Nova Announces First Quarter 2024 Results

Revenue growth of 7% and Adjusted EBITDA growth of 40% in advance of Nova's entry into the British Columbia market

This news release constitutes a "designated news release" for the purposes of the prospectus supplement of Nova Cannabis Inc. dated July 22, 2022, to its short form base shelf prospectus dated June 27, 2022.

EDMONTON, AB, May 7, 2024 /CNW/ - Nova Cannabis Inc. (the "Company" or "Nova") (TSX: NOVC) today released its unaudited condensed interim consolidated financial statements (the "interimfinancial statements") and management's discussion and analysis ("MD&A") for the three months ended March 31, 2024. All financial information in this press release is reported in millions of Canadian dollars and represents results from continuing operations, unless otherwise indicated.

"Building on strong performance in 2023, Nova delivered continued growth in the first quarter of 2024. This growth was driven by increased proprietary data licensing revenues, coupled with strong operating discipline, resulting in a 40% increase in Adjusted EBITDA and 23% growth in gross profit," said Marcie Kiziak, CEO of Nova. "Our agreement with SNDL to own or operate four Dutch Love stores marks our entry into British Columbia, paving the way for Nova to open our first Value Buds locations in the province and further highlights the benefits of our partnership with SNDL. This move strengthens our store footprint in an impactful way, and we are excited to spread the Value Buds experience to consumers across the country."

FIRST QUARTER FINANCIAL AND OPERATING HIGHLIGHTS

• Revenue of $64.3 million for the first quarter of 2024, a 7% increase from the first quarter of 2023, primarily driven by new locations, increasing proprietary data licensing revenue and a continued focus on margin expansion initiatives.
• For locations operational throughout the first fiscal quarter of 2024 and 2023, same-store sales increased 1.5% year-over-year. The Company saw meaningful growth in Ontario, where same-store sales increased 12% for stores operating in the first quarter of 2024 when compared to the first quarter of 2023. Same-store sales refers to the revenue generated by the Company's existing retail cannabis locations which operated during the current and comparative periods.
• Gross profit of $15.8 million (25% of revenue) for the first quarter of 2024, a 23% increase from the first quarter of 2023 from $12.9 million (21% of revenue). Gross profit improvement was driven by growth in proprietary licensing revenue, increases in same-store sales in the Ontario market, and the expansion of private label initiatives.
• Net loss of $0.3 million ($0.01 loss per share) in the first quarter of 2024 compared to a net loss of $0.5 million ($0.01 loss per share) in the first quarter of 2023, representing a 40% improvement year over year.
• Adjusted EBITDA for the first quarter of 2024 of $4.5 million (7% of revenue) compared to $3.2 million for the first quarter of 2023, an increase of 40%.
• Nova's proprietary data licensing program generated revenue of $3.3 million for the first quarter of 2024, compared to $1.5 million in the first quarter of 2023, representing growth of $1.8 million, or 120%.
• Nova's management team ("Management") estimates that its market share was approximately 19% in Alberta and 4% in Ontario for the first quarter of 2024, based on available industry data from Statistics Canada1.
• On April 1, 2024, SNDL and Nova announced that SNDL agreed to assign its rights to own or operate four Dutch Love stores to Nova, marking the Company's entry into British Columbia's retail cannabis market.
• 99 stores operating as of May 7, 2024, an increase of three stores since the beginning of 2024 through the addition of the Dutch Love stores.
• Cash provided by operating activities in the first quarter of 2024 of $2.8 million, a $4.2 million increase, or 300%, from the $1.4 million cash used in operating activities in the first quarter of 2023.
• Cash and cash equivalents of $14.2 million as at March 31, 2024.

SPECIFIED FINANCIAL MEASURES

Certain specified financial measures in this earnings release, including Adjusted EBITDA, are non-IFRS measures and may not be comparable to similar measures reported by other companies. This non-IFRS financial measure should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS Accounting Standards.

Adjusted EBITDA

Adjusted EBITDA is a non-IFRS financial measure that the Company uses to evaluate its operating performance. Adjusted EBITDA provides information to investors, analysts, and others to aid in understanding and evaluating the Company's operating results in a similar manner to Management. Adjusted EBITDA is defined as loss and comprehensive loss before finance costs; gains and losses on fair value adjustments; depreciation; impairments, lease remeasurements and other costs; and certain one-time transaction costs and restructuring costs, as determined by Management.

The following table reconciles Adjusted EBITDA to net loss and comprehensive loss for the periods noted:

LIQUIDITY AND CAPITAL RESOURCES

Summary of Consolidated Cash Flows

Revolving Credit Facility

Nova has access to an uncommitted revolving credit facility with SNDL in an aggregate principal amount not to exceed $15.0 million (the "RevolvingCredit Facility"). On April 1, 2024, SNDL extended the maturity date of the Revolving Credit Facility to March 31, 2026 and amended the Revolving Credit Facility to limit SNDL's right to demand repayment prior to the maturity date, subject to certain conditions.

As at May 7, 2024, Nova had $12.1 million outstanding under the Revolving Credit Facility and no accrued interest outstanding.

STRATEGIC OUTLOOK

Nova aims to disrupt and solidify the cannabis retail market by promoting a wide range of cannabis products at everyday best-value prices while encouraging greater migration from the illicit cannabis market. The Company's strategy is rooted in the quality of its store footprint and locations, the sales efficiency of Nova stores, and the appeal of the Value Buds brand. Nova remains disciplined and customer-focused by choosing the best real estate to execute its strategy – whether through acquiring stores or building its own.

• The Company is focused on expanding its store footprint in the prairie provinces and the key markets of British Columbia and Ontario, following regulatory updates increasing the cap on stores in the Ontario market, and proposed updates to the eight-store cap in British Columbia. The operation of the Dutch Love stores marks Nova's expansion of its Value Buds banner into British Columbia and highlights the benefit of SNDL's M&A pipeline. Nova continues to pursue opportunities based on the quality of the real estate and the potential of attractive economic returns while avoiding unsustainable valuations.
• Nova optimized its proprietary data licensing program to increase mutually beneficial results for both our retail operations and licensed producers while increasing the scale and sustainability of the program. Leveraging Value Buds volume and the Company's access to high-quality analytics, the Company is well-equipped to deliver continued margin and revenue expansion through program optimizations and its ability to provide market-driven solutions.
• The Company is dedicated to enhancing retail fundamentals, focusing on delivering a seamless end-to-end customer experience across both physical and digital platforms. This approach aims to bolster conversion rates and drive incremental margin expansion. Nova is committed to implementing top-tier retail strategies, which involve reshaping in-store dynamics and optimizing the purchasing journey to effectively capitalize on basket growth opportunities.
• Through its relationship with SNDL, the Company's Value Buds branded private label strategy has been successfully launched in Alberta and Ontario with four large format flower offerings and a large format vape. The Company will launch a new 'Diesel and Berries' blend in large-format pre-rolls (28 x 0.5g), as well as in the best-selling 14-gram and 28-gram SKUs, building off the initial success of its private label offerings. The new SKUs are expected to be available in Alberta in May and are anticipated to arrive in Ontario in the third quarter of 2024. The private label strategy enables Nova to develop higher gross margin offerings, build customer loyalty, and create long-term brand awareness. The private label strategy focuses on keystone segments, specifically large format, uniquely curated for the Value Buds consumer, and drives meaningful differentiation through the retail network.

CONFERENCE CALL

Nova will host a conference call and webcast at 10 a.m. EDT (8 a.m. MDT) on Wednesday, May 8, 2024.

Call Access

Canada/USA Toll Free: 1-844-763-8274
International Toll: +1-647-484-8814

Webcast Access

To access the live webcast of the call, please visit the following link:
https://services.choruscall.ca/links/novacannabis2024q1.html

Replay

The webcast archive will be available for three months via the link provided above.
A telephone replay will be available for one month. To access the replay dial:

Canada/USA TF: 1-855-669-9658 or International Toll: +1-604-674-8052
When prompted, enter Replay Access Code: 0889

For further information, refer to the Company's interim financial statements and MD&A for the three months ended March 31, 2024, which are available from the Company's profile on SEDAR+, at www.sedarplus.ca, or on the Company's website at www.novacannabis.ca.

ABOUT NOVA CANNABIS INC.

Nova Cannabis Inc. (TSX: NOVC) is one of Canada's largest and fastest-growing cannabis retailers with a goal of disrupting the cannabis retail market by offering a wide range of high-quality cannabis products at every-day best value prices. The Company currently owns and/or operates locations across Alberta, Ontario, British Columbia and Saskatchewan, primarily under its "Value Buds" and "Firesale Cannabis" banners. Additional information about Nova Cannabis Inc. is available at www.sedarplus.ca and the Company's website at www.novacannabis.ca.

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements or information (collectively "forward-looking statements") within the meaning of the "safe harbour" provisions of applicable securities legislation. Forward-looking statements are typically identified by words such as "continue", "anticipate", "will", "believes", "should", "plan", "intention", "expects", and similar words suggesting future events or future performance. All statements and information other than statements of historical fact contained in this news release are forward-looking statements. In particular, this news release contains forward-looking statements pertaining to: the Company's expectations regarding its growth and business strategies; Nova's private label strategy and the Company's ability to successfully launch additional private label offerings; Nova's ability to become one of the largest cannabis retailers in Canada; the Company's ability to increase its market share; and the Company's expansion in Alberta, Ontario, British Columbia and Saskatchewan and other jurisdictions in Canada where it believes there is business efficacy to operate.

With respect to forward-looking statements contained in this news release, the Company has made assumptions regarding, among other things: the Company's ability to identify locations for, construct and open new stores and the costs related thereto; the availability of hardware and equipment for those stores; government regulation and applicable laws will not change in a manner adverse to the Company; receipt of necessary regulatory approvals to open new stores; the Company's ability to obtain leases for new sites and attract the necessary personnel to operate new stores; continued demand for the products the Company sells; other factors that will drive sales growth in the Value Buds and Firesale banners, including Nova's private label strategy; availability of acquisition opportunities; sustainability of competitors' businesses and competition in the retail cannabis industry, including from the illicit cannabis market; consumer demands; and factors that influence consumer behavior.

Although the Company believes that the expectations reflected in the forward-looking statements, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations and assumptions will prove to be correct. Readers should not place undue reliance on forward-looking statements included in this news release. Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that may cause actual performance and financial results to differ materially from any estimates, forecasts or projections. These risks and uncertainties include, among other things, the risk that Nova will be unable to execute its strategic plan and growth strategy as planned without significant adverse impacts from various factors beyond its control; business decisions and strategies of SNDL, Nova's direct majority shareholder; dependence on suppliers; limited operating history of the cannabis business; overall levels of economic inflation; risk of infringement of intellectual property rights; reliance on information and control systems; potential delays or changes in plans with respect to capital expenditures and the availability of capital on acceptable terms; risks inherent in the retail cannabis industry; competition for, among other things, customers, supply, capital and skilled personnel; changes in labour costs and markets, including Nova's ability to hire and retain staff at current wage levels and the risk of possible future unionization; incorrect assessments of the value of acquisitions; general economic and political conditions in Canada (including Alberta, Ontario, British Columbia and Saskatchewan), and globally; the unpredictability and volatility of the price of the Company's common shares and the potential lack of an active trading market for the Company's common shares; industry conditions, including changes in government regulations; fluctuations in foreign exchange or interest rates; unanticipated operating events; failure to obtain regulatory and third‐party consents and approvals when required; changes in tax and other laws that affect Nova and its shareholders; the potential failure of counterparties to honour their contractual obligations; stock market volatility; and the other factors described in the Company's public filings available at www.sedarplus.ca. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking statements contained in this news release are made as of the date hereof. Except as expressly required by applicable securities legislation, Nova does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

SOURCE Nova Cannabis Inc.

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