TORONTO, ON – February 14, 2023 – Trees Corporation (NEO: TREE) (the “Company” or “Trees”), is pleased to announce its fourth-quarter financial results for the three and twelve month periods ended December 31, 2022, and 2021.
HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (the “QUARTER”):
• Record Corporate retail sales of $2.7 million, 69% higher than the same period in 2021 and record System-wide sales(1) of $4.0 million in the Quarter, a 48% increase over the prior year;
• 68% growth in corporate same-store retail sales(1), over the fourth quarter of 2021 and 48% System-wide same-store sales growth over the same period;
• Gross margin of $1.1 million, or 37% of sales, a 99% increase over the fourth quarter of 2021;
• 13 Trees Cannabis branded stores currently operating on the date of this release, with a 14th store scheduled to open in Etobicoke, Ontario in the first quarter of 2023; and
• Closing of the Company’s 5-store acquisition in B.C. expected in first quarter of 2023.
“We are proud to post another quarterly sales record as our stores hit their stride and continue to grow further”, said Campbell Becher, CEO of Trees. Mr. Becher added “With the imminent closing of our 5 Trees brand licensed store acquisition in B.C., anticipated to close in first quarter of 2023, our quarterly revenue and gross profit margin will jump by approximately 50% beginning immediately after the closing.”
Surging corporate and System-wide sales growth in 2022 is largely attributed to same-store sales growth of 68% and 48% respectively, over the fourth quarter in 2021. Jeff Holmgren, President and CFO said, “our strong same-store sales growth demonstrates the ever-increasing depth of our relationships within existing communities in which we serve. With a continued hyper-focus on the consumer experience, despite intense competition in Canadian retail cannabis markets, Trees is proving its operational excellence while forging a near-term path towards corporate profitability and long term sustainable growth, one customer at a time.”
Consolidated Financial Statements and MD&A
The results discussed herein are a summary and are qualified in their entirety by reference to the Company’s unaudited interim condensed consolidated financial statements and accompanying notes for the three and twelve months ended December 31, 2022 and 2021, and related management’s discussion and analysis of financial condition and results of operations, copies of which are available under the Company’s profile on SEDAR and the Company’s Investor Relations website at www.TreesCorp.ca.
Change to the Financial Year-End
During the twelve months ended December 31, 2022, the Company elected to change its year end to March 31 from December 31. The transition year will include 15 months of operations for the period starting January 1, 2022 and ending March 31, 2023. The Company’s objective for the change was to obtain its annual financial statement audit during a less resource constrained time of the year. The interim and annual reporting periods of the transition year will be changed based on new fiscal year end date.
Trees is a cannabis company at the intersection of community, content, and commerce. Publicly traded on the NEO Exchange, Trees offers a differentiated retail experience, that aims to educate, amplify and unlock emerging consumer segments and need states that allows Trees to uniquely engage the 360-cannabis consumer. The Company currently has 13 Trees branded storefronts in Canada, including eight (8) stores owned and operated in Ontario (with a 9th store scheduled to open in the first quarter of 2023) and five (5) stores operated in BC, subject to the closing of the acquisition of the assets of 101 pursuant to the terms of the third amended and restated asset purchase agreement between Trees and 1015712 B.C. Ltd. (the “APA”). The closing of the APA is subject to certain conditions precedent, including the receipt of certain licensing approvals and related regulatory consents. Until such time as the closing of the acquisition of the assets under the terms of the APA, the BC stores are subject to a brand license agreement and are included when reporting System-Wide Retail Sales1. In September 2022, the Company received its provincial license to operate in British Columbia from the British Columbia Liquor and Cannabis Regulation Branch. The Company has commenced with the closing of the APA which it anticipates completing in the first quarter of 2023.
Non-IFRS Financial Measures
Throughout this MD&A, references are made to non-IFRS financial measures, including system-wide sales, same store sales, earnings before interest, taxes, and depreciation, and amortization (“EBITDA”). These measures do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. Non-IFRS measures provide investors with a supplemental measure of the Company’s operating performance and therefore highlight trends in Company’s core business that may not otherwise be apparent when relying solely on IFRS measures. Management uses non-IFRS measures in measuring the financial performance of the Company.
System-wide retail sales represents the sum of the revenue reported to Trees by (i) brand licensed retail cannabis stores, which are subject to a brand license agreement providing Trees with a royalty interest, and (ii) Company-owned retail cannabis stores. Management believes this measure is useful to the investment community in evaluating brand scale and market penetration and is used by management of Trees to assess the financial and operational performance of the Company and the strength of the Company’s market position relative to its competitors.
Cautionary Note Regarding Forward-Looking Statements
This press release contains statements that constitute “forward-looking information” (“forward-looking information”) within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking information and are based on expectations, estimates and projections as at the date of this news release. Any statement that discusses predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking information. Forward-looking statements in this document include, among others, statements relating to the Trees’ expectations regarding the closing of the transactions contemplated by the APA and receipt of regulatory approvals in connection therewith, expectations regarding the Company’s ability to unlock and capture emerging consumer segments across its platforms, expectations regarding the Company’s ability to engage its customers and new consumer segments and need states, the expectation that the Company will be successful in its growth strategy, and other statements that are not historical facts. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors and risks include, among others: (a) the Company may require additional financing from time to time in order to continue its operations which may not be available when needed or on acceptable terms and conditions acceptable; (b) compliance with extensive government regulation; (c) domestic and foreign laws and regulations could adversely affect the Company’s business and results of operations; (d) the stock markets have experienced volatility that often has been unrelated to the performance of companies and these fluctuations may adversely affect the price of the Company’s securities, regardless of its operating peers; (e) adverse changes in the public perception of cannabis; (f) the impact of COVID-19; and (g) general business, economic, competitive, political and social uncertainties. Accordingly, readers should not place undue reliance on the forward-looking information contained in this press release.The forward-looking information contained in this news release represents the expectations of the Company as of the date of this news release and, accordingly, is subject to change after such date. Readers should not place undue importance on forward-looking information and should not rely upon this information as of any other date. The Company undertakes no obligation to update these forward-looking statements in the event that management’s beliefs, estimates or opinions, or other factors, should change.
The NEO Exchange has neither approved nor disapproved the contents of this press release and accepts no responsibility for the adequacy or accuracy of this release.
For more information, please contact:
President and Chief Financial Officer