Stock Markets

Earnings call: Gold Royalty Corp. reports robust growth and optimistic outlook

Published

4 hours ago

November 7, 2024

Gold Royalty (NYSE:) Corp. has announced a substantial increase in year-to-date revenue, reaching $9 million, a 130% rise from the previous year, during its Third Quarter 2024 Earnings Call. The company’s CEO, David Garofalo, highlighted a significant inflection point with record revenues and a positive net income, largely attributed to a $5.9 million deferred tax asset from an internal reorganization. Gold Royalty Corp., trading under the ticker GROY, is projecting total revenue between $13 million to $14 million for the full year, underpinned by growth from the Côté Gold Mine and initial revenue from the Vares Mine.

Key Takeaways

Record year-to-date revenues of $9 million, up over 130% from 2023.
Third quarter revenue increased by 90% year-over-year to $2.6 million.
Positive net income due to a $5.9 million deferred tax asset.
Projected full-year revenue of $13 million to $14 million.
Revenue growth expected from Côté Gold Mine and initial revenue from Vares Mine.
Guidance for 2024 suggests a midpoint revenue increase of 160% compared to the previous year.
Significant investments by operating partners have increased resource base to over 130 million ounces.
Over 240 royalties in the company’s portfolio, with a focus on debt reduction and disciplined capital allocation.

Company Outlook

Anticipated revenue growth in the fourth quarter from the Côté Gold Mine and Vares Mine.
The company maintains its 2024 revenue guidance, projecting significant year-over-year increase.
Long-term growth catalysts include the Odyssey internal zones, South Railroad project, and the REN project.
Management remains focused on managing cash flows and prioritizing debt repayment amid market challenges.

Bearish Highlights

Analysts anticipate a slight downturn in cash flow projections for 2029.
The Jerritt Canyon investment remains non-valued on the balance sheet, with its future dependent on gold prices.

Bullish Highlights

Gold prices have risen 38% over the past year, positively impacting the portfolio.
The company is optimistic about its exploration portfolio, with strong potential indicated at the Whistler and Tonopah West projects.

Misses

The company notes a disconnect between rising gold prices and the valuation of junior mining equities, with many struggling for capital.

Q&A Highlights

CEO David Garofalo discussed the positive impact of rising gold prices and increased investment from operators.
Management plans to prioritize debt reduction before considering shareholder returns.
New VP of Capital Markets, Jackie Przybylowski, introduced as a contact for investor relations.

Gold Royalty Corp.’s optimistic outlook is supported by significant organic growth in its resource estimates, with total resources now at over 10.5 million ounces. The company’s disciplined approach to capital allocation, focus on debt reduction, and strategic acquisitions positions it well for continued growth. Despite some cautious sentiment regarding the long-term cash flow projections, the overall tone of the earnings call was confident, with management emphasizing the positive trajectory of the company’s financials and operations.

InvestingPro Insights

Gold Royalty Corp.’s (GROY) impressive revenue growth, as highlighted in the earnings call, is further supported by InvestingPro data. The company’s revenue growth for the last twelve months as of Q3 2024 stands at a remarkable 197.02%, with quarterly revenue growth in Q3 2024 at 158.47%. These figures align with the company’s reported 130% year-to-date revenue increase and 90% year-over-year growth in the third quarter.

Despite the strong top-line growth, InvestingPro Tips reveal that GROY is “quickly burning through cash” and “not profitable over the last twelve months.” This is reflected in the company’s operating income margin of -52.49% for the last twelve months as of Q3 2024. These insights underscore the importance of management’s focus on debt reduction and disciplined capital allocation, as mentioned in the earnings call.

The company’s market capitalization stands at $230.28 million, with a price-to-book ratio of 0.41, suggesting the stock might be undervalued relative to its book value. This could be related to the “disconnect between rising gold prices and the valuation of junior mining equities” noted in the article.

For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and metrics beyond those mentioned here. To explore the full range of insights available for Gold Royalty Corp., visit https://www.investing.com/pro/GROY.

Full transcript – Gold Royalty Corp (GROY) Q3 2024:

Operator: Welcome to the Gold Royalty Corp. Third Quarter 2024 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to David Garofalo, Chairman and CEO. Please go ahead.

David Garofalo: Thank you, operator. Good morning, ladies and gentlemen, thank you for participating in today’s call to review our third quarter 2024 results. Please note for those not currently on the webcast, a presentation accompanying this conference call is available on the Presentations page of our website in PDF format. Some of the commentary on today’s call will include forward-looking statements and I will direct everyone to review Slide 2 of the presentation, which includes important cautionary notes. Speaking alongside me on today’s call will be Andrew Gubbels, Chief Financial Officer; and Jackie Przybylowski, Vice President, Capital Markets. The third quarter of 2024 marks an important inflection point for the company. Our outlook continues to grow increasingly positive with the ramp up in construction of several key assets across our portfolio. We achieved record revenues for the nine months ending September 30, 2024 and have reiterated our full year guidance for expected total revenue, land agreement proceeds and interest of $13 million to $14 million. We continue to be excited about the outlook for 2025 as well, with more cash flowing assets, strong commodity prices and our stable cost structure expected to translate to growing revenues and cash flows next year. With that, I will pass the call over to Andrew Gubbels to discuss the details of our third quarter results on Slide 4.

Andrew Gubbels: Thank you, David, and good morning everyone. We had strong financial performance during the quarter with Total (EPA:) Revenue, Land Agreement Proceeds and Interest of $2.6 million, a 90% increase relative to the third quarter of 2023, and we maintained stable cash operating expenses of below $2 million for the quarter. On a year-to-date basis, we have achieved a record $9 million in Total Revenue, Land Agreement Proceeds and Interest, an over 130% increase relative to the comparable period in 2023 and against year-to-date cash operating expenses of $5.9 million. As a result, we’re on track to deliver our first year of positive cash flow from operations with $1.3 million of cash provided by operating activities year-to-date, which excludes $1.5 million of land agreement proceeds credited against mineral properties. We also reported positive net income in the quarter after recognizing a $5.9 million non-cash deferred tax asset following an internal reorganization of the Company’s subsidiaries. By amalgamating certain previously acquired entities, each of which pay tax on a standalone basis, we reduce our administrative burden and allow for a more fulsome utilization of the consolidated company’s tax attributes. The primary driver of the deferred tax asset is the future tax savings from our ability to utilize built up tax losses to shelter earnings from certain producing assets, predominantly Canadian Malartic within the consolidated Gold Royalty Corp. entity. Looking ahead, we expect to have a strong fourth quarter and have maintained our Total Revenue, Land Agreement Proceeds and Interest guidance of $13 million to $14 million for the year 2024. Primary drivers of our expected fourth quarter revenue growth will be the continued ramp up of the Côté Gold Mine in Ontario operated by IAMGOLD (NYSE:) and the Vares Mine in Bosnia operated by Adriatic Metals. We saw continued growth at Côté in the third quarter and expect to see further increases in production in the fourth quarter as IAMGOLD progresses towards targeted nameplate production by the end of the year. At Vares, we expect to receive initial revenue in the fourth quarter from our stream on 100% of the mines production. Vares is on track to achieve nameplate capacity by the end of the year. We expect to see full revenue growth from both these assets in 2025 as we benefit from a full year of production. Jackie will discuss these operational updates along with other catalysts across our portfolio later in the presentation. Moving to Slide 5 again, we continue to expect full year Total Revenue, Land Agreement Proceeds and Interest of $13 million to $14 million, the midpoint of which represents an increase of 160% relative to 2023. Reiterating my prior comments, our expected fourth quarter revenue of $4 million to $5 million will be driven by increased revenue at Côté and initial revenue from Vares as well as continued contributions from our existing cash flowing royalties at Canadian Malartic, Borden, Cozamin and pre-production revenue and interest payments from Borborema. Now to discuss the portfolio in more detail, I’ll pass the call to Jackie.

Jackie Przybylowski: Thanks, Andrew. Turning to Slide 6, I’ll spend a few minutes discussing the ramp up of the Vares Mine and the Côté Gold Mine. At Vares, 63,100 tons of ore were mined in the third quarter due to the nature of our streaming agreement with Adriatic. Gold Royalty recognizes revenue upon delivery and sale of physical copper, hence the lag in our recognizing revenue from Vares until the fourth quarter despite production having occurred in the third quarter. Severe storms and subsequent flooding hit Bosnia and Herzegovina in early October. While production was unaffected, the railway line that connects Sarajevo to Port of Ploče was damaged and concentrate will be trucked by road until the railway line has been repaired. Adriatic Metals has outlined guidance of 180,000 tons mined in 2024 and has also maintained its 2025 production guidance at 750,000 tons to 800,000 tons mined. On October 24, Adriatic was granted all of the permits for Phase 1 of the tailings storage facility at Veovaca. Construction has commenced and the tailings storage facility will be ready in December 2024, which is before its use is required. At Côté, IAMGOLD reported third quarter gold production of 68,000 gold ounces and that the ramp up of the processing plant remains on track to exit the year at 90% of the design throughput, which is 36,000 tons per day. Côté completed a scheduled shutdown in September when key optimizations and improvements were made to improve the availability and performance of the processing plant. Since October 2, which is subsequent to that shutdown, the plant has averaged 30,000 tons per day throughput according to 83% of nameplate design and the plant achieved record daily throughput of 40,900 tons per day on October 15. For the full year 2024, IAMGOLD has said it remains on track to meet the lower end of its production guidance of 220,000 to 290,000 ounces of gold on a 100% basis. Moving to Slide 7. We have several other key positive catalysts across the portfolio. At Agnico Eagle’s Odyssey mine where Gold Royalty holds a 3% NSR royalty ramp and shaft development both continue on schedule. Additional positive drill results at Odyssey north and south demonstrated the potential to add new mineral reserves and mineral resources at the internal zones, which could be brought into production using existing mine infrastructure and could also support development of additional infrastructure in the future. At Aura Minerals’ Borborema project in Brazil where Gold Royalty holds a 2% NSR royalty and a gold linked royalty convertible loan project construction is advancing well and initial production is on track for early 2025, which is expected to be a driver of incremental growth for Gold Royalty next year. Moving to Blackrock (NYSE:) Silver’s Tonopah West project where Gold Royalty holds a 3% NSR royalty, a preliminary economic assessment was published, which outlines an eight-year mine life and total life of mine silver equivalent production of 66.8 million ounces. At one of Gold Royalty’s smaller producing royalties, Fortitude Gold’s Isabella Pearl mine regulatory permits to mine deeper were received. These are expected to result in an extension of the mine life. Gold Royalty holds a 0.375% NSR royalty over the southern half of the Isabella Pearl Pit. And finally at U.S. Gold Inc’s Whistler Project where Gold Royalty holds a 1% NSR royalty and the rate require an additional 0.75% NSR royalty. An updated Mineral Resource Estimate was published for the project which outlines significant growth in indicated resources. The project now hosts 6.5 million gold equivalent ounces of indicated resources and a further 4.2 million gold equivalent ounces of inferred resources. Moving to Slide 8, we can see the long term trajectory of Gold Royalty’s GEO production profile is robust on our consensus estimates. We’re at an exciting inflection point for Gold Royalty as a company from $5 million in revenue in 2023 to $13 million to $14 million in revenue as well as positive operating cash flows expected in 2024. Further, in 2025 and beyond we see a meaningful increase to GEO production. This coupled with the current strong commodity price environment and our leverage to the gold price supports strong revenue and free cash flow growth through to the end of the decade. Supporting this growth is our pipeline of royalties and streams outlined on Slide 9. Our collection of royalties features high quality assets located in favorable mining jurisdictions with established and well capitalized operating partners. We have recently seen the number of cash flowing royalties increase in our pipeline and we are excited to see assets such as REN, South Railroad and Granite Creek move from development to cash flowing in the coming years. Moving to Slide 10. We can walk through a few of the key catalysts across our 240 royalties that will be driving value for Gold Royalty in the near, medium and longer term. Over the next six months, the key drivers will be the ramp ups at Côté and Vares in addition to initial production for Borborema, which I’ve touched on previously. In the medium term, we are excited to see the incorporation of county line into Fortitude Gold’s production plans at Isabella Pearl, Gold Royalty holds a 3% NSR royalty over the County Line project. While a relatively small mine with the potential to produce 20,000 ounces to 30,000 ounces of gold per year, the large royalty rate would be a solid contribution to our revenue profile. Beyond County Line, Granite Creek will be an exciting asset to watch as underground mining rates ramp up over the coming years. i-80 Gold recently appointed Richard Young as CEO. He brings tremendous operating pedigree to the company and we’re excited to see that team deliver at the project. Gold Royalty holds a 10% net profit interest over the Granite Creek Mine. Odyssey, the underground extension of the Canadian Malartic mine is expected to deliver important catalysts in the medium to long-term. The Odyssey internal zones, which are underneath our royalty coverage area would represent potential upside to the underground production profile between now and 2028. And 2028 is when Agnico Eagle (NYSE:) plans to shift Canadian Malarctic to a full underground operation and we expect to see increased attributable production from the Odyssey north and east Malartic deposits at Odyssey at that time. Another longer term catalyst will be initial production from Orla’s South Railroad project in Nevada where Gold Royalty holds a 0.44% NSR royalty over a portion of the property. Orla is currently expecting to move through permitting, construction and into production at South Railroad by 2027. And finally, the last longer term catalyst to highlight is the advancement of the Nevada Gold Mines’ REN project on which Gold Royalty holds a 1.5% NSR and 3.5% NPI royalties and where a pre-feasibility study is expected in 2026 with production shortly thereafter. This will be a meaningful driver of growth for Gold Royalty towards the end of this decade. This summarizes some of the key drivers of growth adding value to our business over the coming years. With over 240 royalties and significant investments being made by our operating partners across the portfolio there are numerous other exploration and development catalysts, which are outlined within our MD&A as well. I’ll now pass the call back to David Garofalo to summarize before opening up for questions.

David Garofalo: Thanks, Jackie. As you can see, we have built a strong, fundamentally sound business on a foundation of long life high quality assets. In closing, this is an exciting time to be a Gold Royalty shareholder. We’ve already started to move towards an important free cash flow inflection point and while the current valuation of the company is frustrating, we are confident that our growing free cash flow profile will result in a rerating of our share price. Until then, we have one of the most robust organic growth pipelines in the sector and are happy to be extremely disciplined in our capital allocation strategy. Our top priority for the growing cash flows is paying down our revolving credit facility and adding to our balance sheet liquidity. With that, I’d be happy to open up the calls at Q&A. Operator?

Operator: Thank you. [Operator Instructions] And today’s first question comes from Heiko Ihle with H.C. Wainwright. Please go ahead.

Heiko Ihle: Hey there. How are you? I assume you can hear me okay?

David Garofalo: Loud and clear, Heiko. Thank you.

Heiko Ihle: Blended. Hey, I mean, gold’s up $760 in the last year. That’s 38%. Leads to a pretty obvious question. I mean, what is the impact of higher gold price on your portfolio? And building on that question, do you see the operators invest more than you probably expected? Call it six, 12, 18 months ago?

David Garofalo: Yes, there’s a few dimensions to that question and I will get Jackie to interject in a moment. And Peter Behncke is on the line as well. But in terms of the impact on the gold price, nothing crystallizes that or illustrates that better than Slide 8 in the presentation provided today in terms of the impact on cash flow. Our leverage to the gold price is immense and only growing as the volume of production attributable to us grows quite significantly, at an average compounded rate on a consensus basis of about 60% per annum right through the end of the decade. And we exit the decade if you use current gold prices at north of $70 million of revenue per annum, if you use $3,200 an ounce, you can see it starts to approach in the mid-80s. So significant gearing to the gold price as a result of our increasing volumes. The other dimension to your question was about the expenditures of our underlying operators. And that’s a key part of the model as well, is our leverage to the exploration of the operators and their expansion plans on their assets. On average, over the last four years, our operating partners have invested over $200 million in exploration on their underlying deposits that we have royalties on in our resource base. The exposure that we have in terms of ounces in the ground has grown from 30 million ounces when we IPO back in March of 2021 to over 130 million ounces to date. Only our acquisition efforts, but the exploration success of the underlying operators. Jackie, Peter, anything you’d like to add to that?

Jackie Przybylowski: Thanks, Dave. I’ll jump in. I’ll just mention that some of the assets in our portfolio, and particularly the key assets that we have producing or near producing now, such as Côté and Vares, they’re at the point of the development where production will grow almost independent of gold or other metals prices. They’re already in that production ramp up phase. But having said that, I mean, several assets in our portfolio could benefit from higher gold prices. For example, our royalty on Agnico Eagle’s Odyssey mine would likely benefit from accelerated sinking of a second shaft or accelerated fill the mill strategy, assuming that the mill would be filled or mined from our royalty lands. So that would be a real benefit to us from current high gold prices. Other development stage assets could also potentially be brought into production earlier. However, as you know, Heiko, development timing is often contingent on various things such as permitting or studies. We’re excited about first production at County Line, initial production at South Railroad and REN, as well as the ramp up of Granite Creek as examples of things that could be accelerated in development. I think I’ll leave it there, Dave, unless you want to follow up with anything else or Peter, I think we could take the next question.

Heiko Ihle: Okay. Building on the prior question, what are you seeing in your, M&A pipeline, corporate development pipeline, giving your answer to what you given to what you just said. I mean, asset prices are quite a bit higher than they were. What are you seeing in regards to asking prices or transactions volumes, that kind of stuff? With that, I’ll get back to you. Thank you.

David Garofalo: Yes. Look, what I would say is that the junior market is more or less been left behind in terms of equity market participation. We haven’t seen the kind of response not only in juniors, but I would say equities more broadly. They haven’t responded to the gold price the way you would think. The gold price is up about 35% this year. And the GDX (NYSE:) and GDXJ have actually underperformed the commodity. It’s not what you would expect, when you’re buying the gold equity to get leveraged to the gold price. That hasn’t happened. So what that means is many of the juniors simply haven’t had access to the capital markets to conduct meaningful exploration or development activities. And so we’re getting a lot of those inbounds as a result of that. So we see a lot of things, but frankly those earlier stage opportunities are limited appeal to us because we generate those royalties effectively for free through our generative program. So doing early stage financing or financing of early stage expiration stage assets really doesn’t have a lot of appeal to us. We have seen quite a few opportunities for financing third party royalties. We’re very limited in terms of what we can do given the weakness in our currency. We have to be extremely disciplined. And you can see that over the course of the last four years, when we had the currency early in 2021, we were quite aggressive in accumulating and expanding our portfolio when we had the currency to do so. Since then, the pace of acquisition has slowed dramatically as our currency abandoned us, waiting for the growth to crystallize. The market really hasn’t attributed the value we think that is intrinsic to our portfolio. So we’re going to be extremely disciplined. And if we have to sit on our hands for the time being until the market recognizes the underlying value of our assets, the intrinsic value, then we’ll do so and we’ll harvest cash flow, pay down debt, and hopefully in due course, look at returns of capital to shareholders on a sustainable basis.

Heiko Ihle: Very good. I’ll get back in queue. Thank you.

Operator: Thank you. And our next question today comes from Eric Winmill with Scotiabank (TSX:). Please go ahead.

Eric Winmill: Great. Good morning, David and team. Thanks for taking my question. Apologies, if I missed it, but any updates on Jerritt Canyon we should be looking at or anything that you’re hearing there, we should think about in terms of modeling going forward?

David Garofalo: Andrew, I can hand that over to you if you’d like.

Andrew Gubbels: Yes, sure. In terms of Jerritt Canyon, you’ll recall that we had written down the Jerritt Canyon investment on our balance sheet in line with some of our peers as well. So from a balance sheet perspective, it’s still a royalty we certainly own, but it’s not one that we’re – we’ve got a evaluation for from a book value perspective. That being said, what one of the benefits of the higher gold prices that was raised by or that was discussed by Jackie and David earlier is the potential for some of these assets that had challenges and potentially went offline as a result of skinnier margins to come back. Now we keep a good dialogue with respect to our operating partners and First Majestic is one of them. We are not aware of a timeline for future prospects around Jerritt Canyon, but with the gold prices where they’re at, we are more encouraged with the potential of what it could be going forward. So, the short answer is, we haven’t changed our internal estimates around Jerritt Canyon, but there is potential with where gold prices are for that to potentially have more relevance in the future.

Eric Winmill: Great, thank you. Appreciate that. Maybe just one more for me, if you don’t mind. But in terms of the exploration portfolio, obviously you’ve got a lot of really great assets there and I would certainly share the sentiment here. There seems to be a disconnect, right given where gold is now that there should be expiration dollars flowing in. But maybe on the exploration side, any assets in particular you think the market’s missing or that you see the greatest potential here for new discovery maybe down the road?

David Garofalo: Yes, excellent question. I’ll hand that over to Peter who’s on the phone as well. Peter?

Peter Behncke: Yes, thanks Dave. And Eric, I’ll build on one of the assets that Jackie highlighted earlier in the presentation. But some of the recent developments at the Whistler Project in Alaska where we have a relatively large royalty, have been very encouraging. They’ve nearly doubled or over doubled the indicated resource there now total resources of 6.5 million ounces indicated, over 4 million inferred. And we could have up to a 1.75% NSR over that entire project or advancing continuing exploration work, completing studies. That’s a very encouraging and large scale project in a good jurisdiction. The other longer dated or advanced expiration stage asset to highlight would be the recent developments at Tonopah West in Nevada. They published their PEA earlier this year and since then have had very encouraging results. And we have a very large 3% NSR royalty over the entire project there a mix of silver and gold within that deposit. And I’d also emphasize that the Tonopah West property was created to our royalty generator model. So a great example of us creating a royalty getting paid for it. We got a $1 million option payment earlier this year on that project. And then we’ll see it advance towards production in the coming years. So very strong rates of return given the very low costs associated with generating royalties like Tonopah.

Eric Winmill: Great. Thanks a lot, Peter. Appreciate that. And yes, look forward to the asset updates here going forward. Hop back in the queue. Cheers.

Operator: Thank you. And our next question today comes from Kerry Smith at Haywood Securities. Please go ahead.

Kerry Smith: Thanks operator. Dave, just for Vares, with this lag on concentrate sales before you actually get final payment, then I assume there’s no provisional pricing that you could benefit from, when the concentrate shipped, you actually get one final payment when it’s actually sold. Is that how it works then?

David Garofalo: I’ll hand it over to Andrew.

Andrew Gubbels: Yes. No thanks, David. Yes, Kerry, that is how it works. Just per the contract, there is a requirement for a certain amount of copper within the concentrate to be to be shipped. We need at least 25 tons to get first payment. And then on an ongoing basis we will get payments as that is shipped. So we’re at the point where they are reaching that first threshold. But not per the royalty or per the stream agreement. We don’t get payment until that they reach that threshold, there’s no provisional pricing involved.

Kerry Smith: Okay. And so for Q4 then they have to get to is that 25 tons of contained copper and concentrate before you start getting paid? Is that how it works?

Andrew Gubbels: That’s right, yes.

Kerry Smith: Okay, and do you have, do you know what the rough. I’m just trying to figure out if you’ll actually have how much revenue you might have in Q4. And because that’s kind of this scale up quarter and then going into 2025, would it be reasonable to assume then that there’s kind of a three-month lag on product, concentrate production to payments? So you’d say Q1, 2025 production would get paid in Q2. Is that kind of how it might work at steady state or would it be a longer lag than three months?

Andrew Gubbels: It’s a good question. In terms of lag, I guess it depends on how quickly they can ramp up and potentially catch up. I mean we’ve scheduled about a quarter of lag or so it’s in terms of for the rest of the year. We think that based on the production profile, we could see line of sight up to five shipments per se that have net as revenue in and around just less than $2 million worth. Potentially it’s a function of also them achieving the ramp up and getting the shipments out. So as of this stage, we do have a circa three months or so lag built into our estimates.

Kerry Smith: Okay. And that roughly $2 million of revenue, that’s what you’re thinking you’ll get in Q4 then, is that what you’re suggesting, I guess?

Andrew Gubbels: Contingent on, the copper prices and then achieving their ramp up objectives. Yes.

Kerry Smith: Gotcha. Okay, that’s helpful. And then from David, from your comments in the, the preamble or the introductory remarks, would it be fair to assume that you plan to take most of your free cash flow on a go forward basis and use that to pay the debt down to a level that you feel is reasonable? And if that’s the case, what do you think is kind of the proper debt level for the company today that you’d like to get that paid down to as soon as you could?

David Garofalo: Yes, look, I think our priority is actually get the revolver effectively down to nil in the short to medium term before we consider returns of capital to shareholders. The convertible is less of a concern for us. It’s a very attractive piece of paper. It’s unsecured five year money callable by us after three years with a strike price of $1.90. So less of a preoccupation for us, but we’d rather have a revolver available to use for other acquisition opportunities when our currency is attractive enough to. Attractively valued enough for us to consider further acquisitions. So really, that’s like a credit card. And we want to pay down our credit card debt as quickly as possible.

Kerry Smith: Got it. Okay. Okay, that’s helpful. Thank you.

Andrew Gubbels: Can I – sorry, Kerry. I’ll just make a correction there. I said $2 million circa a little over $1.5 or $1.2 million or so from Vares just based on the timing. So yes, sorry, I misspoke there.

Kerry Smith: Okay, that’s good. Thank you, Andy. Appreciate it. That’s all from me. Thanks, guys.

Operator: [Operator Instructions] Our next question comes from Weinberg, a Private Investor. Please go ahead.

Brent Weinberg: Yes, can you hear me okay?

David Garofalo: Yes, loud and clear, Brent. Thank you.

Brent Weinberg: Yes, thank you. Thanks for taking my question. Just a little bit of color on Slide 8. The cash flow particularly, just maybe any color you can give me around 2029, where it stops about six years of very significant cash flow growth. But 2029 shows a pause in that or a slight downtick. Is there any particular color that you can add around 2029?

David Garofalo: Now, I hand it off to Jackie and/or Peter. Jackie. You want us to try?

Jackie Przybylowski: Sure. Thanks, Steve. So on that slide, I mean, first of all, I’ll just highlight that these are the six analysts that cover us. This is the average of their expectations. Generally, analyst estimates are going to be more conservative when there’s higher uncertainty. And higher uncertainty includes the longer you go from the current date. So I think part of that would just be a little bit more conservatism around the consensus expectations we do have. The growth between 2027 and 2028 includes the Canadian Malartic underground and so with that stabilizing over the 2028 to 2029 period, I think that that contributes to sort of the reduction in growth at that point. And I would also highlight Côté, most of our royalty is attached to the phase of mining that really is associated with about the first six years of mining and then tends to trail off after that. And so we could see some reduction in the contribution of Côté around that same period. So I think those would be the biggest drivers of why we’re seeing that flat to slightly down consensus expectation in 2029.

Brent Weinberg: Okay, thank you guys. I appreciate that color and congratulations on a good quarter there. Thank you.

Jackie Przybylowski: Thank you.

Operator: Thank you. And this concludes our question-and-answer session. I’d like to turn the conference back over to the management team for any final remarks.

David Garofalo: Well, thank you everybody for your kind attention today. Of course, you can reach any one of us by email, by phone. Jackie is new to the organization of VP of Capital Markets, joined us in September, and she’s our point person in terms of dealing with investor inquiries, and it’s easy to remember emails, jackiep@goldroyalty.com. And of course, you can call 1-800 number if you’d like to speak to her in person. But please don’t hesitate to reach out, and we’d be delighted to take your questions. But thank you for your kind attention today and look forward to talking to you next quarter.

Operator: Thank you, sir. This concludes today’s conference call. We thank you all for attending today’s presentation. You may now disconnect your lines and have a wonderful day.

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Stock Markets

Earnings call: SNDL reports growth in cannabis, challenges in liquor

Published

4 hours ago

November 7, 2024

SNDL Inc. (ticker: SNDL) announced its financial results for the third quarter of 2024 on November 10, 2024, highlighting sustained growth in its Cannabis operations and a record gross margin despite challenges in the Liquor segment. The company reported a slight decline in overall net revenue to $236.9 million year-over-year, primarily due to the Liquor segment’s performance. However, the Cannabis segment continued its upward trajectory with an 8% increase in revenue and a gross margin peak of 26.6%. SNDL also reported a positive free cash flow of $9.2 million and an improved cash balance, with no outstanding debt.

Key Takeaways

SNDL’s Cannabis segment achieved an 11th consecutive quarter of revenue gains, with a 19% year-over-year growth reaching $25 million.
The gross margin for Cannabis improved to a record 21.2%, contributing to a 30% increase in gross profit at $63 million.
Net revenue slightly declined due to the Liquor segment, but overall operating income and cash balance improved.
SNDL completed acquisitions of Indiva and Nova, aiming to strengthen its market position in Canadian edibles and retail.
The company is on track for positive free cash flow for the full year 2024, supported by restructuring savings and operational efficiencies.

Company Outlook

SNDL plans further growth and profitability, with a focus on the Canadian retail market and potential U.S. investments.
The company is also considering ongoing share repurchases as part of its capital allocation strategy.
Strategic initiatives, including a restructuring program, aim to achieve annual savings of over $20 million.
SNDL is committed to enhancing employee engagement and operational improvements.

Bearish Highlights

The Liquor segment experienced a decline, contributing to a slight decrease in overall net revenue year-over-year.
The company faces challenges in the liquor retail market, although its private label offerings are gaining traction.

Bullish Highlights

The Cannabis segment’s robust revenue growth and record gross margin indicate strong performance and market share gains.
Recent acquisitions are expected to bolster SNDL’s position in the edibles market and Canadian retail growth.
Productivity improvements and overhead savings are contributing to the company’s financial health.

Misses

Despite overall revenue growth, the Liquor segment’s decline marks a setback for the company’s diversified portfolio.

Q&A highlights

The acquisition of Indiva is expected to positively impact Q4 results, with nearly two months of performance contributing to the edibles category margins.
SNDL is exploring facility consolidation to monetize noncore real estate, which could enhance cash balances for future investments.
The company addressed the challenges of the illicit cannabis market in Canada, emphasizing the need for broader regulatory changes to support the legal market.

SNDL’s third-quarter earnings call demonstrated the company’s resilience and adaptability in the face of market fluctuations. With a strategic focus on growth, profitability, and employee engagement, SNDL is positioning itself for continued success in the evolving cannabis industry. The company’s proactive measures, including acquisitions and operational restructuring, are expected to drive future performance despite the current challenges in the liquor segment. Investors and stakeholders are encouraged to look forward to future updates on the company’s progress and developments.

InvestingPro Insights

SNDL Inc.’s recent financial results align with several key insights from InvestingPro. The company’s strong performance in the Cannabis segment, which achieved an 11th consecutive quarter of revenue gains, is reflected in InvestingPro’s data showing a 1.14% revenue growth over the last twelve months. This growth, coupled with the company’s strategic acquisitions and focus on operational efficiencies, supports the InvestingPro Tip that “net income is expected to grow this year.”

The company’s improved cash balance and absence of outstanding debt are consistent with an InvestingPro Tip indicating that SNDL “holds more cash than debt on its balance sheet.” This financial stability is further underscored by another tip stating that “liquid assets exceed short term obligations,” which bodes well for the company’s ability to fund future growth initiatives and potential U.S. investments.

Despite the challenges in the Liquor segment, SNDL’s overall financial health appears robust. The company’s market capitalization stands at $539.63 million, and it’s trading at a Price to Book ratio of 0.73, suggesting it may be undervalued relative to its assets. This aligns with the InvestingPro Tip that SNDL is “trading at a low revenue valuation multiple.”

Investors should note that while SNDL is not currently profitable over the last twelve months, analysts predict the company will be profitable this year, as indicated by another InvestingPro Tip. This projection aligns with SNDL’s outlook for positive free cash flow and the expected benefits from recent acquisitions and cost-saving measures.

For those seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for SNDL, providing a deeper understanding of the company’s financial position and market performance.

Full transcript – SNDL Inc (SNDL) Q3 2024:

Operator: Good morning, and welcome to SNDL’s Third Quarter 2024 Financial Results Conference Call. This morning, SNDL issued a press release announcing their financial results for the 2024 third quarter ended on September 30, 2024. This press release is available on the company’s website at sndl.com and filed on EDGAR and SEDAR as well. The webcast replay of the conference call will also be available on the sndl.com website. SNDL has also posted a supplemental investor presentation. In addition to the conference call presentation, we will be reviewing today on its sndl.com website. Presenting on this morning’s call, we have Zach George, Chief Executive Officer; and Alberto Paredero, Chief Financial Officer. Before we start, I would like to remind investors that certain matters discussed in today’s conference call or answers that may be given to questions could constitute forward-looking statements. Actual results could differ materially from those anticipated. Risk factors that could affect results are detailed in the company’s financial reports and other public filings that are made available on SEDAR and EDGAR. Additionally, all financial figures mentioned are in Canadian dollars, unless otherwise indicated. We will now make prepared remarks, then we’ll move on to analyst questions. I would now like to turn the call over to Zach George. Please go ahead.

Zachary George: Welcome to SNDL’s Q3 2024 Financial and Operational Results Conference Call. We are pleased to report robust revenue growth in our Cannabis segments, a record-breaking gross margins and positive free cash flow for the third quarter of 2024. Our Cannabis segments continued to show strong momentum, achieving steady revenue gains for the 11th consecutive quarter. Despite weaker demand in our Liquor segment, we delivered higher year-over-year margins and substantial growth in operating income for the segment. We achieved an all-time high gross margin of 26.6%, propelled by further margin expansion in Liquor retail and significant improvement within our Cannabis operations. Free cash flow was positive this quarter, supported by ongoing operational gains in gross margin and efficient working capital management. We remain on track to deliver positive free cash flow for the 2024 calendar year, meeting or even exceeding our guidance. This quarter and in recent days, we launched several strategic initiatives that we expect to drive SNDL towards long-term sustainable profitability. These include a restructuring program aimed at reducing corporate overheads, enhancing organizational efficiency and realizing annualized savings of more than $20 million. Additionally, we moved to privatize Nova through the acquisition of the remaining outstanding minority equity interest and just yesterday closed the acquisition of Indiva, enabling us to emerge as the leader in the Canadian infused edibles category. Together, these actions are strengthening our foundation and expanding our potential for future growth. Our leadership team is working on a number of additional initiatives and investment opportunities that we are excited to share as they come to fruition in future periods. Our solid balance sheet serves as a beacon for future opportunities, enabling us to allocate capital thoughtfully across both organic and inorganic investments. In the third quarter, we increased our cash balances from $183 million on June 30 to $263 million on September 30, 2024, and continue to have 0 outstanding debt. We have not raised cash through the issuance of shares since 2021, and our share repurchase program became active subsequent to the end of the quarter. I will now turn the call over to Alberto.

Alberto Paredero: Thank you, Zach. I want to remind you all that amounts discussed today are denominated in Canadian dollars, unless otherwise stated. Certain amounts referred to on this call are non-GAAP and non-IFRS measures. For definitions of these measures, please refer to SNDL’s management discussion and analysis document. Looking at our Q3 2024 financial highlights, we continue to see significant improvements in gross profit, gross margin and free cash flow. Net revenue in the third quarter of 2024 reached $236.9 million, a marginal decline compared to the prior year. This decline was driven by our Liquor retail segment, while our combined Cannabis segment posted a healthy 8% growth. Gross profit of $63 million represents a $14.4 million increase or 30% growth year-over-year with a substantial 610 basis points improvement in gross margin. This translates into another quarter of record gross margin, reaching 26.6%. Despite the significant improvements in margin and continued optimization of operating expenses, adjusted operating income was negative $16.6 million, a slight decrease compared to the prior year. This was mainly driven by an unfavorable $13.4 million fair value adjustment from our equity accounted investees in the quarter compared to a $6.6 million revaluation in the same quarter of the prior year. It is important to note that we only adjust operating income for restructuring charges and intangible impairments, which in the third quarter were limited to a $1.9 million restructuring charge. If we were to exclude the volatility created by quarterly fair value adjustment to our equity accounted investees, the improvement in adjusted operating income compared to the same third quarter of the prior year would have been $19 million. Free cash flow was positive in the quarter at $9.2 million, bringing the year-to-date free cash flow to a negative $2.8 million. We’re on pace to deliver positive free cash flow for the 2024 calendar year, in line with or ahead of guidance. Free cash flow in the quarter was lower than in the same period of prior year, driven by different management of phasing of retail inventory buildup throughout the year, as we will discuss in a few minutes. When examining the historical quarterly financial performance evolution, we clearly observe a few patterns. Net revenue in 2024 is relatively flat compared to 2023 as the strong growth in our Cannabis segment is being offset by market softness in the larger Liquor segment. We also see a clear trend of profitability improvement, both in gross profit and adjusted operating income. The same applies to free cash flow, where there is a noticeable upward trend compared to previous years. Additionally, we observed a more muted seasonality effect, thanks to our disciplined approach to working capital management. As we look at the contributions from each segment, we can see how the net revenue decline in Liquor is impacting the overall consolidated results despite the strong performance from Cannabis. When we add the $5.6 million net revenue growth from Cannabis retail, the $4.1 million from Cannabis operations and the negative $3.1 million in the Corporate segment related to the revenue elimination from Cannabis operations sales into our own retail, we arrived at a total of $6.5 million or 8% growth in Cannabis. In terms of gross profit, Liquor Retail shows a small decline of $0.3 million despite the larger revenue shortfall. Cannabis Retail contributes to an improvement of $0.7 million, while Cannabis operations is driving most of the growth with an impressive $14 million improvement. The aggregate of all the segment adds up to $14.4 million or 30% growth in gross profit. When looking at adjusted operating income, we can clearly see the significant step-up in profitability driven by our operating segments, offset by the volatility of the fair value adjustment in our Investment segment. Our Corporate segment shows a small unfavorable variance of $1.4 million, driven by inflation and the different phasing of onetime expenses, partly offset by restructuring productivity savings. Free cash flow is positive at $9.2 million in the third quarter of 2024, although it is a reduction compared to the same quarter in the previous year, this reduction is driven by a different phasing of inventory buildup between the quarters. We can see this more clearly on the next page. As we examine the drivers of free cash flow in the third quarter of 2024, we first noticed the negative $19.3 million in net income, primarily driven by the fair value adjustment in our Investment segment. Since this is a noncash item in our P&L, it is offset by noncash add-backs, which are higher in the third quarter compared to the previous 2 quarters for this reason. A benefit we saw in the third quarter was a collection of $10.7 million of accrued interest related to the repayment of the majority of Ascend and Jushi loans from SunStream. This interest was previously recorded in our P&L as part of the net asset value of the Investment segment. As the interest was collected, we see a positive impact on free cash flow. The repayment of the principal balance was associated with these 2 loans, while reported as an increase in cash is excluded from free cash flow calculation. The net change in inventory and other working capital is slightly positive at $0.9 million in the third quarter of 2024, with relatively small fluctuations between quarters. As we can see in the bar chart on the right of Page 7, in 2024, we have significantly less volatility in terms of inventory seasonality buildup. In previous years, we had a large increase in the first quarter, a moderate increase in the second and reductions in the second half of the year. In 2024, the buildup in the first half was much smaller. And as a result, the reduction in the second half will also be smaller. Let’s now look at each of the 3 operating segments, starting with Liquor Retail. Net revenue in the third quarter of 2024 for this segment was $144.6 million, a decline of $7.2 million or 4.8% compared to the prior year. While the decline is smaller than what we saw in the second quarter and revenue is growing quarter-over-quarter by $4 million, what is still impacted by the softness seen across North America. We continue to believe this is not a concern in terms of long-term growth potential for this segment. Despite these macro headwinds, we continue to expand gross margin, reaching 25.6% in the third quarter, an improvement of 100 basis points compared to last year. As a result of this margin expansion and efficiencies in the management of operating expenses, this segment’s operating income delivered significant growth of $3.5 million or 42.5% compared to the same quarter of 2023. Moving into Cannabis Retail. We saw net revenue in Q3 2024 of $81.1 million, a 7.4% increase compared to Q3 of 2023. This growth was mainly driven by same-store sales growth of 2.3%, new store openings and incremental revenue from our Dutch Love stores acquired earlier in the year. The gross margin of 25.5% represented a reduction of 100 basis points compared to the same period of last year due to several strategic pricing decisions aimed at increasing the store traffic. Adjusted operating income increased by $1 million or 28.1% compared to the prior year, driven by the gross profit improvement. Finally, our Cannabis Operations segment is once again showing the largest improvement, both in terms of growth and profitability. In the third quarter of 2024, this segment delivered net revenue growth of 19% year-over-year, reaching $25 million. All of this growth is organic and driven by increased provincial board and B2B distribution. By accelerating gross margin improvements through several productivity initiatives, the segment reached a new record of 21.2%, translated to $5.3 million in gross profit. This is a significant step-up compared to last year and previous quarters. Adjusted operating income was negative $0.6 million, marking an improvement of close to $14 million compared to the same period last year. In summary, our Cannabis business is experiencing strong growth, and we’re driving significant improvements in profitability and cash flow generation. We’re on pace to deliver our guidance of positive free cash flow for the full year, marking an important step in contributing to raise the bar and realize our full potential. I would now like to pass the call back to Zach to share a few more operational highlights for the quarter.

Zachary George: Thank you, Alberto. Beyond our financial performance, I would also like to highlight our core priorities: growth, profitability and people as each are fundamental to our long-term success. Starting with growth, our Cannabis segments have led with a combined net revenue increase of 7.4% year-over-year in Q3 and an impressive 90 basis point share gain in Canadian retail. Key drivers include quality execution, stabilization from 2023 store openings and the recent expansion into British Columbia. Our Cannabis Operations segment showed dynamic growth of 19%, driven by quality and innovation with 71 distribution points added this quarter and 491 year-to-date. Through M&A, we strengthened our portfolio with 2 very recent acquisitions, Indiva, making us a leader in Canadian edibles and the privatization of Nova, allowing SNDL shareholders to fully benefit from retail segment growth. In Liquor retail, despite this year’s market contraction, our private label offerings are growing to meet consumer demand for quality and affordability while driving margin accretion. Shifting to profitability. We are pleased to see continued strong momentum, leading to the record gross margin and $9 million of positive free cash flow in the quarter. Our positive free cash flow was enabled by efficiency improvements and interest income and not impacted by the noncash fair value adjustment of our investment portfolio. Productivity improvements totaled $15 million in Q3, largely from our Cannabis Operations segment through procurement, manufacturing and cultivation efficiencies. Data licensing in our Cannabis and Liquor Retail segments reached $4 million this quarter, a 6% increase from the second quarter. We also achieved $5 million in overhead savings, more than offsetting inflation and growth investments driven by efficiency gains across all segments as well as restructuring actions initiated in July. As you can see on the following page, summarizing the restructuring program progress, this program delivered more than $2 million in savings in the quarter, equivalent to an annualized run rate of $10 million or about 50% of our planned target. Finally, we remain committed to our people as a top strategic priority. In the second quarter, we launched a strategic talent review to identify key roles as well as development and succession plans. We continued deploying several community engagement initiatives, offering all of our team members the possibility to participate in sessions around mental and physical well-being and also rolled out an employee recognition program with over 40 awards being presented across our organization, celebrating the amazing contributions from our team members. Last but not least, we continue the development of a total reward structure that aligns our compensation philosophy with both individual and company performance. My conviction and confidence in our team that is setting new records with each quarter are at all-time highs. Our dedicated leaders have the expertise and drive to unlock SNDL’s significant potential. I’d like to thank our entire team for their contributions and our shareholders for their continued trust. I will now pass the call back to the operator for analyst Q&A. Thank you.

Operator: [Operator Instructions] The first question comes from the line of Frederico Gomes from ATB Capital Markets.

Frederico Gomes: First question on the Nova acquisition. Could you talk about, I mean, why you decided to acquire that remaining stake? And strategically, I guess, just what sort of advantages do you see in owning — fully owning Nova as opposed to a majority stake?

Zachary George: Frederico, thank you very much for the question. So as you know, this is a very competitive space with excess taxation and reasonably low margins. So the acquisition of that minority stake in Nova is going to ensure that SNDL shareholders can get the full benefit of the cash flow and earnings potential of that retail business.

Frederico Gomes: On your Cannabis operations, quite a significant improvement in margins there. Can you talk a little bit about the key drivers behind that margin improvement? And in terms of your expectations going forward, do you expect to continue to see margin expanding? And if so, where is that going to come from?

Alberto Paredero: Yes. Fred, this is Alberto. So yes, actually, most of the — or all of the improvements are driven by an end-to-end holistic productivity program that the management team of the segment has put in place already since the end of last year. As you remember, in the fourth quarter of 2023, we decided to exit or close the Olds facilities that created already a bump in the gross margin and the profitability of the segment in the first couple of quarters. Since then, we have been driving efficiencies in labor and automation in our manufacturing facilities. We’re seeing a ramp-up in our cultivation assets as well. So as we were already anticipating in the previous quarters, we were expecting to be over 20% by the end of this year. So we’re happy to see that already happening in the second — in the third quarter. And we have a long list of additional initiatives, including the additional capacity utilization from the growth that the business has seen and more automation and efficiency improvements that will continue to push that gross margin further up.

Zachary George: Yes. Frederico, you’ve been following our story for quite some time, and you’re well aware that in the earlier days several years ago, Olds was sitting with exposure to a power jurisdiction that really challenged its competitiveness. And so as we’ve built the business, leaned more into procurement and broadened out our manufacturing capabilities, we have been able to eliminate exposure to high-cost biomass, which would really impair COGS. And so that was a meaningful first step that’s been showing up through the numbers in the last year. And our President of Cannabis, Tyler Robson, has been leading for a number of initiatives that are being very impactful in today’s environment, including managing mix, SKU creep, automation. And so there’s a number of efficiencies that are still in play. And we’re very confident in the team being in a position where they actually understand the drivers here and can action against the economic outcomes that we’re seeking. So when we think about room for expansion, do we think that we can take gross margins to a zone where they have a 3 handle, the answer is absolutely. So a lot more to come here.

Frederico Gomes: Perfect. And then just one more for me. In regards to capital allocation, I know that you mentioned a bit of this, but how are you looking at, I guess, different growth options and investments in Canada, the U.S. or other geographies internationally? And the second part of the question also in regards to your buyback, you obviously repurchased some shares recently. So can you comment on those repurchases? Is it something that you intend to continue to do tap that buyback? And in terms of the valuation here, you bought it at $1.90. So how do you view your valuation right now at over $2.20?

Zachary George: So there’s a few questions in there. Just starting with capital allocation. It’s going to be a very similar answer consistent with what we spoke about last quarter, Frederico. So two real key priorities in terms of capital allocation are going to be continued growth in Canadian retail and also investment in – potential investment in assets in the U.S. Both of those pillars are part of our core multiyear strategic plan. And when you think about the repurchase of shares, we absolutely want to take advantage of repurchasing shares at levels that we think reflect a discounted valuation. The transactions that you referenced were part of a nondiscretionary trading plan, which we were able to execute through a blackout period. And this is something that will be regularly reviewed by our Board in terms of scale and levels at which to purchase. So we expect to be in a position to acquire shares on an ongoing basis. I think there’s a misconception out there that somehow a share repurchase plan is best used to prop up a security. And that’s just something we will never do. It’s really for the benefit of long-term holders as we’re reflecting really strongly into positive free cash flow and ultimately net income.

Operator: Our next question comes from the line of Yewon Kang from Canaccord Genuity.

Yewon Kang: So my first question is regarding the recently completed Indiva acquisition. Through that transaction, SNDL obtained a facility in London. And my understanding is now that the company has 2 edibles-focused facility, including the LYF facility in Kelowna. Just wanted to ask about if you guys have any plans to consolidate these facilities in the future. And I know it’s only been a few weeks since the acquisition closed, but could you guys give us a color on the upside you’re seeing from integrating Indiva brands onto your distribution channel?

Zachary George: It’s a great question. And I’ll let Alberto talk a little bit about our broader planning. The acquisition actually closed yesterday, so well inside of a few weeks. And we’re very excited about the addition of the Indiva team and product mix to our broader business. You will see an impact in Q4 from almost 2 months’ worth of performance there. And given the margin profile that’s available in the edibles category, we see that this acquisition being margin accretive to our upstream manufacturing portfolio. So it’s something we’re very excited about. I would answer the question on real estate more broadly. There are a number of opportunities we have for facility consolidation that will result in noncore real estate being available for monetization, which should further bolster cash balances and enable us to recycle capital into accretive opportunities. We’re going to be working on a longer-term prudent and thoughtful integration plan with Indiva, and we’ll be able to provide more details on that in the coming months.

Alberto Paredero: Yes. Just to add the — both our teams, the existing of SNDL and the team from Indiva now joining our family, they are already collaborating and exploring the different synergy opportunities that we have across revenue, supply chain and operating expenses. We do have a long list of ideas that are being analyzed to make sure we make the right choices and the right decisions. But certainly, we do see a lot of synergies. We’ll be able to share where those opportunities are as we complete the analysis in the next several weeks.

Yewon Kang: And just a second question on the retail environment for Cannabis dispensaries. So a couple of your peers have called out some of the pressures that they’re seeing in Ontario, specifically in relation to the illicit stores popping up all around the province. Just wanted to ask if you have been seeing similar pressures on your retail stores as a result of this illicit market that’s popping up again and what your thoughts are going forward in terms of the provincial regulators coming in to regulate these illegal stores?

Zachary George: It’s a great question. It’s also a very difficult question. The impact of the illicit market in the Canadian – within the Canadian landscape has been constant. I wouldn’t say that there’s some new emergence of headwinds. They’ve been there in different forms in most provinces. What we do know is that there is some degree of enforcement happening, and we’ve seen pockets and incidents that are encouraging in terms of our provincial government’s willingness to stamp out the illicit market. We still need broader regulatory change to help support that. And we believe that you’re going to see additional rational reform come through in 2025. Even something as small as changing the limits on edibles from 10 milligrams to 100 would have a material impact on illicit market trade. Again, no one’s coming to save us here. So what we do know is that convenience and value are winning with the consumer at the end of the day, and we’re able to offer a very competitive selection that is delighting consumers. And so we’re going to continue to focus on being strong competitors in the legal market.

Operator: [Operator Instructions] This concludes the question-and-answer session. I would like to turn the conference back over to Zach George for any closing remarks.

Zachary George: Thank you, operator, and thank you to everyone for joining us for the call. We look forward to updating you in the coming months. Have a great day.

Operator: This concludes today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Stock Markets

Dow rack up over 1,000 points after Trump victory spurs risk on sentiment

Published

4 hours ago

November 7, 2024

Investing.com — The Dow racked up strong gains Wednesday as Donald Trump was elected the 47th President of the United States, stoking optimism that his policies could spur further economic growth.

At 1.05 p.m. ET (18:05 GMT), the surged 1,394 points, or 3.3%, the index 2.2%, and the climbed 2.6%.

All three indices soared to all-time highs, with the last time the Dow jumped over 1,000 in a single day being in November 2022.

Trump wins White House; Red sweep likely

The Associated Press and other major news networks have declared Trump the winner of the 2024 presidential election, confirming his return to the White House.

Meanwhile, the Republicans have taken a majority in the Senate, the upper chamber of the US Congress, and were also on track to win the House of Representatives, raising the possibility of a Republican sweep in the 2024 elections.

“The big question for markets now is whether Trump’s win will bring full Republican control or a split government. If Republicans take both chambers, Trump could have more room to cut corporate taxes—a potential boost for investor confidence, ” said Russell Shor, Senior Market Specialist at Tradu.

Republican control of Congress–the so-called “red sweep”–presents a much easier path for Trump to enact major policy changes that some expect will likely continue to support the current bull market.

“In our base case, we expect the S&P 500 to rise to 6,600 by the end of 2025, a near-15% price return from current levels, driven by our expectations of benign US growth, lower interest rates, and the continued structural tailwind from AI,” UBS said in a Wednesday note.

Trump is widely expected to enact more inflationary policies, given his largely protectionist stances on immigration and trade.

The and Treasury yields shot up on this notion, with the greenback hitting a near four-month high.

‘Trump trades’ prosper, vulnerable renewables sag

Individual stocks closely associated with the Trump campaign also benefited strongly Wednesday.

Trump Media & Technology (NASDAQ:), which owns the Truth Social platform and is primarily owned by Donald Trump, soared nearly 6%.

Tesla (NASDAQ:) stock rose 14%, with the electric vehicle giant viewed as a key beneficiary of a Trump win, as CEO Elon Musk was a major backer of the former president’s campaign.

Citigroup (NYSE:), Bank of America (NYSE:) and Wells Fargo (NYSE:) all rose strongly as investors waged that the new Trump presidency would result in less regulation in the banking sector.

Coinbase Global (NASDAQ:) stock rose 28%, with the cryptocurrency exchange helped by bitcoin climbing to a record high as Trump has positioned himself as pro-cryptocurrency.

On the flip side, First Solar (NASDAQ:) stock fell 10%, falling along with other renewable energy firms, with Trump expected to roll back many of the climate regulations passed under President Joe Biden.

Fed meeting in spotlight

The central bank is widely expected to at the conclusion of a two-day meeting on Thursday.

Any signaling on the Fed’s plan for future rate cuts will be closely watched, given recent signs of stickiness in U.S. inflation. The central bank has signaled a largely data-driven approach to future easing.

(Peter Nurse, Ambar Warrick contributed to this article.)

Stock Markets

Western Alliance stock hits 52-week high at $94.41

Published

4 hours ago

November 7, 2024

Western Alliance Bancorporation (NYSE:) stock soared to a 52-week high, reaching $94.41, marking a significant milestone for the company. This peak reflects a robust performance over the past year, with the stock demonstrating a remarkable 1-year change, surging by 100.58%. Investors have shown increased confidence in the financial institution, as Western Alliance continues to capitalize on strategic growth opportunities and deliver strong financial results, propelling the stock to new heights. The 52-week high serves as a testament to the bank’s resilience and the positive sentiment surrounding its future prospects in the competitive banking sector.

In other recent news, Western Alliance Bancorporation has declared quarterly dividends for both its common and preferred stock, and has been the focus of various financial firms’ analyses. The company announced a cash dividend of $0.38 per share for its common stock and a quarterly cash dividend for its 4.250% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, amounting to $106.25 per share. Financial firms such as Piper Sandler, Citi, and Barclays (LON:) have adjusted their price targets and earnings per share (EPS) estimates for the bank. Piper Sandler reduced its price target to $101, citing a slight decrease in EPS estimates for the coming years. Citi raised its price target to $102, anticipating a reduction in the bank’s GAAP expenses in the upcoming year, while Barclays reduced its price target to $105. These recent developments occurred after Western Alliance Bancorporation reported a steady third-quarter performance with an EPS of $1.80, significant deposit growth of $1.8 billion, and loan growth of $916 million. The bank anticipates fourth-quarter loan growth at approximately $1.25 billion, with an expected decrease in deposits by $2 billion due to seasonal outflows.

InvestingPro Insights

Western Alliance Bancorporation’s recent stock performance aligns with several key metrics and insights from InvestingPro. The company’s market cap stands at $10.27 billion, reflecting its substantial presence in the banking sector. WAL’s P/E ratio of 14.41 suggests a relatively attractive valuation compared to industry peers.

InvestingPro Tips highlight WAL’s strong recent performance, noting a “high return over the last year” and “strong return over the last three months,” which corroborates the article’s mention of the stock’s 100.58% surge over the past year. Additionally, the tip indicating that WAL is “trading near 52-week high” directly supports the article’s main focus on the stock reaching a new peak.

The data shows a robust revenue growth of 12.72% over the last twelve months, demonstrating WAL’s ability to expand its business. This growth, coupled with an operating income margin of 39.17%, underscores the bank’s operational efficiency.

Investors seeking more comprehensive analysis can access additional insights through InvestingPro, which offers 11 more tips for Western Alliance Bancorporation, providing a deeper understanding of the company’s financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.