Ms. Marcie Kiziak reports

NOVA ANNOUNCES SECOND QUARTER 2023 RESULTS

Nova Cannabis Inc. has released unaudited condensed interim consolidated financial statements and management's discussion and analysis for the three and six months ended June 30, 2023. All financial information in this press release represents results from continuing operations, unless otherwise indicated.

"During the second quarter, Nova achieved positive net earnings, record revenue, gross margin and adjusted [earnings before interest, taxes, depreciation and amortization] as a result of our disciplined pricing strategy, combined with expanding proprietary data licensing agreements and private label sales," said Marcie Kiziak, chief executive officer of Nova Cannabis. "This quarter's results demonstrate Nova's effective execution in positioning the company for long-term profitable growth. We have been disciplined in our strategy and maintained a sharp focus on our key objectives, and our resolute dedication solidifies our promise to deliver tangible shareholder value. With the added financial and operational scale from the upcoming Nova reorganization (defined below), we are tremendously excited for the future as we expand our strategy and retail offerings to serve Canadians coast to coast."

The transaction between Nova Cannabis and SNDL Inc. to implement a strategic partnership in the cannabis industry was approved by Nova Cannabis's minority shareholders who are not related parties on May 5, 2023. Completion of the Nova Cannabis reorganization remains subject to certain other customary closing conditions, including receiving approval from one remaining provincial regulator. Subject to the satisfaction or waiver of all closing conditions, the Nova Cannabis reorganization is expected to be completed on or before Aug. 25, 2023.

Financial and operating highlights:

• All-time-high revenue of $64.0-million, a 13.7-per-cent increase from the second quarter of 2022 and a 6-per-cent increase from the first quarter of 2023;
• Same-store sales for the second quarter of 2023 grew by 38 per cent from the second quarter of 2022;
• Record gross margin of $14.6-million (22.8 per cent of revenue), a 37.9-per-cent increase from $10.6-million for the second quarter of 2022 (18.8 per cent of revenue); gross margin improvement was driven by price stabilization in the Alberta market, strategic inventory and pricing review, private label initiatives, and growth in proprietary data licensing arrangements; these factors contributed to seven consecutive quarters of gross margin improvement;
• Net earnings of $1.0-million (two cents per share) in the second quarter of 2023 compared with a net loss of $1.4-million (two cents per share) in the second quarter of 2022; this marks Nova Cannabis's first quarter of positive net earnings since its inception;
• Adjusted EBITDA for the second quarter of 2023 of $5.5-million (8.6 per cent of revenue) compared with $2.1-million (3.7 per cent of revenue) for the second quarter of 2022;
• Nova Cannabis took pro-active steps to optimize its proprietary data licensing program in the first half of 2023; this margin-accretive opportunity has resulted in revenue of $2.7-million for the second quarter of 2023, compared with $1.3-million in the second quarter of 2022; revenue from licensing agreements increased by 73 per cent from the first quarter of 2023;
• 92 stores operating as of Aug. 9, 2023, a net increase of four stores since the beginning of 2023;
• Same-store sales continue to improve, with average annualized sales of $2.9-million from stores that have been open for at least one year;
• On April 6, 2023, the company launched Firesale Cannabis, a new deep discount retail banner that combats industry waste and provides a unique experience for value-conscious shoppers; Firesale's inaugural location opened in Edmonton, Alta., with more locations expected to open in Alberta and Ontario;
• Nova Cannabis's management team estimates that its market share was approximately 3.6 per cent in Alberta and 19.9 per cent in Ontario for the second quarter of 2023, based on available industry data (1);
• Value Buds' private label products represented approximately 7 per cent of total 28-gram sales and 18 per cent of 14-gram sales in Value Buds stores nationwide; private label margins are approximately 5 per cent higher than margins on comparable competitor products;
• Cash provided by operating activities in the second quarter of 2023 of $2.55-million, a $2.53-million increase from $20,000 in cash provided by operating activities in the second quarter of 2022;
• Liquidity, including cash and availability under the revolving credit facility, of $8.5-million as at June 30, 2023.

(1) Source: Statistics Canada: retail trade sales by province and territory as of May, 2023.

Strategic outlook

Nova Cannabis's objective is to be one of the largest and fastest-growing cannabis retailers in Canada. Its goal is 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 Cannabis stores, and the appeal of the Value Buds brand. Nova Cannabis remains disciplined and customer focused by choosing the best real estate to execute its strategy whether through acquiring stores or building its own.

• Through its partnership with SNDL, Value Buds' private label strategy has been launched in Alberta and Ontario. The private label strategy enables Nova Cannabis 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 throughout the retail network.
• Nova Cannabis's partnership with SNDL enables the company to leverage shared services with SNDL, which contributes valuable support to scale key initiatives for an annual fee, which is materially lower than the cost of building and operating the infrastructure necessary for Nova Cannabis to manage those services in-house. This collaboration empowers the organization to gain additional resources and expertise, further enhancing its ability to drive success and achieve its strategic objectives.
• The company continues its aggressive pricing strategy to capture further market share. Nova Cannabis has begun adjusting pricing across all categories in different markets to test elasticity and understand consumer buying trends.
• Nova Cannabis took pro-active steps to optimize its proprietary data licensing program in the first half of 2023, which has no direct associated costs. Data licensing revenue is expected to increase the company's gross margin by approximately two percentage points in each quarter.
• Nova Cannabis has opened or acquired four additional stores in 2023: two in Alberta and two in Ontario. Pending completion of the Nova Cannabis reorganization, announced by the company on Dec. 20, 2022, the company will acquire 29 additional stores located in Alberta, Ontario, Saskatchewan, Manitoba and British Columbia from SNDL's retail network, increasing the company's store footprint by more than 33 per cent.
• The completion of the Nova Cannabis reorganization is expected to create a well-capitalized cannabis retail platform through a vertical integration model leveraging SNDL's upstream and mid-stream capabilities. The Nova Cannabis reorganization will enable Nova Cannabis to continue to evolve in a still immature sector by becoming a trusted partner to the Canadian cannabis ecosystem.

Conference call

Nova Cannabis will host a conference call and webcast at 10:30 a.m. EDT (8:30 a.m. MDT) on Thursday, Aug. 10, 2023.

Call access

Canada:  1-800-319-4610

International:  1-604-638-5340

Webcast access

A webcast will be available.

Replay

The webcast archive will be available for three months. A telephone replay will be available for one month. To listen to the replay, dial the following.

Canada/Unites States toll-free:  1-800-319-6413

International toll:  1-604-638-9010

When prompted, enter replay access code:  0322 followed by the number key

For further information, refer to the company's interim financial statements and management's discussion and analysis for the three and six months ended June 30, 2023, which are available from the company's profile on SEDAR+ or on the company's website.

About Nova Cannabis Inc.

Nova Cannabis (Toronto Stock Exchange: 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 everyday best-value prices. Nova Cannabis currently owns and/or operates 92 locations across Alberta, Ontario and Saskatchewan, primarily under its Value Buds banner.

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