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Canadian cannabis producer SNDL Inc. (NASDAQ: SNDL) posted record gross profit margins and better-than-expected revenue in the first quarter as the company positions itself for potential expansion into the U.S. market through its new investment platform.

SNDL’s revenue for the quarter edged up 4% year-over-year to C$197.8 million, beating Yahoo Finance analysts’ average estimate by C$86 million. The growth in its cannabis retail and operations segments offset a flat performance from its liquor retail business. However, sales were down 20% from fourth-quarter 2023 levels amid typical seasonality impacts on its retail divisions.

For the period ending March 31, net loss was $4.65 million, an improvement of 87% over the year versus $36.14 million in the first quarter of 2023.

SNDL posted a gross profit of C$50.4 million, representing a gross margin of 25%. That was up from 17% gross margins in the prior-year quarter.

The Calgary-based company said the margin improvement was driven by increased sales of private-label brands, supply chain initiatives and the consolidation of cultivation facilities following the closure of its Olds, Alberta site last October.

“The SNDL team has delivered a solid first quarter result, exemplified by a record gross margin of 25% and the undeniable improvement in the profitability of all of our operating segments over multiple years,” CEO Zach George said in a statement.

The company recorded an operating loss of C$4.4 million, a vast improvement from an operating loss of C$32.2 million a year earlier. Cash flow from operations was negative C$6.1 million.

Despite the quarterly operating loss, SNDL ended March with C$783.2 million in cash, securities and investments on its balance sheet following the sale of shares and warrants throughout 2022 and 2023. It currently has no outstanding debt.

“We are well positioned to further expand our retail network and product distribution in Canada where we expect further consolidation and attrition,” George said. “Building on the momentum of our Canadian operations, the recent completion of Nasdaq’s review of our SunStream USA structure creates an opportunity for SNDL to close on U.S. assets currently under restructuring.”

SNDL is targeting the acquisition of equity positions in certain U.S. cannabis operators like Parallel and Skymint through its newly formed SunStream USA investment platform following Nasdaq’s confirmation that the structure complies with listing rules.

The company also said potential federal reclassification of cannabis to Schedule III could further facilitate investment opportunities and tax benefits if finalized.

The post SNDL touts record margins, cash hoard as it eyes U.S. expansion appeared first on Green Market Report.

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Adam Jackson, KahliBuds, 420GrowLife