Terrascend Corp: New Developments Helping This Beaten-Down Cannabis Play Rebound

TerrAscend Corp Up 12% Over Last Week

Like virtually all cannabis stocks, TerrAscend Corp (OTCMKTS:TRSSF, CNSX:TER) stock has been trending lower for much of 2019.

Compared to most marijuana stocks, however, TRSSF stock has not fallen as drastically; it’s down just 13% year-to-date.

And over the last week, TerrAscend stock has rebounded more than 12%.

Since the start of October, the company has announced the closing of the first tranche of a proposed private placement; received a license to sell cannabis extracts, edibles, and topicals in Canada; and announced that it tripled the capacity of its cultivation and processing facility.

All this comes on the heels of record second-quarter revenue and raised guidance for 2019.

TRSSF Stock Overview

TerrAscend Corp is an integrated recreational and medical cannabis company that supplies products, brands, and services to the global cannabinoid market.

In fact, TerrAscend is the only legal marijuana company with sales in the U.S., Canada, and Europe—the three largest cannabis markets in the world. (Source: “TerrAscend Investor Presentation,” TerrAscend Corp, last accessed October 24, 2019.)

In Canada, TerrAscend has wholesale supply agreements in six provinces, giving it access to over 25 million Canadians (70% of the country’s population).

In the U.S., it has cultivation, production, distribution, and retail operations in California, Nevada, and Pennsylvania. It also has the same kind of operations under development in New Jersey.

The company has also received EU good manufacturing practice (GMP) certification for its manufacturing facility in Mississauga, Ontario, Canada. This gives TerrAscend the potential to reach approximately 280 million European consumers.

TerrAscend currently has:

• More than 110,000 square feet of cultivation and production
• Five retail dispensaries
• A cannabidiol (CBD) distribution network of more than 10,000 stores
• 225,000 square feet of cultivation and distribution facilities under construction
• Seven brands (“Haven,” Knüba,” “State Flower,” “Valhalla,” “Funky Farms,” “Original Hemp,” and “Ilera”)
• Partnerships with Canopy Rivers Inc. (OTCMKTS:CNPOF, TSE: RIV), JW Asset Management, and Canopy Growth Corp (NYSE:CGC)

(Source: “TerrAscend Corp. (TRSSF),” Yahoo! Finance, last accessed October 24, 2019.)

License to Sell Cannabis Edibles, Extracts, & Topicals

On October 22, TerrAscend announced that it received a license from Health Canada to sell marijuana edibles, extracts, and topicals from its facility in Mississauga. Its sales of CBD-infused products are expected to begin in December. (Source: “TerrAscend Receives License to Sell Cannabis Extracts, Topicals, and Edibles,” TerrAscend Corp, October 22, 2019.)

TerrAscend submitted 15 stock keeping units (SKUs) to Health Canada that included edibles, vape pens, and cartridges. The company plans on submitting additional SKUs in the coming months.

Cultivation & Processing Facility Triples

On October 7, TerrAscend announced that it received approval to significantly expand its facility in Mississauga from 17,800 to 51,800 square feet. (Source: “TerrAscend Canada Triples Licensed Cultivation and Processing Capacity,” TerrAscend Corp, October 7, 2019.)

Over the next number of months, TerrAscend will be bringing its brands and formulations from its U.S. operations to the Canadian market.

“Achieving this approval milestone is a crucial step in our plan to cultivate premium grade cannabis at scale for distribution to the EU and other international markets,” said CEO Michael Nashat.

First Tranche of $25-Million Private Placement

In early October, TerrAscend announced that it had closed on a $25.0-million private placement offering. The first tranche, a $10.0-million lead order from Canopy Rivers, has been completed. (Source: “TerrAscend Announces Closing of First Tranche of Proposed $25 Million Non-Brokered Private Placement of Unsecured Convertible Debentures and Warrants,” TerrAscend Corp, October 2, 2019.)

TerrAscend plans to use the proceeds from the private placement on various capital expenditures, growth initiatives, working capital, and general purposes.

Nashat commented, “This growth capital enables TerrAscend to accelerate our organic and acquisition-driven investments in our key markets around the globe, as we execute our strategic vision of being a truly global cannabinoid company, committed to scientific innovation and operational integrity.”

Record Second-Quarter Revenue, Raised Guidance

On August 22, TerrAscend reported its financial results for the second quarter ended June 30.

Revenue for the second quarter increased 21% quarter-over-quarter to CA$17.6 million, up from $14.6 million in the first quarter and significantly up from the CA$0.01 million in the second quarter last year. (Source: “TerrAscend Announces Record Revenue For Second Quarter 2019 and Increases Full Year Guidance,” TerrAscend Corp, August 22, 2019.)

The company reported a second-quarter net loss of $0.37 per share, compared to a loss of CA$0.05 per share in the same prior-year period.

There was an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $12.5 million, compared with a loss of CA$6.4 million in the first quarter of 2019 and a loss of CA$4.0 million in the second quarter of 2018.

Going forward, TerrAscend Corp raised its full-year revenue guidance to CA$141.0 million, up from previous guidance of CA$135.0 million.

During the second quarter, TerrAscend announced the closing of the California component of its Apothecarium transaction. Apothecarium, a multi-state dispensary operator, has three dispensaries in California.

In the fourth quarter of 2019, the company expects to open new Apothecarium locations in Berkeley, California, one in an undisclosed location in California, and another one in Phillipsburg, New Jersey.

Analyst Take

TerrAscend stock may be a beaten-down cannabis stock, but new developments and a strong outlook are helping it rebound.

TerrAscend Corp continues to improve its margins, launch new products, make strategic acquisitions, and increase its global footprint.

Looking ahead, the company continues to experience strong growth in demand, which TerrAscend expects to accelerate in the third quarter and continue in the fourth quarter.