Gage Posts Record Q3 $27.2M Revenue Ahead Of Acquisition By TerrAscend

Michigan-based cannabis premium brand and operator Gage Growth Corp. GAGE GAEGF reported record financial results Monday for the three and nine months ended September 30, 2021.

Revenue increased to a record of $27.2 million in the third quarter of 2021 compared to $26.4 million in the second quarter of 2021, representing a 3.2% increase.

"In the third quarter of 2021, Gage had a record performance across all financial and operating metrics," Fabian Monaco, the company's CEO said. "We will continue to invest while improving our margins. Moreover, as we further introduce our in-house branded concentrate products, we expect our gross margin to further improve over the next two quarters."

Q3 2021 Financial Highlights

• Gross margin, before the impact of biological asset adjustments, was 36.5% compared to 34.2% in the second quarter of 2021.
• The 230 basis point improvement quarter over quarter in gross margin to 36.5%, due to a greater mix of higher-margin sales from retail locations and cultivation capacity expansion.
• The company said it anticipates continuing its sequential margin expansion in the fourth quarter, as in-house branded vape cart sales have recently accounted for over 80% of the category month-to-date in November.
• Adjusted EBITDA came in negative at $1.8 million, representing an improvement from a $2 million loss in the prior quarter.
• Net loss totaled $3.4 million, compared to a $9.4 million loss in the second quarter of 2021.
• The company had $17.7 million in cash and $72.3 in pro forma cash at the quarter-end.

"With a strong balance sheet, we are well-positioned to execute on our near-term acquisition opportunities that will fuel the overall growth of the company," Monaco continued.

Recent Operational Updates

• Closed on a senior secured term loan for aggregate gross proceeds of $55 million last week to finance its retail acquisition strategy in Michigan, as well as support its future growth, and for general working capital purposes.
• In addition to 10 operational retail dispensaries, Gage is looking to acquire over 10 Michigan-based retail locations in the coming months.
• Successfully acquired another dispensary in Detroit, as it expects to close another proposed acquisition of a dispensary in Sturgis by the end of November.
• The second Kalamazoo dispensary is expected to open in December.
• Introduced Gage branded vape carts in October 2021, which currently account for almost 80% of the overall vape cart sales so far in November.

Acquisition Of Gage By TerrAscend

In the meantime, on September 1, 2021, TerrAscend entered into an agreement for the proposed acquisition of all of the securities of Gage, through a court-approved plan, under the Canada Business Corporations Act.

Earlier this month, Gage's shareholders approved the transaction. Shortly after, Gage announced that the Ontario Superior Court of Justice has issued a final order approving the arrangement.

The transaction is on track to close in early 2022, the Detroit-based company reported.

"We are very pleased with the announcement of the proposed acquisition of Gage by TerrAscend," Monaco said. "Our shared strategic and corporate values make this combination a strong fit, and I am extremely excited and looking forward to executing on our shared strategy of deep vertical integration and scale in our core markets."

GAEGF Price Action

Gage's shares traded 2.15% higher at $1.9 million per share at the market close on Friday.

Photo: Courtesy of Gage Growth Corp.