TerrAscend Corp More Than Doubled Since November: More to Come?

TerrAscend Stock Climbed 356% in 2020; Getting Warmed Up in 2021

TerrAscend Corp (CNSX:TER, OTCMKTS:TRSSF) is an excellent cannabis stock that’s poised for serious growth.

I last wrote about this Canadian-based pot stock back in early December, when it was trading at $7.84 per share. Since then, TRSSF stock has made some serious gains.

TerrAscend stock hasn’t taken a breather since bottoming last March. TRSSF stock advanced 356% in 2020, 457% year-over-year, 138% since the November election, and 72% since early December.

Why all the buzz for a marijuana stock most Americans haven’t heard of? Despite the coronavirus pandemic, TerrAscend Corp has been reporting strong financial results. In fact, in November, it reported record third-quarter results and provided strong guidance.

On October 6, the company announced that it had started to generate revenue from its newly expanded “State Flower” cultivation facility in San Francisco.

TerrAscend also recently announced that it had completed the second phase of construction at its cultivation and manufacturing facility in New Jersey, and that it had expanded its U.S. footprint into Maryland.

Chart courtesy of StockCharts.com

About TerrAscend Corp

Most American pot investors are not all that aware of TerrAscend stock—but they should be.

The Mississauga, ON, Canada-based company is the first North American legal marijuana operator with scale operations in both the U.S. and Canada. It was also the first legal cannabis company to generate sales in the U.S., Canada, and Europe.

Where did  TerrAscend get the money to do that?

In 2017, Canopy Growth Corp (NYSE:CGC) and JW Asset Management, LLC together invested $52.5 million in TerrAscend, with the goal of building out operations in the U.S. (Source: “Investor Presentation: November 2020,” TerrAscend Corp, last accessed January 19, 2021.)

As a multi-state operator, TerrAscend’s U.S. footprint includes high-growth markets like California, New Jersey, and Pennsylvania. In Canada, it operates in the medical and recreational marijuana markets from coast to coast.

In addition to its current wholesale and retail marijuana flower sales, TerrAscend’s product line includes pre-rolls, cannabis-infused edibles, extracted distillate and vaporizable oil, tinctures, topicals, and medically blended vapes.

TerrAscend Expands U.S. Footprint into Maryland

In early November, TerrAscend announced that it had signed a definitive agreement to acquire HMS Health, LLC and HMS Processing, LLC from Curaleaf Holdings Inc (CNSX:CURA, OTCMKTS:CURLF). (Source: “TerrAscend Expands U.S. Footprint Via Acquisition of Maryland Based Grower Processor,” TerrAscend Corp, November 6, 2020.)

HMS cultivates and processes medical cannabis products in the state of Maryland. The acquisition is expected to be immediately accretive to TerrAscend on an earnings before interest, taxes, depreciation, and amortization (EBITDA) basis.

HMS currently operates a 22,000-square-foot cultivation and processing facility in Frederick, MD. The facility produces dried flower and oil products for the medical cannabis market and has the capability to produce edibles upon regulatory approval. TerrAscend plans to significantly expand the facility’s capacity this year.

Second Phase of New Jersey Cultivation & Manufacturing Facility

On January 11, TerrAscend announced that it had completed the second phase of construction at its cultivation and manufacturing facility in Boonton, NJ. (Source: “TerrAscend Completes Second Phase of New Jersey Cultivation and Manufacturing Facility,” TerrAscend Corp, January 11, 2021.)

This phase of construction added roughly 80,000 square feet of indoor cultivation, bringing the facility’s total footprint to approximately 140,000 square feet. TerrAscend has the ability to further increase the Boonton facility to 240,000 square feet.

The company also recently received approval from the New Jersey Department of Health to begin cultivation activities within the new indoor facility.  TerrAscend expects to complete its first indoor harvests in the first quarter of 2021.

Oversubscribed Non-Brokered Private Placement

On January 12, TerrAscend announced an oversubscribed, non-brokered private placement for gross proceeds of approximately CA$224.0 million (about US$175.0 million), with 80% of the commitments coming from four large U.S. institutional investors, including Wasatch Global Investors. (Source: “TerrAscend Announces Oversubscribed C$224 Million Non-Brokered Private Placement,” TerrAscend Corp, January 12, 2021.)

The offering consists of 18,115,623 common shares issued at the price of CA$12.35 per common share.

“TerrAscend is strategically building depth and scale in some of the largest and highest growth markets in the U.S. cannabis industry,” said Jason Ackerman, CEO and executive chairman. (Source: Ibid.)

“This financing further solidifies an already strong balance sheet providing the company with ample cash to both accelerate existing expansion plans and simultaneously pursue [merger and acquisition] transactions in additional limited license states.”

Record Third-Quarter Results

In November, TerrAscend announced that its revenue for the third quarter of 2020 increased 90% year-over-year and 36% quarter-over-quarter to a record $50.9 million. (Source: “TerrAscend Reports Record Third Quarter 2020 Net Sales of $51 Million and Adjusted EBITDA(1) of $17.8 Million,” TerrAscend Corp, November 18, 2020.)

The company reported a third-quarter net loss of $17.6 million, versus a second-quarter net loss of $13.6 million and a 2019 third-quarter net loss of $17.3 million. TerrAscend blamed the net loss on a net increase in fair value of warrant and derivative liability of $22.2 million and a revaluation of contingent consideration of $8.1 million.

TerrAscend Corp’s adjusted net income for the 2020 third quarter was $12.7 million. This represents the first positive results in the company’s history. For the second quarter, TerrAscend reported an adjusted net loss of $7.4 million. For the 2019 third quarter, TerrAscend reported an adjusted net loss of $17.3 million.

TerrAscend’s EBITDA were $17.8 million, compared to $11.4 million in the second quarter and an EBITDA loss of $6.6 million in the 2019 third quarter.

During the third quarter, TerrAscend Corp:

• Completed an additional 25% cultivation expansion in Pennsylvania
• Achieved breakeven adjusted EBITDA in its Canadian division
• Opened its third Pennsylvania “Apothecarium” dispensary, in Thorndale
• Opened its fourth California Apothecarium dispensary, in Berkeley
• Received approval for, and commenced cultivation in, its 37,000-square-foot New Jersey greenhouse—the first approved for medical cannabis cultivation in the state

Outlook for 2020 and 2021

TerrAscend increased its full-year 2020 guidance to at least $196.0 million in net sales and at least $54.0 million of adjusted EBITDA. In 2019, TerrAscend reported full-year revenue of $84.9 million.

For 2021, the company expects full-year net sales in the range of $360.0 to $380.0 million and adjusted EBITDA in the range of $140.0 to $160.0 million.

Analyst Take

What’s not to like about TerrAscend Corp? The company has a strong balance sheet, record financial results, an expanded U.S. footprint, and an increased guidance for 2020.

If any pot stock deserves to uplist to the Nasdaq, it’s TerrAscend stock.