Ms. Marcie Kiziak reports

NOVA ANNOUNCES THIRD QUARTER 2023 RESULTS

Nova Cannabis Inc. today released its unaudited condensed interim consolidated financial statements and management's discussion and analysis (MD&A) for the three and nine months ended Sept. 30, 2023. All financial information in this news release is reported in millions of Canadian dollars and represents results from continuing operations, unless otherwise indicated.

"We are steadfast in our commitment to delivering value for our shareholders, which is underscored by our second sequential quarter, where Nova has achieved free cash flow," said Marcie Kiziak, chief executive officer of Nova. "Nova continues to break records in net earnings, revenue, gross margin and adjusted EBITDA as the consistent execution of our disciplined strategy makes us stronger in a consolidating market. I'm extremely proud of our team's achievements in expanding private label and proprietary data licensing sales, which have significantly improved our operations. We are confident that our long-term strategic plan to expand our footprint nationwide will offer a wealth of new opportunities and further solidify our leadership position in the Canadian cannabis retail market."

Financial and operating highlights:

• Record revenue of $67.7-million, a 15.0-per-cent increase from the third quarter of 2022 and a 5.8-per-cent increase from the second quarter of 2023;
• For locations operational throughout the third fiscal quarter of 2023 and 2022, same-store sales increased 3.9 per cent year over year;
• Record gross margin of $17.0-million (25.1 per cent of revenue), a 52.8-per-cent increase from $11.1-million for the third quarter of 2022 (18.9 per cent of revenue) and a 16-per-cent increase from the previous quarter from $14.6-million (22.8 per cent of revenue). Gross margin improvement was driven by price stabilization in the Alberta market, private-label initiatives and proprietary data licensing agreement growth. These factors have contributed to eight consecutive quarters of gross margin improvement;
• Net earnings of $2.1-million (four cents per share) in the third quarter of 2023, compared with a net loss of $1.5-million (three cents per share) in the third quarter of 2022. Net earnings increased by $1.1-million or 102.4 per cent from the second quarter of 2023;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the third quarter of 2023 of $6.8-million (10.0 per cent of revenue), compared with $2.5-million (4.3 per cent of revenue) for the third quarter of 2022 and $5.5-million (8.6 per cent of revenue) for the second quarter of 2023;
• The data licensing program resulted in revenue of $4.0-million for the third quarter of 2023, compared with $1.4-million in the third quarter of 2022, and represents growth of 48 per cent compared with the second quarter of 2023;
• 92 stores operating as of Nov. 8, 2023, an increase of four stores since the beginning of 2023;
• Nova's management team estimates that the company's market share was approximately 19.1 per cent in Alberta and 3.5 per cent in Ontario for the third quarter of 2023, based on available industry data (1);
• Nova expanded its private-label collaboration with SNDL Inc. on Sept. 8, 2023, introducing a new 1.2-gram vape to its existing large-format flower offerings. From the launch of this product to Sept. 30, 2023, Hello My Name is Strawberry was the best-selling 1.2-gram vape cartridge in Alberta Value Buds stores;
• Cash provided by operating activities in the third quarter of 2023 of $5.6-million, a $2.3-million increase from the $3.3-million cash provided by operating activities in the third quarter of 2022;
• Liquidity, including cash and availability under the revolving credit facility (defined below), of $10.9-million as at Sept. 30, 2023.

Specified financial measures

Certain specified financial measures in this earnings release, including adjusted EBITDA, are non-IFRS (international financial reporting standards) measures and may not be comparable with 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.

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.

An attached table reconciles adjusted EBITDA to net loss and comprehensive loss for the periods noted.

Liquidity and capital resources

Revolving credit facility

Nova has an uncommitted revolving credit facility with SNDL in an aggregate principal amount not to exceed $15.0-million. On Oct. 30, 2023, the term of the revolving credit facility was extended to Nov. 30, 2023.

As at Nov. 8, 2023, the full $15.0-million available under the revolving credit facility has been drawn by the company.

Strategic outlook

Nova's strategy is to be the largest, fastest-growing and most profitable cannabis retailer in Canada. The company's goal is to disrupt and strengthen the cannabis retail market through the promotion of a wide range of cannabis products at everyday best-value prices while encouraging greater migration of consumers 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:

• Through its partnership with SNDL, Value Buds' private-label strategy has been successfully launched in Alberta and Ontario. 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.
• Nova's management services agreement with SNDL enables the company to leverage shared corporate services, contributing valuable support to scale key initiatives for an annual fee that is materially lower than the cost of building and operating the infrastructure necessary for Nova to manage those services in-house. This collaboration empowers the company to access additional resources and expertise, enhancing Nova's ability to drive success and achieve its strategic objectives.
• The company continues its aggressive pricing strategy to capture further market share. Nova has begun adjusting pricing across all categories in different markets to test elasticity and understand consumer buying trends.
• The transaction between Nova and SNDL to implement a strategic partnership in the cannabis industry (the Nova reorganization) was approved by Nova's minority shareholders who are not related parties on May 5, 2023. While all other provincial approvals have been received, the continued review by one provincial regulator has necessitated a further extension of the outside date for the closing of the previously announced Nova reorganization to Nov. 30, 2023.

Conference call

Nova will host a conference call and webcast at 4 p.m. EST (2 p.m. MST) on Thursday, Nov. 9, 2023.

Call access

Canada/United States toll-free:  800-715-9871

Conference ID No.:  8078331

Replay

The webcast archive will be available for 12 months.

For further information, refer to the company's interim financial statements and MD&A for the three and nine months ended Sept. 30, 2023, which are available from the company's profile on SEDAR+ and on the company's website.

About Nova Cannabis Inc.

Nova 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. The company currently owns and/or operates 92 locations across Alberta, Ontario and Saskatchewan, primarily under its Value Buds and Firesale Cannabis banners.

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

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