TerrAscend Swings to Profit in Q3, Sales Rise

TerrAscend (TER), an integrated cannabis company operating in Pennsylvania, New Jersey, and California, reported higher sales and swung from a loss to a profit in the third quarter of 2021.

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Sales & Earnings

Net sales came in at $49.1 million for the quarter ended September 30, an increase of 29% quarter-over-quarter. This strong growth was driven by the acquisitions of KCR and HMS, more dispensaries (from seven to 13), and expansion of cultivation capacity.

Adjusted gross margin was 46% in Q3 2021, compared to 59% in Q3 2021.

Adjusted EBITDA declined from $13.2 million to $10.5 million. The adjusted EBITDA margin was 21%, lower than 35% in Q3 2020. Net income amounted to $62.3 million in the quarter, compared with a net loss of $14.6 million reported a year ago.

The cannabis operator had a cash balance of $103 million at the end of the quarter, which will be used to support growth initiatives.

Management Commentary

TerrAscend executive chairman Jason Wild said, “I am pleased with the improvements made in Pennsylvania since we withdrew full year 2021 guidance in August. The ratio of quality flower to trim from recent harvests has increased dramatically. Additionally, THC and Terpene potency has been testing at all-time highs. In New Jersey, we are well prepared for adult use once the state gives us the go ahead.

“Our New Jersey Apothecarium dispensaries will have some of the best selection and depth of product available in the state at launch. We are building this business for success over the long term and will continue to make decisions with that mindset. For the 4th quarter, we expect to show sequential revenue and adjusted EBITDA growth with these positive trends accelerating into 2022.”

Acquisition In Maryland

TerrAscend also announced its wholly owned subsidiary has acquired a commercial property in Maryland from GB&J’s LLC to expand cultivation and processing footprint in that state. The purchase price is approximately $2.8 million plus certain costs and expenses. (See Insiders’ Hot Stocks on TipRanks)

Wall Street’s Take

Earlier in November, Needham analyst Matt McGinley maintained a Buy rating on TER and a C$13.76 price target. This implies 79.2% upside potential.

Overall, consensus on the Street is that TER is a Strong Buy based on seven Buys. The average TerrAscend price target of C$14.97 implies 94.9% upside potential to current levels.