TerrAscend Reports Fourth Quarter and Full Year 2023 Financial Results

Rhea-AI Summary

TerrAscend Corp. reports a record Net Revenue of $317.3 million in 2023, marking a 28.0% increase year-over-year. The company also achieved a Gross Profit margin of 50.3%, showing a 930 basis-point improvement. Adjusted EBITDA from continuing operations reached $68.8 million, up by 77.1% year-over-year. TerrAscend delivered its first full year of positive Cash Flow and Free Cash Flow.

Positive

• Record Net Revenue of $317.3 million in 2023, a 28.0% increase year-over-year
• Gross Profit margin of 50.3%, a 930 basis-point improvement
• Adjusted EBITDA from continuing operations at $68.8 million, up by 77.1% year-over-year
• First full year of positive Cash Flow and Free Cash Flow

Negative

• None.

Full year 2023 record Net Revenue of $317.3 million, an increase of 28.0% year-over-year

Full year 2023 Gross Profit margin of 50.3%, a 930 basis-point improvement year-over-year

Full year 2023 Adjusted EBITDA from continuing operations¹ of $68.8 million, an increase of 77.1% year-over-year

Delivered first full year of both positive Cash Flow from continuing operations and Free Cash Flow²

TORONTO, March 14, 2024 (GLOBE NEWSWIRE) -- TerrAscend Corp. (“TerrAscend” or the “Company”) (TSX: TSND, OTCQX: TSNDF), a leading North American cannabis company, today reported its financial results for the fourth quarter and full year ended December 31, 2023. All amounts are expressed in U.S. dollars and are prepared under U.S. Generally Accepted Accounting Principles (GAAP), unless indicated otherwise.

The following financial measures are reported as results from continuing operations due to the shutdown of the licensed producer business in Canada, which is reported as discontinued operations through September 30, 2023. All historical periods have been restated accordingly.

Fourth Quarter 2023 Financial Highlights

• Net Revenue was $86.6 million, an increase of 25.5% year-over-year.
• Gross Profit Margin was 48.2%, compared to 44.6% in Q4 2022.
• GAAP Net loss from continuing operations was $41.8 million, inclusive of $57.7 million of non-cash impairment charges, compared to a net loss of $2.0 million in Q4 2022. The non-cash impairment charges were recorded against goodwill and intangibles for the Company’s Michigan and California businesses.
• EBITDA from continuing operations¹ was ($36.7) million, including the aforementioned non-cash impairment charges of $57.7 million, compared to $30.0 million in Q4 2022.
• Adjusted EBITDA from continuing operations¹ was $19.6 million, an increase of 60.7% year-over-year.
• Adjusted EBITDA Margin from continuing operations¹ was 22.7%, compared to 17.7% in Q4 2022.
• Cash flow provided by continuing operations was $9.4 million compared to $7.3 million in Q4 2022.
• Free Cash Flow² was $7.9 million compared to $3.9 million in Q4 2022.

Full Year 2023 Financial Highlights

• Net Revenue was $317.3 million, an increase of 28.0% year-over-year.
• Gross Profit Margin was 50.3% compared to 41.0% in 2022.
• GAAP Net Loss from continuing operations was $82.3 million, inclusive of $58.0 million of non-cash impairment charges, compared to a net loss from continuing operations of $299.4 million in 2022, inclusive of $311.1 million of non-cash impairment charges. The non-cash impairment charges were recorded against goodwill and intangibles for the Company's Michigan and California businesses.
• EBITDA from continuing operations¹ was ($3.3) million, compared to ($248.5) million in 2022, including the aforementioned non-cash impairment charges of $58.0 million in 2023 and $311.1 million in 2022.
• Adjusted EBITDA from continuing operations¹ was $68.8 million, an increase of 77.1% year-over-year.
• Adjusted EBITDA Margin from continuing operations¹ was 21.7% compared to 15.7% in 2022.
• Cash flow provided by (used in) continuing operations was $31.1 million compared to ($21.8) million in 2022.
• Free Cash Flow² was $23.4 million compared to ($61.5) million in 2022.

“We made substantial progress in 2023 across virtually all facets of our business, including significantly improving our margins, transforming our balance sheet, materially lowering our interest expense, and delivering positive free cash flow, all while driving industry leading revenue growth of 28%. I am extremely pleased that, for the first time in our history, we generated positive cash flow for a full year, with $31.1 million in cash flow from continuing operations and $23.4 million in free cash flow,” stated Jason Wild, Executive Chairman of TerrAscend. “We have the right team, high-performing assets, strong operating results and cash flow, and ample greenfield opportunities to pursue additional growth. 2023 was about operational excellence and strengthening the foundation. 2024 is about expansion by capitalizing on the current environment and entering into attractive states on accretive terms which would not have been possible two years ago.”

Financial Summary Q4 2023, Full Year 2023 and Comparative Periods
All figures are restated for the Canadian business recorded as discontinued operations through Q4 2023.

(in millions of U.S. Dollars)	Q4 2023				Q4 2022				2023				2022
Revenue, net		86.6				69.0				317.3				247.8
Year-over-Year increase		25.5	%			50.3	%			28.0	%			27.6	%
Gross profit		41.8				30.8				159.7				101.5
Gross profit margin		48.2	%			44.6	%			50.3	%			41.0	%
General & Administrative expenses		27.7				34.5				115.2				115.6
Share-based compensation expense (included in G&A expenses above)		2.2				1.6				7.7				12.2
G&A as a % of revenue, net		32.0	%			50.0	%			36.3	%			46.6	%
Net loss from continuing operations		(41.8	)			(2.0	)			(82.3	)			(299.4	)
EBITDA from continuing operations		(36.7	)			30.0				(3.3	)			(248.5	)
Adjusted EBITDA from continuing operations1		19.6				12.2				68.8				38.8
Adjusted EBITDA Margin from continuing operations1		22.7	%			17.7	%			21.7	%			15.7	%
Net cash provided by (used in) operations- continuing operations		9.4				7.3				31.1				(21.8	)
Free Cash Flow2		7.9				3.9				23.4				(61.5	)

1. Adjusted EBITDA from continuing operations and Adjusted EBITDA Margin from continuing operations are non-GAAP measures. Please see discussion of non-GAAP measures and reconciliation to Net Income (Loss) for Adjusted EBITDA from continuing operations and Net Revenue for Adjusted EBITDA Margin from continuing operations, the closest comparable GAAP measures, at the end of this press release.
2. Free Cash Flow is non-GAAP measure defined in the section titled “Definition and Reconciliation of Non-GAAP Measures” below and is reconciled to net cash provided by operating activities, the closest respective GAAP measure, at the end of this release.

2023 Business and Operational Highlights

• First full year of positive cash flow provided by continuing operations and positive Free Cash Flow in the Company’s history.
• In March 2023, promoted Ziad Ghanem to the role of Chief Executive Officer.
• Closed on Private Placements totaling $21.0 million, enabling qualification for Toronto Stock Exchange (“TSX”) listing.
• Completed sale of Mississauga facility in Canada for CAD $19.7 million.
• Closed on a $25.0 million commercial loan with Stearns Bank carrying an interest rate of prime plus 2.25%, equivalent to 10.5%, with proceeds used to pay down higher interest debt.
• Paid down $43.0 million of Ilera senior secured term loan.
• Closed on the acquisition of four high-performing retail dispensaries in Maryland.
• Commenced adult-use sales in Maryland with the maximum four retail dispensaries permitted and a state-of-the-art cultivation and manufacturing facility.
• Commenced trading on the TSX under the symbol ‘TSND’ on July 4, 2023.
• Introduced Wana infused gummies in New Jersey and Maryland.
• Successfully launched both Kind Tree and Legend in Michigan, as well as Legend and Valhalla in Pennsylvania.
• Scaled up production of non-flower THC SKUs at Hagerstown, Maryland facility.
• Opened 18^th and 19^th Michigan retail locations.
• Awarded Maryland “Best Retail Expansion Strategy” by Benzinga.
• Provided foundational support to the David Boies lawsuit filed against the U.S. Attorney General, seeking equal treatment for cannabis businesses.
  

Subsequent Events

• Paid down additional $9.8 million of debt.
• Acquired the remaining 50.1% equity in State Flower, a California cultivator, and three Apothecarium dispensaries in California, all of which were already previously consolidated into financial results.
• Expanded Valhalla product lineup to include one of the first 100mg edibles in Pennsylvania.
  

Fourth Quarter 2023 Financial Results
Net revenue for the fourth quarter of 2023 was $86.6 million as compared to $69.0 million for the fourth quarter of 2022, representing year-over-year growth of 25.5%. The 25.5% year-over-year growth was driven by the acquisition of four dispensaries and commencement of adult-use sales in Maryland, and a more than doubling of the Company’s wholesale business in New Jersey, partially offset by retail declines in New Jersey and Michigan.

Gross profit margin for the fourth quarter of 2023 was 48.2% as compared to 44.6% in the fourth quarter of 2022. The year-over-year improvement of 360 basis points was driven by yield improvements in New Jersey, margin optimization in Michigan, and the acquisition of four dispensaries and commencement of adult-use sales in Maryland. In the fourth quarter, gross margin in Maryland declined compared to the previous quarter, resulting from an equipment malfunction which led to a crop failure at its Maryland facility. The product output from that incident led to higher discounting in the quarter. Maryland gross margins in the quarter were also impacted by temporary under absorption of fixed costs in non-flower production due to scale up in this area. The Company is increasing output of non-flower product to meet its growing wholesale business and increase verticality in its four dispensaries. The increased output is expected to partially improve gross margin in Q1 and more fully absorb fixed costs into Q2.

General & Administrative expenses (G&A) for the fourth quarter of 2023 were $27.7 million as compared to $34.5 million in the fourth quarter of 2022. G&A expenses, excluding stock-based compensation, were $25.4 million compared to $32.9 million in the fourth quarter of 2022. G&A as a percent of revenue, excluding stock-based compensation, was 29.4% in the fourth quarter, achieving the Company’s stated goal of 30%, compared to 47.6% in the fourth quarter of 2022. The fourth quarter of 2022 included a $10.0 million reserve for bad debt related to one customer in Michigan.  

GAAP Net loss from continuing operations was $41.8 million, inclusive of $57.7 million of non-cash impairment charges, compared to a net loss of $2.0 million in Q4 2022. The non-cash impairment charges were recorded against goodwill and intangibles for the Company’s Michigan and California businesses.

Adjusted EBITDA from continuing operations, a non-GAAP measure, was $19.6 million, representing a 22.7% Adjusted EBITDA margin, as compared to $12.2 million and 17.7% in Q4 2022. The year-over-year improvement of 490 basis points was driven by gross margin expansion and G&A expense leverage.

Full Year 2023 Financial Results 
Net revenue for the full year 2023 totaled $317.3 million, as compared to $247.8 million for 2022, an increase of 28.0%, primarily driven by adult-use sales in New Jersey, the acquisition of four retail dispensaries in Maryland, the commencement of adult-use sales in Maryland, and growth in retail sales in Michigan.

Gross profit margin was 50.3% compared to 41.0% for the full year 2022. The increase was driven by adult-use sales and yield improvements in New Jersey, adult-use sales and the acquisition of four retail dispensaries in Maryland, various margin optimization efforts in Michigan, and cost optimizations in Pennsylvania.  

While revenue grew 28.0%, General & Administrative expenses (G&A) declined year-over-year. G&A expenses were $115.2 million, as compared to $115.6 million in 2022. G&A as a percent of revenue was 36.3% as compared to 46.6% in 2022. This 1,030 basis points of reduction as a percentage of revenue was driven by the growth in sales and the Company’s across the board efforts to optimize its costs and drive positive cash flow. Also, the fourth quarter of 2022 included a $10.0 million reserve for bad debt related to one customer in Michigan.

GAAP Net Loss from continuing operations was $82.3 million, inclusive of $58.0 million of non-cash impairment charges, compared to a net loss of $299.4 million in 2022, inclusive of $311.1 million of non-cash impairment charges. The non-cash impairment charges were recorded against goodwill and intangibles for the Company's Michigan and California businesses.

Adjusted EBITDA from continuing operations, a non-GAAP measure, was $68.8 million as compared to $38.8 million in 2022 resulting in an increase of 77.1% year-over-year. The year-over-year increase in Adjusted EBITDA from continuing operations was driven by the growth in revenue of 28.0% year-over-year, and improvements in gross margin. Adjusted EBITDA margin from continuing operations was 21.7% as compared to 15.7% in 2022, an improvement of 600 basis points year-over-year. The year-over-year improvement was driven by the improvements in gross margin and optimizations of G&A.  

Balance Sheet and Cash Flow
Cash and cash equivalents, including restricted cash, were $25.3 million as of December 31, 2023, compared to $26.8 million as of December 31, 2022. Net cash provided by operating activities was $9.4 million for the fourth quarter of 2023 compared to $7.3 million in the fourth quarter of 2022. This represented the Company’s sixth consecutive quarter of positive cash flow from continuing operations. Capex spending was $1.5 million in the fourth quarter of 2023 related to the Company’s Hagerstown, Maryland expansion. Free cash flow was $7.9 million compared to $3.9 million in the fourth quarter of 2022. During the quarter, payments were made related to $4.1 million of debt paydown and $4.7 million of cash distributions to the Company’s New Jersey partners.  

After initiating a comprehensive evaluation in early 2023, and based on legal interpretations, the Company has changed its tax position to challenge its tax liability under Internal Revenue Code - Section 280E. This has resulted in the reclassification of $59.2 million of tax liabilities, as of December 31, 2023, to long term liabilities and an uncertain tax position on the balance sheet. The Company will be filing amended returns for calendar years 2020, 2021 and 2022 and expects to receive refunds of approximately $26 million of federal and state refunds related to 2020 and 2021. The current income tax liability on December 31, 2023 was $4.8 million and the Company plans to make payments as an ordinary taxpayer going forward.

As of March 13, 2024, there were 367 million basic shares outstanding including 291 million common shares, 13 million preferred shares as converted, and 63 million exchangeable shares. Additionally, there are 42 million warrants and options outstanding at a weighted average price of $3.91.

Conference Call
TerrAscend will host a conference call today, March 14, 2024, to discuss these results. Jason Wild, Executive Chairman, Ziad Ghanem, President and Chief Operating Officer, and Keith Stauffer, Chief Financial Officer, will host the call starting at 5:00 p.m. Eastern time. A question-and-answer session will follow management's presentation.

Date:	Thursday, March 14, 2024
Time:	5:00 p.m. Eastern Time
Webcast:	https://ir.terrascend.com/news-events/ir-calendar
Dial-in Number:	1-888-664-6392
Replay:	416-764-8677 or 1-888-390-0541 Available until 12:00 midnight Eastern Time Thursday, March 28, 2024 Replay Entry Code: 119971#

Financial results and analyses are available on the Company’s website (www.terrascend.com) and SEDAR+ (www.sedarplus.ca).

The Toronto Stock Exchange (“TSX”) has neither approved nor disapproved the contents of this news release. Neither the TSX nor any securities regulator accepts responsibility for the adequacy or accuracy of this release.

About TerrAscend
TerrAscend is a leading TSX-listed cannabis company with interests across the North American cannabis sector, including vertically integrated operations in Pennsylvania, New Jersey, Maryland, Michigan, and California through TerrAscend Growth Corp. and retail operations in Canada through TerrAscend Canada, Inc. (“TerrAscend”). TerrAscend operates The Apothecarium, Gage, and other dispensary retail locations, as well as scaled cultivation, processing, and manufacturing facilities in its core markets. TerrAscend’s cultivation and manufacturing practices yield consistent, high-quality cannabis, providing industry-leading product selection to both the medical and legal adult-use markets. The Company owns or licenses several synergistic businesses and brands including Gage Cannabis, The Apothecarium, Cookies, Lemonnade, Ilera Healthcare, Kind Tree, Legend, State Flower, Wana, and Valhalla Confections. For more information visit www.terrascend.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. Cannabis remains a Schedule I drug under the US Controlled Substances Act, making it illegal under federal law in the United States to, among other things, cultivate, distribute, or possess cannabis in the United States. 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 US federal money laundering legislation.

While the approach to enforcement of such laws by the federal government in the United States has trended toward non-enforcement against individuals and businesses that comply with medical or adult-use cannabis programs in states where such programs are legal, strict compliance with state laws with respect to cannabis will neither absolve TerrAscend of liability under U.S. federal law, nor will it provide a defense to any federal proceeding which may be brought against TerrAscend. The enforcement of federal laws in the United States is a significant risk to the business of TerrAscend and any proceedings brought against TerrAscend thereunder may adversely affect TerrAscend's operations and financial performance.

Forward Looking Information
This news release contains “forward-looking information” within the meaning of applicable securities laws. Forward-looking information contained in this press release may be identified by the use of words such as, “may”, “would”, “could”, “will”, “likely”, “expect”, “anticipate”, “believe”, “intend”, “plan”, “forecast”, “project”, “estimate”, “outlook” and other similar expressions, and include statements with respect to future revenue and profits. Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors relevant in the circumstances, including assumptions in respect of current and future market conditions, the current and future regulatory environment, and the availability of licenses, approvals and permits.

Although the Company believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because the Company can give no assurance that they will prove to be correct. Actual results and developments may differ materially from those contemplated by these statements. Forward-looking information is subject to a variety of risks and uncertainties that could cause actual events or results to differ materially from those projected in the forward-looking information. Such risks and uncertainties include, but are not limited to, current and future market conditions; risks related to federal, state, provincial, territorial, local and foreign government laws, rules and regulations, including federal and state laws in the United States relating to cannabis operations in the United States; and the risk factors set out in the Company’s most recently filed MD&A, filed with the Canadian securities regulators and available under the Company’s profile on SEDAR+ at www.sedarplus.ca and in the section titled “Risk Factors” in the Company’s Annual Report for the year ended December 31, 2023 filed with the Securities and Exchange Commission on March 14, 2024.

The statements in this press release are made as of the date of this release. The Company disclaims any intent or obligation to update any forward-looking information, whether, as a result of new information, future events, or results or otherwise, other than as required by applicable securities laws.

Definition and Reconciliation of Non-GAAP Measures
In addition to reporting the financial results in accordance with GAAP, the Company reports certain financial results that differ from what is reported under GAAP. Non-GAAP measures used by management do not have any standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies. The Company believes that certain investors and analysts use these measures to measure a company’s ability to meet other payment obligations or as a common measurement to value companies in the cannabis industry, and the Company calculates: (i) EBITDA from continuing operations and Adjusted EBITDA from continuing operations as net income (loss), adjusted to exclude [provision for income taxes, finance expenses, depreciation and amortization, relief of fair value upon acquisition, share-based compensation, gain on extinguishment of debt, restructuring related charges, impairment of good will and intangible assets and certain other items which management believes are not reflective of the ongoing operations and performance, (ii) Adjusted EBITDA Margin from continuing operations as EBITDA from continuing operations adjusted for certain material non-cash items such as inventory write downs outside of the normal course of operations, share based compensation expense, impairment charges taken on goodwill, intangible assets and property and equipment, the gain or loss recognized on the revaluation of our contingent consideration liabilities, the gain or loss recognized on the remeasurement of the fair value of the U.S denominated preferred share warrants and other warrants liabilities, one time fees incurred in connection with our acquisitions and certain other adjustments management believes are not reflective of the ongoing operations and performance, (iii) Free Cash Flow as net cash provided by operating activities from continuing operations as presented in the Consolidated Statements of Cash Flows, less capital expenditures for property and equipment, and (iv) General & Administrative expenses excluding stock-based compensation as a percentage of Revenue, net. Such information is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The Company believes this definition is a useful measure to assess the performance of the Company as it provides more meaningful operating results by excluding the effects of expenses that are not reflective of the Company’s underlying business performance and other one-time or non-recurring expenses.

For more information regarding TerrAscend: 
Keith Stauffer
Chief Financial Officer
ir@terrascend.com
855-837-7295

TerrAscend Corp.
Consolidated Balance Sheet
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

	At				At
	December 31, 2023				December 31, 2022
Assets
Current Assets
Cash and cash equivalents	$	22,241			$	26,158
Restricted cash		3,106				605
Accounts receivable, net		19,048				22,443
Investments		1,913				3,595
Inventory		51,683				46,335
Assets held for sale		—				17,349
Prepaid expenses and other current assets		4,898				5,508
		102,889				121,993
Non-Current Assets
Property and equipment, net		196,215				215,812
Deposits		337				837
Operating lease right of use assets		43,440				29,451
Intangible assets, net		215,854				239,704
Goodwill		106,929				90,328
Other non-current assets		854				3,462
		563,629				579,594
Total Assets	$	666,518			$	701,587
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities	$	49,897			$	44,286
Deferred revenue		4,154				2,935
Loans payable, current		137,737				48,335
Contingent consideration payable, current		6,446				5,184
Operating lease liability, current		1,244				1,857
Lease obligations under finance leases, current		2,030				521
Corporate income tax payable		4,775				23,077
Other current liabilities		717				2,599
Current liabilities from discontinued operations		—				9,111
		207,000				137,905
Non-Current Liabilities
Loans payable, non-current		61,633				145,852
Operating lease liability, non-current		45,384				31,545
Lease obligations under finance leases, non-current		407				6,713
Derivative liability		5,162				711
Convertible debt		7,266				—
Deferred income tax liability		17,175				30,700
Financing obligations		—				11,198
Liability on uncertain tax position and other long term liabilities		81,751				15,792
		218,778				242,511
Total Liabilities		425,778				380,416
Commitments and Contingencies
Shareholders' Equity
Share Capital
Series A, convertible preferred stock, no par value, unlimited shares authorized; 12,350 and 12,608 shares outstanding as of December 31, 2023 and December 31, 2022, respectively		—				—
Series B, convertible preferred stock, no par value, unlimited shares authorized; 600 and 600 shares outstanding as of December 31, 2023 and December 31, 2022, respectively		—				—
Series C, convertible preferred stock, no par value, unlimited shares authorized; nil and nil shares outstanding as of December 31, 2023 and December 31, 2022, respectively		—				—
Series D, convertible preferred stock, no par value, unlimited shares authorized; nil and nil shares outstanding as of December 31, 2023 and December 31, 2022, respectively		—				—
Proportionate voting shares, no par value, unlimited shares authorized; nil and nil shares outstanding as of December 31, 2023 and December 31, 2022, respectively		—				—
Exchangeable shares, no par value, unlimited shares authorized; 63,492,038 and 76,996,538 shares outstanding as of December 31, 2023 and December 31, 2022, respectively		—				—
Common shares, no par value, unlimited shares authorized; 288,327,497 and 259,624,531 shares outstanding as of December 31, 2023 and December 31, 2022, respectively		—				—
Additional paid in capital		944,859				934,972
Accumulated other comprehensive income		1,799				2,085
Accumulated deficit		(704,162	)			(618,260	)
Non-controlling interest		(1,756	)			2,374
Total Shareholders' Equity		240,740				321,171
Total Liabilities and Shareholders' Equity	$	666,518			$	701,587

TerrAscend Corp.
Consolidated Statements of Operations and Comprehensive Loss
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

	For the years ended
	December 31, 2023				December 31, 2022				December 31, 2021
Revenue, net	$	317,328			$	247,829			$	194,210
Cost of Sales		157,630				146,325				81,708
Gross profit		159,698				101,504				112,502
Operating expenses:
General and administrative		115,189				115,588				75,107
Amortization and depreciation		9,433				9,658				5,533
Impairment of intangible assets		51,303				140,727				3,633
Impairment of goodwill		4,690				170,357				5,007
Impairment of property and equipment		2,079				1,089				312
Total operating expenses		182,694				437,419				89,592
(Loss) income from operations		(22,996	)			(335,915	)			22,910
Other (income) expense
(Gain) loss from revaluation of contingent consideration		(645	)			(1,061	)			3,584
Gain on extinguishment of debt		—				(4,153	)			—
Gain on fair value of warrants and purchase option derivative assets		(322	)			(58,523	)			(57,904	)
Gain on disposal of fixed assets		(1,914	)			—				—
Finance and other expenses		37,041				35,893				27,849
Transaction and restructuring costs		344				1,445				3,111
(Gain) Loss on lease termination		(1,217	)			—				3,278
Unrealized and realized foreign exchange (gain) loss		(53	)			712				4,654
Unrealized and realized loss (gain) on investments		2,603				(43	)			(6,192	)
(Loss) income from continuing operations before provision for (benefit from) income taxes		(58,833	)			(310,185	)			44,530
Provision for (benefit from) income taxes		23,453				(10,783	)			28,877
Net (loss) income from continuing operations	$	(82,286	)		$	(299,402	)		$	15,653
Discontinued operations:
Loss from discontinued operations, net of tax		(4,444	)		$	(25,949	)		$	(9,518	)
Net (loss) income	$	(86,730	)		$	(325,351	)		$	6,135
Foreign currency translation		286				738				(6,485	)
Comprehensive (loss) income	$	(87,016	)		$	(326,089	)		$	12,620
Net (loss) income from continuing operations attributable to:
Common and proportionate Shareholders of the Company		(91,101	)		$	(303,959	)		$	12,629
Non-controlling interests	$	8,815			$	4,557			$	3,024
Comprehensive (loss) income attributable to:
Common and proportionate Shareholders of the Company	$	(95,831	)		$	(330,646	)		$	9,596
Non-controlling interests	$	8,815			$	4,557			$	3,024
Net (loss) income per share
Net (loss) income per share - basic:
Continuing operations	$	(0.33	)		$	(1.24	)		$	0.07
Discontinued operations		(0.02	)			(0.11	)			(0.05	)
Net (loss) income per share - basic	$	(0.35	)		$	(1.35	)		$	0.02
Weighted average number of outstanding common and proportionate voting shares		279,285,588				244,351,028				181,056,654
Net (loss) income per share - diluted:
Continuing operations	$	(0.33	)		$	(1.24	)		$	0.06
Discontinued operations		(0.02	)			(0.11	)			(0.05	)
Net (loss) income per share - diluted	$	(0.35	)		$	(1.35	)		$	0.01
Weighted average number of outstanding common and proportionate voting shares, assuming dilution		279,285,588				244,351,028				208,708,664

TerrAscend Corp.
Consolidated Statements of Cash Flows
(Amounts expressed in thousands of United States dollars, except for share and per share amounts)

	For the Twelve Months Ended
	December 31, 2023				December 31, 2022				December 31, 2021
Operating activities
Net (loss) income from continuing operations	$	(82,286	)		$	(299,402	)		$	15,653
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities
Non-cash adjustments of inventory		985				9,082				4,941
Accretion expense		10,674				9,740				4,273
Depreciation of property and equipment and amortization of intangible assets		20,382				22,624				12,789
Amortization of operating right-of-use assets		2,319				1,980				1,074
Share-based compensation		7,707				12,162				14,941
Deferred income tax expense		(18,615	)			(35,299	)			(1,245	)
Gain on fair value of warrants and purchase option derivative		(322	)			(58,523	)			(57,904	)
Gain on disposal of fixed assets		(1,914	)			—				—
(Gain) loss from revaluation of contingent consideration		(645	)			(1,061	)			3,584
Impairment of goodwill and intangible assets		55,993				311,084				8,640
Impairment of property and equipment		2,079				1,089				312
(Gain) loss on derecognition of right of use assets and lease termination		(1,217	)			1,163				3,278
Release of indemnification asset		—				3,973				4,504
Forgiveness of loan principal and interest		—				—				(1,414	)
Bad debt expense		—				9,941				—
Employee Retention Credits recorded in other income		—				(9,440	)			—
Gain on extinguishment of debt		—				(4,153	)			—
Debt modification fees expensed		—				2,507				—
Unrealized and realized foreign exchange (gain) loss		(53	)			712				4,654
Unrealized and realized loss (gain) on investments		2,603				(43	)			(6,192	)
Changes in operating assets and liabilities
Receivables		(9,259	)			2,862				(3,209	)
Inventory		(5,185	)			676				(18,508	)
Prepaid expense and other current assets		1,198				856				(1,649	)
Deposits		500				3,666				—
Other assets		797				711				(726	)
Accounts payable and accrued liabilities and other payables		644				(12,103	)			2,820
Operating lease liability		(1,861	)			(1,314	)			(663	)
Other liability		(2,070	)			(13,846	)			6,440
Uncertain tax position liabilities		66,404				3,905				(2,690	)
Contingent consideration payable		—				(410	)			(11,394	)
Corporate income tax payable		(18,946	)			14,598				(6,938	)
Deferred revenue		1,219				428				467
Net cash provided by (used in) operating activities- continuing operations		31,131				(21,835	)			(24,162	)
Net cash used in operating activities - discontinued operations		(3,660	)			(4,288	)			(7,653	)
Net cash provided by (used in) operating activities		27,471				(26,123	)			(31,815	)
Investing activities
Investment in property and equipment		(7,762	)			(39,631	)			(39,835	)
Investment in intangible assets		(1,666	)			(2,261	)			(376	)
Principal payments received on lease receivable		—				515				677
Distribution of earnings from associates		—				—				469
Investment in NJ partnership		—				—				(50,000	)
Deposits for business acquisition		—				(1,065	)			—
Success fees related to ATC and other investment		(3,012	)			—				—
Payment for land contracts		(1,275	)			(1,271	)			—
Cash portion of consideration (paid in) received acquisitions, net of cash of acquired		(16,789	)			16,227				(42,736	)
Net cash used in investing activities - continuing operations		(30,504	)			(27,486	)			(131,801	)
Net cash provided by (used in) investing activities - discontinued operations		14,285				(93	)			(620	)
Net cash used in investing activities		(16,219	)			(27,579	)			(132,421	)
Financing activities
Transfer of Employee Retention Credit		12,677				—				—
Proceeds from loan payable, net of transaction costs		23,869				43,419				766
Proceeds from options and warrants exercised		98				24,342				30,785
Loan principal paid		(50,154	)			(42,221	)			(4,500	)
Loan amendment fee paid and prepayment premium paid		(1,178	)			(4,977	)			—
Tax distributions to NJ partners		—				(1,539	)			—
Capital contributions paid to non-controlling interests		(11,621	)			(7,550	)			(53	)
Payments of contingent consideration		—				(6,630	)			(18,274	)
Proceeds from private placement, net of share issuance costs		20,822				—				173,477
Payments made for financing obligations and finance lease		(1,474	)			(1,125	)			—
Net cash (used in) provided by financing activities- continuing operations		(6,961	)			3,719				182,201
Net cash used in financing activities- discontinued operations		(5,539	)			—				—
Net cash (used in) provided by financing activities		(12,500	)			3,719				182,201
Net (decrease) increase in cash and cash equivalents and restricted cash during the year		(1,248	)			(49,983	)			17,965
Net effects of foreign exchange		(168	)			(2,896	)			2,451
Cash and cash equivalents and restricted cash, beginning of the year		26,763				79,642				59,226
Cash and cash equivalents and restricted cash, end of the year	$	25,347			$	26,763			$	79,642
Supplemental disclosure with respect to cash flows
Income taxes (refund received) paid	$	(3,280	)		$	9,917			$	37,060
Interest paid	$	23,037			$	26,840			$	21,171
Lease termination fee paid	$	379			$	3,300			$	—
Non-cash transactions
Equity and warrant liability issued as consideration for acquisition	$	8,601			$	338,739			$	34,427
Shares issued for Canopy USA arrangement	$	—			$	55,520			$	—
Warrant issued as consideration for services	$	1,000			$	—			$	—
Promissory note issued as consideration for acquisitions	$	11,689			$	10,000			$	8,839
Shares issued for legal and liability settlement	$	794			$	264			$	—
Accrued capital purchases	$	1,494			$	2,187			$	450

TerrAscend Corp.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Amounts expressed in thousands of United States dollars, except for percentages)(unaudited)

The table below reconciles net loss from continuing operations to EBITDA from continuing operations and Adjusted EBITDA from continuing operations:

	For the Three Months Ended								For the Year Ended
	December 31, 2023				December 31, 2022				December 31, 2023				December 31, 2022
Revenue, net	$	86,566			$	69,041			$	317,328			$	247,829
Net loss		(41,814	)			(12,522	)			(86,730	)			(325,351	)
Net loss margin %		-48.3	%			-18.1	%			-27.3	%			-131.3	%
Loss from discontinued operations		—				10,572				4,444				25,949
Loss from continuing operations		(41,814	)			(1,950	)			(82,286	)			(299,402	)
Add (deduct) the impact of:
Provision for income taxes		(9,202	)			14,819				23,453				(10,783	)
Finance expenses		9,065				12,046				35,106				39,059
Amortization and depreciation		5,203				5,046				20,382				22,624
EBITDA from continuing operations		(36,748	)			29,961				(3,345	)			(248,502	)
Add (deduct) the impact of:
Relief of fair value upon acquisition		—				—				—				2,770
Non-cash write downs of inventory		—				—				—				5,894
Vape recall		—				—				—				2,965
Share-based compensation		2,238				1,638				7,707				12,162
Impairment of goodwill and intangible assets		55,993				(20,158	)			55,993				311,084
(Gain) Loss from revaluation of contingent consideration		—				(1,250	)			(645	)			(1,061	)
Restructuring and executive severance		186				45				921				472
Legal settlements		—				623				746				623
Other one-time items		2				998				3,808				5,207
Loan modification fees		—				2,507				—				2,507
Bad debt expense write offs in Michigan		—				9,941				—				9,941
Employee Retention Credits Transfer Fee		—				(9,440	)			2,236				(9,440	)
Gain on extinguishment of debt		—				(4,153	)			—				(4,153	)
Gain on lease termination and derecognition of ROU asset		(1,217	)			1,162				(1,012	)			1,162
Gain on fair value of warrants and purchase option derivative asset		(2,886	)			32				(322	)			(58,523	)
Indemnification asset release		—				—				—				3,973
Impairment of property and equipment		1,734				241				2,079				774
Gain on disposal of fixed assets		(35	)			—				(1,914	)			315
Unrealized and realized loss (gain) on investments		238				(34	)			2,603				(43	)
Unrealized and realized foreign exchange (gain) loss		122				99				(53	)			712
Adjusted EBITDA from continuing operations	$	19,627			$	12,212			$	68,802			$	38,839
Adjusted EBITDA Margin from continuing operations		22.7	%			17.7	%			21.7	%			15.7	%

The table below reconciles Net cash provided by (used in) operating activities – continuing operations to Free Cash Flow:

	For the Three Months Ended								For the Year Ended
	December 31, 2023				December 31, 2022				December 31, 2023				December 31, 2022
Net cash provided by operating activities- continuing operations	$	9,420			$	7,308			$	31,132			$	(21,835	)
Capital expenditures for property and equipment		(1,538	)			(3,391	)			(7,762	)			(39,631	)
Free Cash Flow	$	7,882			$	3,917			$	23,370			$	(61,466	)

The table below reconciles Revenue, net to General & Administrative expenses excluding stock-based compensation as a percentage of revenue, net:

	For the Three Months Ended								For the Year Ended
	December 31, 2023				December 31, 2022				December 31, 2023				December 31, 2022
Revenue, net	$	86,566			$	69,041			$	317,328			$	247,829
General & Administrative expenses		27,684				34,500				115,189				115,588
Less: stock-based compensation		2,238				1,638				7,707				12,162
General & Administrative expenses excluding stock-based compensation	$	25,446			$	32,862			$	107,482			$	103,426
G&A excluding stock-based compensation as a % of revenue, net		29.4	%			47.6	%			33.9	%			41.7	%

FAQ

What was TerrAscend's Net Revenue for 2023?

TerrAscend reported a Net Revenue of $317.3 million in 2023, showing a 28.0% increase year-over-year.

What was the Gross Profit margin for TerrAscend in 2023?

TerrAscend achieved a Gross Profit margin of 50.3% in 2023, marking a 930 basis-point improvement.

What was the Adjusted EBITDA from continuing operations for TerrAscend in 2023?

TerrAscend's Adjusted EBITDA from continuing operations in 2023 was $68.8 million, representing a 77.1% increase year-over-year.

Did TerrAscend achieve positive Cash Flow in 2023?

Yes, TerrAscend reported positive Cash Flow for the first time in its history in 2023, with $31.1 million in cash flow from continuing operations.

What was the GAAP Net Loss for TerrAscend in 2023?

TerrAscend's GAAP Net Loss from continuing operations was $82.3 million in 2023, inclusive of non-cash impairment charges.