SNDL Q4 2023 Earnings Call Transcript

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Provided by Quartr
March 21, 2024

Key Takeaways

  • In 2023 SNDL achieved record net revenue of C$909 M (+28% y/y) and gross profit of C$190 M (+36% y/y), generating positive free cash flow of C$18 M in H2 and adjusted EBITDA of C$29 M.
  • The January 2023 Valens acquisition drove ~C$22 M in annualized cost synergies through better capacity utilization, automation and cultivation footprint optimization, with further cannabis operations efficiencies expected in 2024.
  • SNDL’s liquor retail segment enhanced margins via data programs, refined inventory and private label growth, while cannabis retail hit record net revenue of C$290 M (+41% y/y) and gross profit of C$74 M (+56% y/y), including C$12.3 M in data licensing revenue.
  • The company maintains diversified exposure with manufacturing across major cannabis categories and a non-consolidated US portfolio valued at C$572 M via its Sunstream Bancorp joint venture, positioning for compliant U.S. multi-state expansion.
  • SNDL is debt-free with C$767 M in unrestricted cash, marketable securities and credit investments against a market cap of ~C$530 M, extended its share buyback through November 2024, and believes shares remain materially undervalued.
AI Generated. May Contain Errors.
Earnings Conference Call
SNDL Q4 2023
00:00 / 00:00

There are 8 speakers on the call.

Operator

Good morning, and welcome to Essendial's Year End and 4th Quarter 2023 Financial Results Conference Call. This morning, sNDL issued a press release announcing their financial results for the year end and 4th quarter ended on December 31, 2023. This press release is available on the company's website atsndl.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 along with a shareholder letter from Chief Executive Officer, Zack George, on its sndl.com website.

Operator

Presenting on this morning's call, we have Zack George, Chief Executive Officer Alberto Padero, Chief Financial Officer Tank Lander, President Liquor Retail and Tyler Robson, President Cannabis. 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 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.

Operator

We will now make prepared remarks, and then we'll move on to analyst questions. I would now like to turn the call over to Zack George. Please go ahead.

Speaker 1

Good morning, everyone, and thank you for joining us on our full year and Q4 2023 earnings call. 2023 was a transformational year for SMDL, marked by several financial milestones, including record revenue and gross profit. The year began with remarkable year over year revenue growth of almost 1,000 percent in Q1 of 2023, which was then followed by positive free cash flow generation of $18,000,000 in the second half of the year. 2023 net revenue a record $909,000,000 a 28% increase from the previous year, while gross profit surged to a record $190,000,000 dollars up 36% from the prior year. SNDL's team has worked to build a scaled and diversified platform that we believe will be the basis for the creation of sustainable shareholder value.

Speaker 1

Our operations include award winning liquor and cannabis retail banners, broad manufacturing capabilities and a uniquely positioned non consolidated exposure to U. S. Cannabis operators with a fair value of more than $500,000,000 We are also in the process of monetizing a number of real estate and credit assets that will continue to feed and strengthen our industry leading balance sheet. The acquisition of Valens in January of 2023 was a key tactical move for SNDL, enhancing our upstream capabilities in Canadian cannabis. We now have manufacturing capabilities across all major product categories and continue to drive automation and labor efficiencies.

Speaker 1

We have exited exposure to high cost own cultivation and leaned into procurement opportunities. Integrating Valens' operation into our infrastructure has led to significant synergies resulting in approximately $22,000,000 in annualized cost savings. These savings stem from better capacity utilization and various cost reduction initiatives, including the optimization of our cultivation footprint. Our progress is reflected in the steady sequential improvement of our gross profit over the year. We expect our cannabis operations segment to deliver additional operating efficiencies in 2024 and are excited by growth opportunities in B2B and international markets.

Speaker 1

We've continued to build upon the stable foundation of our liquor retail segment with a focus on margin enhancement. We've achieved this through the launch of our data program, the refinement of inventory management practices and growth in private label offerings. These initiatives have been pivotal in optimizing our operations within this segment. We also reached record results in revenue, gross profit and cash flow within our cannabis retail segment. The increase showcases the company's efforts in continued margin expansion initiatives and data program enhancements.

Speaker 1

In 2023, we streamlined our investment portfolio by divesting from equity securities and certain credit exposures. As of year end, the company held a portfolio of cannabis related investments with a carrying value of $572,000,000 including $538,000,000 to Sunstream. SNDL's joint venture, Sunstream Bancorp, launched Sunstream USA Group in the 3rd quarter. This new entity is designed to hold the post reorganized equity of Skymint and Parallel, which include licenses in Florida, Michigan, Massachusetts and Texas. It is structured to exclude voting or operational control, enabling SNDL to preserve its NASDAQ listing until further regulatory reform allows for the consolidation of these exposures.

Speaker 1

The establishment of Sunstream USA Group represents a compliant arm's length expansion ensuring that SNDL does not engage in plant touching activities while participating in a multistate cannabis platform. The restructurings of Skymint in parallel result in simplified capital structures, the elimination of certain material liabilities and improved competitive positioning. The closing of these transactions will provide Sunstream USA Group with the optionality to access third party investors, engage in industry consolidation through mergers and acquisitions and gain critical consumer insights. The structure of Sunstream USA Group is being reviewed by NASDAQ to align with all U. S.

Speaker 1

Compliance and governance standards. While many Canadian operators make promotional statements regarding future U. S. Dominance, SNDL is the only Canadian licensed producer with cannabis enterprise exposure in the U. S.

Speaker 1

At this scale. We look forward to updating shareholders on these developments in the near future. As mentioned in my shareholder letter, which can be found on our website, SNBL maintains a debt free balance sheet with a market capitalization of around $530,000,000 well below our cash and credit investments valued at $767,000,000 and without any consideration for our operating segments, which continue to show both revenue growth and margin improvement. We believe that the company's recent market valuation does not reflect SNDL's intrinsic value and that the valuation gap is so significant that investors purchasing shares today could potentially be acquiring substantial asset value at a low or even negative cost on an applied basis. Considering the broader Canadian cannabis industry context and the CRA's garnishments to combat an estimated $300,000,000 in unpaid excise taxes, SNDL's financial health places us in an enviable position with our debt free, cash rich balance sheet with no tax arrears, we expect to benefit from the financial instability of peers who will struggle to consistently deliver product to provincial boards and end markets on a profitable basis.

Speaker 1

Our steadfast consumer centric approach and unwavering commitment to quality and regulated products remain the bedrock of our strategy. Our demonstrated success with both mergers and acquisitions and organic growth has laid the foundation for our team to build momentum and strive for excellence and execution. Looking ahead to 2024, we are well positioned for expansion, utilizing the extensive scale of our platform to drive sustained value creation for our shareholders. We are focused on realizing efficiencies and margin expansion across our segments with quality of consumer experience at the forefront of our endeavors. Finally, I want to express my gratitude to the entire and commitment to our vision.

Speaker 1

To our investors, this is a team that wants to win. We have significant work ahead, but the undeniable improvement in our results is driving conviction in our ability to push harder as we aggressively pursue our performance goals and outcomes. I will now pass the call to Alberto to provide more information on our financial results.

Speaker 2

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. Since joining SNDL team in July, I have seen significant progress, not just in terms of our financials, but for our organization as a whole.

Speaker 2

We have navigated the challenges of the regulatory products industry and made a strong improvement in how we operate and how we manage our finances. Our focus has been on strengthening the balance sheet, enhancing cash flow generation and driving profitable growth. Through several strategic initiatives and disciplined financial and operational management, we're improving our cost structure and sharpening our capital allocation. Not only have we redesigned our operating governance and financial planning processes, we have also realigned the finance structures and attracted key talent to drive value creation while increasing the efficiency of our back office. It is exciting to see how these changes are already having positive impact in 2024.

Speaker 2

Now let's dive into our consolidated financial performance for Q4 2023. Our net revenue reached $249,000,000 or 3% growth from $240,000,000 in the same quarter last year. This includes a revenue elimination entry of $12,000,000 that we introduced as of the Q3 of 2023. Without this adjustment, our net revenue growth in the 4th quarter would have been 8%. I am particularly proud to highlight our gross profit for the quarter, which sets a new record of $57,000,000 or 23 percent of sales.

Speaker 2

This compares to $44,000,000 in Q4 2022. This significant improvement is a testament to our supply chain optimization efforts including the strategic decision to close our old Alberta cultivation facility announced in October. Change in cash and cash equivalent was negative $7,000,000 compared to a negative $12,000,000 in the Q4 of 2022, a 42% improvement. We achieved a positive free cash flow of $1,400,000 in the quarter, showcasing the effective cash management despite the usual increase in working capital associated with the holiday season. This reflects our 2nd consecutive quarter of positive free cash flow in 2023.

Speaker 2

Our operating income saw a loss of $85,000,000 which includes $29,000,000 of restructuring costs and restructuring related asset write offs and also $29,000,000 of goodwill impairments. This is a 45% improvement over the $155,000,000 loss we report in the Q4 of 2022. Lastly, our adjusted EBITDA was a positive $3,500,000 a 147% improvement from the loss reported in the last quarter of 2022. This improvement is a clear indicator of our commitment to streamlining operations and enhancing our financial health. Turning to our annual performance.

Speaker 2

I'm pleased to report several record achievements in 2023. Our net revenue reached an all time high of 909,000,000 dollars up 28% from $712,000,000 in 2022. Gross profit for the year is a new record at 190,000,000 dollars or 21% of our sales. This is a significant increase of 36% compared to the $140,000,000 or 20% of sales we reported last year. This is a testament to our improved cost management and operational efficiency.

Speaker 2

Pension cash and cash equivalents was negative $84,500,000 in 23 compared to a negative $279,000,000 70 percent year over year improvement. A highlight for the year was achieving positive free cash flow in the 3rd and 4th quarters, totaling 17,700,000 This includes an impressive $16,300,000 in the 3rd quarter and $1,400,000 in the 4th quarter as mentioned earlier, demonstrating our ability to generate cash while continuing to invest in growth. Our operating income showed a loss of $163,000,000 for the year, which includes restructuring charges of $20,000,000 and asset impairments of $55,000,000 as well as streamlining our operations to enable future profitable growth. Despite this, we have seen a remarkable fifty 3% improvement from the previous year's loss of $348,000,000 Finally, our adjusted EBITDA from continuing operations increased to $29,000,000 in 2023, a significant improvement from a loss of $16,000,000 in 2022. I will let Tank and Tyler provide more details on the Q4 and year end 2023 results for the liquor retail and cannabis operations segments, but I would like to comment on the results for our Cannabis Retail segment.

Speaker 2

Cannabis Retail revenue includes operations of Nova retail stores for the period of March 31, 2022 to December 31, 2022. In Q4 2023, our cannabis retail segment witnessed a 10% increase in net revenue, reaching $75,000,000 compared to $68,000,000 in the same quarter of the previous year. And same store sales increased by 2%. Gross profit was $20,000,000 or 27 percent of sales, making a 27% increase from the previous year. Our proprietary data licensing program generated $4,200,000 in Q4 2023.

Speaker 2

For the year end 2023, for our cannabis retail segment, we achieved a record net revenue of 290,000,000 dollars making a significant 41% increase from the $206,000,000 reported in 2022. Equally North Wharfey is the record gross profit from this segment, which reached $74,000,000 or 25 percent of sales in 2023. This represents a substantial 56% year over year increase from $47,000,000 or 23% of sales in 2022. These figures highlight our successful margin expansion initiatives and operational efficiencies. Additionally, our proprietary data licensing program generated $12,300,000 in revenue in 2023, up 193% from $4,200,000 in 2022.

Speaker 2

Finally, looking at our investments and equity positions in the year end 2023. As of the end of 2023, the company has deployed capital into cannabis related credit investments with current value of $572,000,000 including $538,000,000 through the joint venture. In 2023, our investment portfolio generated a positive operating income of 12,000,000 dollars a significant improvement from the $91,000,000 loss in the previous year. Despite the minor decrease in interest and fee revenue to $14,000,000 from $17,000,000 our equity accounted in that this showed a notable recovery, contributing $6,800,000 in profits compared to 43 $1,000,000 loss in 2022. The company financials health is strong supported by $766,000,000 in unrestricted cash, marketable securities and investments, leading to a net book value of $1,200,000,000 It is also important to highlight that we have not raised any cash through the share offering since June 2021.

Speaker 2

And to date, the company has no debt. SMDL's Board of Directors approved extending the company's share repurchase program to November 202024. The company's share repurchase program continues to be available to lower the outstanding share flow. Management will continue to assess opportunities to utilize the program to the extent we believe it is in the best interest of our shareholders. For the 3 months ended December 31, 2023, the company did not purchase common shares for cancellation.

Speaker 2

Our results this year represent another solid step towards executing our business strategy, our culture of financial rigor and continuous improvement and the hard work and dedication of our employees. Looking ahead, we're committed to continue in our path of fiscal responsibility and strategic growth. Our goals are clear to deliver value to our shareholders, to invest in innovation and growth opportunities and to strengthen our market position. I will now pass the talk to Tank to provide an update on our liquor retail results.

Speaker 3

Thank you, Alberto, and thank you all for joining today. Our liquor retail segment remains a steady revenue driver, providing opportunities for increased margins in SNDL's regulated products business. Margin expansion remains a crucial focus as consumer patterns shift in liquor retail. This ensures ongoing growth for our liquor banners while consistently delivering exceptional customer experiences. Looking at full year revenue for 2023, liquor retail contributed 5 $79,000,000 to our cumulative revenue.

Speaker 3

This represents a growth of 25% year over year from $462,000,000 Revenue comparisons for liquor retail in 2022 include operations from March 31 to December 31, 2022 following the acquisition of Alcana. In Q4 2023, revenue remained steady at $159,000,000 stable from Q4 2022 and increasing 5% from $152,000,000 in the preceding quarter. As of December 31, 2023, our store count remains stable with 170 total stores, comprised of 12 Wine and Beyond, 20 Liquor Depot and 138 Ace Liquor Discounter locations. The impact of Wine and Beyond banner in new markets is highlighted by the success of our Kelowna Dilworth location, which has seen a 20% increase in revenue year over year. Additionally, the Dilworth location has seen its margin increase 17% from the year prior.

Speaker 3

We look forward to opening a new Wine and Beyond location in Airdrie, Alberta in early Q2, 2024, building on the success of this banner. Gross profit for 2023 amounted to 1 $137,000,000 representing approximately 24% of sales, up 29% from year prior. For the Q4, gross profit increased to $38,000,000 or 24% of sales from $37,000,000 in Q4 2022 and up 3% from Q3 2023. These increases are driven by seasonality, procurement productivity and a continued focus expanding and enhancing our private label offerings, which is a key driver in total margin expansion. Private label sales increased by approximately 28% in 2023, now representing 11% of total sales across all banners, an increase of 2% from the year prior.

Speaker 3

In Q4 2023, gross profit for private label increased 19% from Q4 202220% sequentially. As a key growth tactic, we are continually developing our private label program to boost margins, while maintaining the diverse selection our customers know and love. Looking to additional growth opportunities, we have officially launched proprietary data agreements for our liquor retail segment and revenue will be reported in the Q1 of 2024. Leveraging insight from our cannabis retail segment, we are now able to capitalize on our customer insights to improve vendor relations and the end to end customer experience, creating accretive revenue and margin growth initiatives with no associated cost of sales. We continue to focus on expanding our reach and accessibility, specifically through digital and e commerce avenues.

Speaker 3

Piloting new advertising opportunities, we aim to broaden our digital reach while reducing our environmental footprint. Moving away from traditional print methods is expected to deliver significant cost savings while creating new opportunities to engage our consumer base. Our achievements in 2023 underscore our sharp focus on fundamentals and margin expansion, positioning our business to adapt to changing market conditions. This sets the stage for sustained top line growth throughout 2024. Thank you.

Speaker 3

And I will now pass the call over to Tyler Robson to cover our Cannabis Operations segment.

Speaker 4

Thank you, Tank. Reflecting on my 1st full calendar year with SNBL, I'm incredibly proud of the team's achievement and confident in our strategic direction moving forward. 2023 was a building year. We had to dismantle the house and fortify our foundation to support the future of SMDL. We reorganized our facility footprint, streamed on our product portfolio, optimized our processes with a sharp focus on quality and efficiency.

Speaker 4

We changed the fundamentals of our business aiming for near term profitability for our cannabis operations segment. This set the stage for a strong 2024 and we have already seen preliminary indicators of our future success. Net revenue for 2023 was $87,000,000 The growth represents a 96% increase from the year prior, supported by provincial support revenue increasing by 102% and wholesale revenue by 3 91%. Net revenue for the Q4 of 2023 was $26,000,000 up 112% from $12,000,000 in Q4 2022 and 24% sequentially. This revenue increase highlights the impact of our strategic initiatives, including the acquisitions of Valens and Zenimas and improving the sales performance across our portfolio.

Speaker 4

Q4 2023, we saw an improvement gross profit to negative CAD1 1,000,000 from negative CAD9 1,000,000 in the same quarter of the previous year, marking an 88% improvement. This significant enhancement in gross profit primarily resulted in the decision to close Olds Alberta facility and move away from high cost cultivation. We still have room for improvement, but we have established substantial competitive advantages over the past year. We have better aligned our operations to manage the fluctuating market, addressing inventory and cost challenges that have stalled our gross margin growth in previous years. We have rationalized our portfolio and shifted over our cultivation efforts to better meet consumer demand, emphasizing the quality, potency and consistency.

Speaker 4

SNDL has adopted a fewer, bigger, better approach, resulting in the reduction of our total SKU count from 327 to 125, sharpening our focus on key consumer categories. Our improvements in innovation are apparent in record depletion rates and increased acceptance of new SKUs by the Provincial Board. We have clear a path to win in the key categories of vape, flower, pre roll through improved hardware, increased potency and to ensure consistent and exacting quality standards. After the quarter end, we revoked our cultivation license from the old facility. Following the transition of all cultivation activities to AFFO, New Brunswick in October of 2023.

Speaker 4

The significantly reduced overhead costs coupled with the improvements in cultivation yield position us to further capitalize on revenue and margin growth in the coming quarters. After a tactical and transformative year, we are seeing our expected results and a strengthened path forward for our cannabis operations segment. We remain diligent on quality, financial prudence and process innovation to continue to deliver long term value for both our shareholders and our consumers. Thank you. And I will now pass the call back to Zack for closing remarks.

Speaker 1

We are proud of our milestones this year and remain focused on sustained profitability. We are determined to continue this upward trajectory and the team is committed to driving shareholder value and excellence in all aspects of our operations. Thank you for your attention this morning. We look forward to providing additional material updates on our initiatives and presenting our Q1 2024 results in the next 45 days. I will now pass the call back for analyst questions.

Speaker 1

Thank you.

Operator

Thank you. We will now begin the analyst The first question comes from Federico Gomez with ATB Capital Markets. Please go ahead.

Speaker 5

Hi, good morning. Thank you for taking my questions. Zach, in your shareholder letter, you mentioned how attractive your valuation is and you said that either the management team is going to close the valuation gap or market forces will. So could you just expand a little bit on that in terms of the alternatives you have or are evaluating to try to close that gap? And also why be more aggressive with buybacks this quarter?

Speaker 5

Thank you.

Speaker 1

Good morning, Fred. Thanks for the question. So just taking that in reverse order, due to earnings, cadence and strategic activity, we've actually been in a blackout for quite a while. That blackout gets lifted into the end of March here. So we do have the option to repurchase shares at these levels.

Speaker 1

In terms of the reference to closing the valuation gap, we're focused on fundamentals, 1st and foremost. And as we've been speaking for the last 2 years about our journey to sustainable free cash flow, We do believe that that's the key to bringing in incremental investors, getting institutions to take a look at our business model and ultimately result in much higher implied values than what we're seeing today. In terms of other alternatives, I think that that's somewhat self explanatory. There are a whole host of options. You've got a multi segment business model.

Speaker 1

You have a debt free entity that is cash rich. And so there are a number of opportunities for a variety of different transactions that could be looked at in order to unlock value.

Speaker 5

Thank you. I guess my second question is on the competitive environment in Canada, specifically on your cannabis operations. There obviously have been reports about the CRA cracking down on delayed excise taxes. I'm just curious, are you seeing any meaningful improvements in competition here this year? And I guess from a supply and demand standpoint, do you think that the Canadian market is looking better at this point or still oversupplied?

Speaker 5

Thank you.

Speaker 1

It's a great question. I would say that we can safely say that Canada remains very well supplied. Certainly, recent actions and the garnishment effects that we're seeing in just at their early stages are going to have an impact on product availability and the number of licenses ultimately that are out there in Canada. But it's still early days. You've seen a few companies disclose events or move into restructurings as a result of excess liabilities.

Speaker 1

But we believe there's quite a large iceberg underneath the water. And so the concentration of these excise arrears are unclear at this time. So we expect a greater impact. But this is an important part of sort of balance being brought back to the Canadian industry. It's certainly going to take some time, but that process is absolutely underway.

Speaker 5

Thank you very much. I'll hop back in the queue. Thanks.

Operator

The next question comes from Yuan Kang with Canaccord Genuity. Please go ahead.

Speaker 6

Hi, good morning. This is Erin King on behalf of Matt Bottomley. Thank you for the question. Just wanted to ask about the adjusted EBITDA margin this quarter. It came in about 1.4%.

Speaker 6

There was a sequential decline of about 5.5%. Could you comment on the drivers behind this EBITDA slide quarter over quarter? Thank you.

Speaker 2

Yes. Thank you, gentlemen. Thank you for the question. Yes, the main driver was actually a change in valuation in our Sandstream investments related to an increased contribution from our company. We have to remember we're valuing this Sunstream investment, particularly right now for Parlin and Skymint on the basis of the future cash flow generation.

Speaker 2

So any short term changes to investments or collections have short term impacts in those valuations, but the underlying cash flow expectations that we have from these businesses in the future remain steady. So I will say it's purely the way our accounting works, but that's the main driver is actually an $8,000,000 loss that we recorded in the Q4 according to that.

Speaker 6

I see. Thank you so much. And if I could just ask a follow-up. I think you guys already touched upon this during Federico's question, but how have you guys taken the recent regulatory changes that have been proposed in the Canadian cannabis environment, whether it's the recommendation coming out of the committee in terms of adjusting the excise tax structure, and the elimination of provincial stamps along with we're hearing some news about potential retailer and license produced partnerships being used or being recommended. So I guess my question is how have you guys been taking this news and has this kind of impacted any of your future expectations going forward?

Speaker 6

Thanks.

Speaker 1

Thank you. It's a great question. There were a number of questions in there. Look, in terms of excise reform, I would we would reiterate the view that this is going to take quite a bit of time. No one is coming to save us as participants in this industry.

Speaker 1

And so we don't actually expect excise reform to impact the fundamentals of Canadian operators in the near term. That's probably a multiyear path. There are there is room for optimism. We are seeing common sense reform move across a number of provinces and the federal government. So whether that's some loosening of rules around marketing, clearer path and understanding of the allowable relationships between retail license holders and LPs, increase in license caps, changes to allowable product formats.

Speaker 1

There are a number of initiatives that are going to drive efficiencies and improvement and ultimately improve the consumer experience that are undeniable positives. But we expect a pretty slow pace of change on some of the larger items such as excise reform.

Speaker 6

Got it. Thank you so much. I'll jump back into the queue.

Operator

The next question comes from Pablo Zuaneck with Zuaneck and Associates. Please go ahead.

Speaker 7

Good morning, everyone. Zach, regarding the Sandstream portfolio, maybe I lost I missed it in the presentation, but I think the fair value, it says €551,000,000 I don't know if you can comment about the outstanding principal and it's 5 credits, how much of that is parallel and mint and if you can remind us what is the rest. I think in the past you've given some color on that, But it'd be nice to know of the principal, how much is being equitized and how much is still outstanding, if you can give some color there. Thank you.

Speaker 1

Yes. Thank you, Pablo, and good morning. Good to hear from you. So we haven't given delineation on individual credits. You're correct that of the 5, we have 3 performing credits in the portfolio, 2 were in the process of being equitized, because those capital structures need to be solidified in the restructuring itself and the fact that we are right in the midst of review with NASDAQ.

Speaker 1

We're going to hold off on commenting on the scale and individual valuation of those equitized credits that we expect to occur in the near term. And when we do move forward and the NASDAQ review is completed, we expect to give significantly more transparency on the state of play with those entities, the structure and the initial valuation.

Speaker 7

Thank you. And then in terms of Sandstrom USA, the new company you're setting up, is the only thing pending the NASDAQ issue or is there any type of litigation still going on? I mean, the trade press has had comments on the matter, especially around Skymint and I think even Parallel. But just some color would be helpful there. Is it all done and completed and now a matter of the Nasdaq issue or is there still anything else pending?

Speaker 7

Thank you.

Speaker 1

Yes. In terms of outstanding matters, the key issue for us to close is this final hurdle with the NASDAQ. There are as you point to, there are lingering litigation issues involved in these restructurings, frustrated stakeholders, pursuing different outcomes and taking action against various stakeholders, sometimes legacy stakeholders and sometimes existing creditors, which would include our Sunstream group. So those are ongoing, and we're not going to get into too much detail about current litigation, but we don't believe that this is going to hold up our timeline

Speaker 2

any further.

Speaker 7

Understood. And then if I can just add one more. I mean, obviously, Florida, we're all waiting for April 1, right? See what happens to the Supreme Court there. There could be a scramble for expansion capital investments.

Speaker 7

Is Surterra, to some extent, or parallel, come strong for the time being until this whole deal closes? Or can you help them in any way to expand if that were to make sense?

Speaker 1

I would not describe either Skymint or Parallel as being hamstrung. The existing management teams are aggressively working to right size their business. There's been significant improvement in their cost structures over the last 2 years. They have they're very much living in reality and the improvement in those in the performance of those businesses has been material. Again, we don't have those positions consolidated.

Speaker 1

And so we're excited about being able to provide detailed supplemental information as we complete these restructurings.

Speaker 7

Okay. Thank you. Luca, if you don't mind, I mean, I don't know if there's more people in the queue, but I'll add a couple of more. So regarding the other free credits on Sunstream, and I know you can't say much there, but on the JV Sunstream Bancorp, once you set up Sunstream USA and you have all these very attractive assets in Florida, Michigan and other places, you become an attractive partner to a number of people, right? So I know it's a bit hypothetical, but the 3 other credits, even though they may be performing, they could still become part of the ecosystem, right?

Speaker 7

I'm saying you could even equitize them, if that were to make sense, are you going to negotiate that? Can you make any general comments on that? Or that's just out of your question?

Speaker 1

No, it's an astute observation. There are a number of opportunities for further consolidation in the U. S. We have been approached by a handful of parties that are very interested in gaining greater efficiencies and scale and consolidating the U. S.

Speaker 1

Landscape. Those parties may be part of the existing credit book, but there's also a number that are outside of that group as well. So there are a number of broader discussions that get had from time to time. If something material were to arise, it would certainly be disclosed. And until then, we're really focused internally on improving performance within our platform.

Speaker 1

But do expect at the margin that consolidation and M and A opportunities will arise over the next 12 to 24 months.

Speaker 7

And very last one. I mean, obviously, there's a lot of focus on the U. S, but this Friday, we may have some good positive news from Germany with the Bundesrat decision. When people are asking about Canadian companies and exposure there, I talk about Tilray, I talk about Aurora and others, of course, and Coral Reef continues to make inroads there. What can we say about SNDL in terms of their current position in front of European opportunities or the plans that you may have?

Speaker 7

Thank you. That's all.

Speaker 1

I'm going to have Tyler just comment on the current state of play in international and related opportunities.

Speaker 4

Yes, happy to. Look, we've been spending a lot of time evaluating international markets. Obviously, Germany is one of the biggest populous countries over there. There's a ton of opportunity. So we're anxiously awaiting the final news for medical versus medical, what that landscape looks like.

Speaker 4

We will be headed to ICBC to not only meet a few individuals, but get a better lay of the land. But you'll kind of see us focus on a few over there like Germany. So we'll get at that for now, but you'll definitely see some opportunities or some foresight into that market once legislation fully rolls out.

Speaker 7

Understood. Thank you. Very helpful. Thank

Operator

you. This concludes the question and answer session. I would like to turn the conference back over to Zach George for any closing remarks. Please go ahead.

Speaker 1

Thank you to everyone for joining us this morning. We look forward on updating you on our progress in the near future. Have a great day.

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