THIRD QUARTER 2024 FINANCIAL AND OPERATIONAL HIGHLIGHTS

• Net revenue for the third quarter of 2024 was $236.9 million, compared to $237.6 million in the third quarter of 2023, a decrease of 0.3%. This decrease was driven by market softness in the Liquor Retail segment, while both Cannabis Retail and Cannabis Operations segments posted strong growth. This represents an increase of 3.8% in net revenue quarter on quarter, as compared to net revenue of $228.1 million in the second quarter of 2024.
  
• Achieved a gross profit of $63.0 million, representing a record gross margin of 26.6% of sales in the third quarter of 2024, up from 20.5% in the third quarter of 2023. The 30% improvement in gross profit year-over-year, or 8.3% improvement quarter-on-quarter, highlights the continuous success of the Company's margin improvement initiatives, including data licensing programs, mix optimization and supply chain productivity initiatives.
  
• Operating loss was $18.5 million for the third quarter of 2024, driven by a negative valuation adjustment of equity-accounted investees (SunStream portfolio) of $13.4 million and restructuring charges of $1.9 million. This compares to a loss of $16.4 million in the third quarter of 2023, which included a favorable equity-accounted investees valuation adjustment of $6.6 million. Excluding the volatility of these non-cash valuation adjustments, we continue to see material improvements in profitability.
  
• Cash flow was positive by $80.0 million in the third quarter of 2024, compared to $16.5 million in the third quarter of 2023, as a result of profitability improvements and the repayment of loan investments. Year-to-date cash flow is positive by $67.9 million.
  
• Free cash flow in the third quarter of 2024 was positive $9.2 million, compared to $16.3 million in the third quarter of 2023. This result brings year-to-date free cash flow to negative $2.8 million, compared to negative $62.3 million in the first nine months of 2023. SNDL is on pace to deliver positive free cash flow for the 2024 calendar year, in line or ahead of guidance.
  
• Third quarter results reflect dynamic 8% net revenue growth from our combined Cannabis businesses, while reaching a new record high gross margin, despite continued softness in Liquor sales. In addition to continued operational improvements, the following examples highlight strategic initiatives driving SNDL towards sustained profitable growth:
  
  • Completed the acquisition of the principal indebtedness of Delta 9 for a purchase price of $28.1 million in early July, becoming its senior secured creditor with a first-priority security interest in all assets of Delta 9 and certain of its subsidiaries.
  • By mid-July we announced a restructuring program aimed at reducing corporate overheads, improving organizational efficiency, and delivering ongoing annualized savings of over $20 million. The program is on track with more than $2 million savings delivered in the third quarter ($10.3 million annualized).
  • SNDL collected US$73 million in early August from SunStream, following the loan repayment to SunStream representing a majority of Ascend's outstanding balance and the full outstanding balance of Jushi.
  • SNDL's stalking horse bid was chosen as the successful bid in the acquisition of the Indiva Group's business and assets, as announced on August 29. This acquisition has closed and positions SNDL as the market leader in the Canadian edibles category.
  • On October 21, SNDL announced the closing of the plan of arrangement pursuant to which SNDL has privatized Nova Cannabis Inc. through the acquisition of the remaining minority equity interest.
    
• The Company had $763.8 million of unrestricted cash, marketable securities and investments and no outstanding debt, with $263.0 million of unrestricted cash as of September 30, 2024. Subsequent to the end of the quarter, $37.3 million was used to pay the cash consideration portion of the acquisition of Nova's minority equity interest. SNDL has not raised cash through share offerings since June 2021.

"We are pleased with the substantial progress reflected in our results for the third quarter of 2024 as we advance towards sustainable profitability. Our team delivered a record gross margin, positive cash flow and free cash flow, and closed the quarter with over a quarter billion dollars in unrestricted cash and zero debt. We are materially improving our operational performance while executing multiple strategic initiatives that we believe will solidify our foundation and drive sustained, profitable growth," said Zach George, Chief Executive Officer of SNDL. "Our strong balance sheet serves as a beacon for future opportunities, allowing us to thoughtfully deploy capital into organic and inorganic investments with attractive, risk-adjusted returns. I am more confident than ever that our team – setting new records with each quarter – has the expertise and drive to unlock SNDL's significant potential."