agreement to sell its greenhouse facility and certain equipment located at the facility (the "PharmHouse Sale"). Upon approval of the PharmHouse Sale by the Ontario Superior Court of Justice, the Company made a payment of
As at March 31, 2021, the Company revised its estimated liability in respect of the PharmHouse Guarantee. The Company considered the total of: i) the net proceeds expected to be received pursuant to the PharmHouse Sale; and ii) the projected cash available for distribution upon termination of PharmHouse's proceedings under the Companies' Creditors Arrangement Act ("CCAA"), and compared this total to the principal amount then-outstanding on the PharmHouse Credit Facility of
Subsequent to the quarter, the PharmHouse Sale closed, and PharmHouse used the net proceeds received from the PharmHouse Sale to reduce the amount owing under the PharmHouse Credit Facility. Concurrently, the Company made a
As previously disclosed, the Company received a new statement of claim (the "Revised Claim") on February 10, 2021, filed by the PharmHouse majority shareholder concerning certain disputes relating to PharmHouse. The Revised Claim is substantially similar to a claim previously filed in September 2020, which was subsequently discontinued. As with the previously filed statement of claim, the Company views the Revised Claim as it relates to its actions to be completely without merit and intends to vigorously defend its position at the appropriate time and in the appropriate forum.
Q4 2021 Portfolio Updates
The following represents a brief summary of other developments in the RIV Capital portfolio during and subsequent to Q4 2021:
- Subsequent to the quarter, Headset Inc. ("Headset") launched its Insights Premium platform in Pennsylvania, marking the first time a full market read of consumer insights has been available for the state. As part of this launch, Headset noted that Pennsylvania's medical-only market brought in approximately
$909.0 million between April 2020 and March 2021. Headset also released several reports highlighting trends and growth in the broader U.S. market. In April, it projected that cannabis sales in the U.S. will reach approximately$23.0 billion in 2022. - YSS Corp. announced that it entered into a business combination agreement with Alcanna Inc. to form Nova Cannabis Inc (TSXV: NOVC) ("Nova"). This transaction also closed during the quarter. Subsequent to the quarter, the Company sold all of its common shares in Nova for net proceeds of approximately
$1.4 million . - Subsequent to the quarter, the Company closed an agreement with Tweed Tree Lot to sell a property located in Fredericton, New Brunswick in exchange for a cash payment of
$4.0 million . The Company had previously leased the property to Tweed Tree Lot. - High Beauty launched the High & Bye CBG Collection, a collaboration with Lygos, Inc. High Beauty also announced that its products are now available in Cult Beauty in the United Kingdom and GlossWire. High Beauty's products are now available at 42 retailers worldwide, accounting for 2,340 stores in the U.S., Canada, Hong Kong, United Arab Emirates, and the European Union.
- Subsequent to the quarter, ZeaKal announced that its PhotoSeed™ technology is the first plant trait proven to enhance the oil profile of hemp. According to ZeaKal's analytical chemistry data, PhotoSeed increased oil composition in hemp biomass by up to
50% relative to controls, comprising up to8% of the plant's dry weight. - Greenhouse Juice announced that it is now a Certified B Corporation, reflecting its consideration for all stakeholders and the environment in its business practices. Greenhouse Juice also began distributing its products to Health Planet in Ontario, and Thrifty Foods and Costco in British Columbia.
- Dynaleo launched two brands: Sunshower and DYNATHRIVE CBD. Both brands are available in British Columbia, Saskatchewan, Alberta, and Ontario. Subsequent to the quarter, Dynaleo completed a
$9.7 million oversubscribed equity financing.
This press release should be read in conjunction with the Company's audited consolidated financial statements and management's discussion & analysis ("MD&A") for the three and twelve months ended March 31, 2021, which are available under the Company's profile on SEDAR at www.sedar.com and on the Company's website at www.rivcapital.com/investors. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.
For more information regarding the Company and its portfolio companies, please refer to the MD&A and the Company's annual information form dated June 2, 2020 ("AIF"), also available under the Company's profile on SEDAR at www.sedar.com and on the Company's website at www.rivcapital.com/investors.
About RIV Capital
RIV Capital is an investment and acquisition company specializing in cannabis with a portfolio of 12 companies across various segments of the cannabis value chain. We believe that bringing together people, capital, and ideas raises the potential of the entire cannabis industry. By leveraging our industry insights, in-house expertise, and thesis-driven approach to investing, we aim to provide shareholders with exposure to specialized and disruptive cannabis companies.
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 plans, strategies, and objectives of the Company regarding investment and acquisition opportunities in the U.S, and the Company's ability to enter and participate in such opportunities, the impact of U.S. legislative changes related to cannabis on the ability of the Company to invest in the U.S., and the potential de-listing of the Company's securities from the TSX and the subsequent listing of its securities on a stock exchange that does not prohibit investments or acquisitions of companies with business activities related to cannabis operations in the U.S.
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: compliance with laws; risks related to the U.S. cannabis industry; regulatory and licensing risks; changes in cannabis industry growth and trends; changes in general economic, business and political conditions, including changes in the financial markets; the global regulatory landscape and enforcement related to cannabis, including political risks and risks relating to regulatory change; risks relating to anti-money laundering laws; compliance with extensive government regulation, including RIV Capital's interpretation of such regulation; public opinion and perception of the cannabis industry; divestiture risks; and the risk factors set out in RIV Capital's annual information form for the year ended March 31, 2020 and in RIV Capital's management information circular dated January 15, 2021 in connection with the CGC Transaction, each of which has been filed with the Canadian securities regulators and are available on RIV Capital's profile on SEDAR at www.sedar.com.
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.
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