SNDL (SNDL) Q3 2023 Earnings Call Transcript

SNDL (SNDL 3.08%)
Q3 2023 Earnings Call
Nov 13, 2023, 10:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning and welcome to SNDL's third-quarter 2023 financial results conference call. This morning, SNDL issued a press release announcing their financial results for the third quarter ended on September 30th, 2023. This press release is available on the company's website at sndl.com and filed on EDGAR and SEDAR as well. The webcast replay of the conference call will also be available on the sndlgroup.com website.

SNDL has also posted a supplemental investor presentation on its website. Presenting on this morning's call, we have Zach George, chief executive officer; Alberto Paredero, chief financial officer; Tank Vander, president, liquor retail; and Tyler Robson, president, cannabis. Before we start, I would like to remind investors that certain matters discussed in today's conference call or answers that may be given to questions could constitute forward-looking statements. Actual results could differ materially from those anticipated.

Risk factors that could affect results are detailed in the company's financial reports and other public filings that are made available on SEDAR and EDGAR. Additionally, all financial figures mentioned are in Canadian dollars unless otherwise indicated. We will now make prepared remarks, and then we'll move on to analyst questions. I would now like to turn the call over to Zach George.

Zach George -- Chief Executive Officer

Good morning all and thank you for joining us on our third-quarter 2023 financial and operational results conference call. I want to begin by acknowledging an important milestone for the SNDL team as this is the first quarter since inception that we have generated both positive net cash from operating activities and free cash flow. This milestone is a testament to the dedication of our team in driving positive change and the resilience and adaptability of our business segments. We are building the foundation of an important regulated product company with international potential that does not have a close peer in Canada. We are finding attractive opportunities for operational improvement in an industry where capital is scarce and many competitors are starved for liquidity amid price compression driven by persistent oversupply and over-licensing. Our goals are a far climb from where we stand today.

We still have a lot of work to do, but we are making tremendous progress against a challenging macro backdrop. Although much of our regulated product business has shown recession resistance, we take nothing for granted given the likely duration of the current rate environment and are aggressively seeking efficiencies to improve profitability. SNDL has equipped itself with the flexibility to navigate market uncertainties and preserve our growth trajectory. Our platform structure creates strategic optionality and our debt-free balance sheet helps us focus on delighting consumers without the burden of material cash interest obligations. Tank will provide further color on the liquor retail segment, but I wanted to highlight some key initiatives that we have recently undertaken. We recently finalized the structure of our liquor retail data program, and we expect to see results in the first quarter of 2024.

Its launch is expected to strengthen our supplier partnerships, enhance revenue, and contribute to margin expansion within our liquor retail segment. In the third quarter of 2023, SNDL's cannabis retail segment demonstrated substantial growth and operational progress. Net revenue saw 14% increase compared to Q3 2022, marking a record for the segment since the company's diversification into cannabis retail in 2021. Enhancements to our proprietary data licensing program significantly contributed to the success with revenues climbing to 4 million in the third quarter, a significant increase over the previous year's 1.4 million and up 50% from the preceding quarter. We are committed to refining our cannabis retail operations, enhancing partnerships, and delivering superior products to consumers. This strategy includes expansion into markets where our presence is currently limited to reinforce SNDL's leading cannabis retailer in Canada.

We've taken significant strides in our cannabis operations segment to streamline operations and reduce costs. The rationalization of our facility footprint and procurement processes sets the stage for significant financial improvements and further demonstrates our commitment to operational excellence. Our president, Tyler, will provide further details on our cannabis operations shortly. As of the end of Q3 2023, SNDL's financial position in Canadian dollars included $785 million in unrestricted cash, marketable securities, and long-term investments. Our robust liquidity profile stands in contrast to our current market capitalization of approximately $500 million, a figure that we believe does not fully reflect the intrinsic value of our enterprise. Said another way, the market is currently ascribing a materially negative value to our expanding operating segments. These segments are positioned with the potential to yield more than $1 billion in annual revenue, underscoring our perspective that SNDL remains undervalued in the marketplace.

In a climate where managing costs is more crucial than ever, our ability to streamline our investment portfolio by divesting of equity securities and certain credit exposures is integral to our strategy. As of the close of Q3 2023, SNDL had deployed capital into credit investments with a carrying value of 583.2 million. The lion's share of this value, approximately 550.5 million, has been committed to the SunStream Bancorp joint venture. SunStream is a joint venture sponsored by SNDL and has directed the formation of SunStream USA with the aim of restructuring certain SunStream-controlled loans. This development is poised to create a dedicated U.S. platform designed to attract independent third-party investors offering independent management and governance.

Most importantly, the structure of SunStream USA is set to undergo review by NASDAQ, aligning with all U.S. compliance and governance standards. Its acquiring balance in January of 2023, the company has realized approximately $22 million in annualized savings, exceeding our initial target of $10 million. In 2023 alone, we achieved cost savings of approximately $18 million. These savings have largely been driven by a reduction in SG&A expenses, supply chain consolidation, and enhanced operational efficiencies. Looking ahead to 2024, we anticipate that run rate synergies will surpass $40 million annually with expected proceeds from asset sales potentially contributing more than 9 million in additional cash proceeds.

Investors may not realize that as we start 2024, none of the assets that SNDL held just over three years ago following its deep financial restructuring and flirtation with CCAA will be in operation. SNDL's leadership has driven a 100% complete transformation of a business that continues to evolve and change. This is not the team to underestimate. SNDL's performance metrics from the third quarter provide a clear affirmation of our strategy. Our confidence is increasing, and we are building a culture focused on accountability and performance. Our commitment to the consistent delivery of well-priced, high-quality products and superior retail experiences has never been stronger.

We are excited to continue to update investors on our performance as we work to deliver strong fundamental unadjusted results. Once again, I thank you for your continued support of SNDL. I will pass the call to Alberto to provide further details on our financial results.

Alberto Paredero -- Chief Financial Officer

Thank you, Zach. I want to remind you all that amounts discussed today are denominated in Canadian dollars unless otherwise stated. Please note that certain amounts referred to on this call are non-GAAP and non-IFRS measures. For definitions of these measures, please refer to SNDL's Management's Discussion and Analysis document. As we dive into our financials, it is great to report that, for the first time in our history, we have reached positive free cash flow in the quarter.

To be precise, in Q3 2023, we achieved 16.5 million of positive free cash flow, compared to negative 67.1 million in Q3 2022. Our cash flow from operations grew 27.5 million in Q3 2023, up from 8.6 million in Q3 2022. Achieving these customer milestones is a clear indicator of our operational improvements and reinforces the focus on our strategic initiatives as a path to deliver on much higher ambition in the future. Our restricted cash balance tells a similar story of growth from 185.5 million at June 30th, 2023 to 202 million at September 30th, 2023.

This increase speaks volumes about our targeted efforts to optimize operational efficiency, particularly working capital. Revenue growth remains steady, registering at 237.6 million for the quarter, a 3.1% increase from Q3 2022. Our reported gross margin reveals a slight decrease to 48.6 million in Q3 2023, down 3.4% from the same period last year. While we're seeing operational improvements, the reported gross margin has been impacted this last quarter by non-cash inventory impairment charges, to a large extent, triggered by our efforts to simplify our portfolio and operations. For perspective, if we were to exclude the impact of inventory impairments and obsolescence charges in Q3 2023 and Q3 2022, our gross margin would have grown over 20% year on year. In terms of adjusted EBITDA, we achieved 16.1 million for the quarter, slightly down from the Q3 2022 results of 18.3 million. A better gross profit in 2023 has been offset by higher sales and marketing and G&A expenses in 2023 and higher investment segment income in 2022.

I will let Tank and Tyler provide more details on the Q3 '23 results for the liquor retail and cannabis operations segments, but I would like to comment about the results for our cannabis retail segment. Revenues for the segment have reached 75.5 million, which is 14.1% growth from Q3 2022. This record-high revenue for the cannabis retail segment was supported by a healthy increase in same-store sales of 3.9% year over year across all banners, as well as opening of new stores. Gross margin rates $20 million in Q3 2023, up 38% growth versus the same period last year. As a percentage of net revenue, gross margin expanded from 21.9% in Q3 2022 to 26.5% in Q3 2023, an improvement of 4.6 percentage points driven by continuous efficiency improvements and expansion of our proprietary data licensing program. This data program delivered revenue for the third quarter of 2023 of 4 million, compared to 1.4 million in the third quarter of 2022.

This represents an increase of 54% versus the second quarter of 2023, showcasing the success of the programs optimization introduced earlier in the year. Finally, looking at our investments and equity positions in Q3 2023. At the end of the third quarter of 2023, the company had deployed capital into cannabis-related credit investments with a current value of 583 million, including 550.5 million through the SunStream joint venture. The revenue generated by our investment portfolio in the third quarter stands at 10 million. This is mainly attributed to interest and fee revenues of 3.3 million in addition to a 6.6 million increase in the estimated fair value of our U.S. credit investments.

The company's financial health is strong, supported by 785 million in unrestricted cash, marketable securities, and investments linked to a net book value of 1.3 billion. It is also important to highlight that we have not raised any cash to share offerings since June 2021, and today, the company has no debt. SNDL's Board of Directors approved extending the company's share repurchase program to November 20, 2024. The company's repurchase program continued to be available to lower our outstanding share flow. Management will continue to assess opportunities to utilize the program to the extent we believe it is in the best interest of our shareholders. For the three months ended September 30, 2023, the company did not purchase common shares for cancellation.

We also remain deeply committed to regulatory diligence and compliance. Our dedication to paying excise taxes on time reflects our strong focus on responsible business practices. So far, this year, we have already paid 35.6 million in excise taxes. Since the company's inception, we have paid a total of 80 million. Even though these high excise tax levels create obvious challenges in the cannabis sector, we believe that meeting our financial obligations is essential for responsible business conduct and positively impacting communities we are part of.

In summary, our results this quarter represents another solid step toward the execution of our business strategy, our culture of financial rigor and continuous improvement, as well as the relentless passion and dedication of our nearly 3,000 employees. While we're pleased with the progress we have made, we are setting our target on much bigger goals as we're working on several initiatives to generate additional growth, further solidify our operational efficiency, and improve our financial rigor. I'm confident that through these initiatives and the determination of our organization, our future is bright. I will now pass the call to Tank to provide an update on our liquor retail results.

Tank Vander -- President, Liquor Retail

Thank you, Alberto. Our liquor retail results this quarter reflect our successful margin growth initiatives, which are not only delivering their intended results but also guiding our strategy for future innovations and expansions. Our retail footprint remains stable with 170 locations primarily in Alberta and one store in British Columbia. Same-store sales have remained steady year over year across all liquor banners. We are in the process of finalizing a new Wine and Beyond store in Airdrie, Alberta, which is located in one of Alberta's fastest-growing municipalities.

This new store is projected to generate approximately 7.6 million in annualized sales in the first year, emphasizing the success of the banner's destination shopping approach. It is scheduled to open in the first quarter of 2024. Despite economic headwinds, our quarterly revenues stood strong at $152 million with stable basket value and customer count despite a downturn in national retail spending. In response to consumer spending trends and macroeconomic factors, we continue to optimize our operations to ensure we are meeting the needs of our customers by prioritizing value, quality, and digital experiences. This approach has not only maintained our stability but also driven growth in key metrics, which is reflected in our year-over-year and sequential margin growth. Our gross margin reached 37.3 million, representing 24.5% of our sales in Q3 2023.

This is a meaningful improvement compared to Q3 2022 where gross margin was 35.6 million, or 23.3% of sales. The 4.8% gross margin growth is mainly driven by procurement productivity, product mix management initiatives, and the success of our private label program. Private label sales, a significant driver of gross margin growth, increased 33% compared to Q3 2022 and 7% sequentially. Private label as a percentage of sales increased from 7.3% of sales to 9.7% from the comparative period in the year prior, representing growth of over 3.5 million. To further capitalize on the success of our private label program, we are currently developing a private label for wine with plans to launch in the first quarter of 2024.

Our private label will feature various wine varietals from different regions, showcasing notable winemakers at accessible prices. This initiative is designed to build on our margin growth strategies and continue to drive differentiation through SNDL's liquor retail banners. Looking to new initiatives, we are pleased to announce we have built out the framework for our proprietary data licensing program. We anticipate reporting initial revenue in Q1 2024 and scaling this program through the upcoming year. This will not only support all our stakeholders but also boost our efforts to increase profits. In September, SNDL launched an e-commerce platform for its liquor retail banner, Wine and Beyond.

The company observed 121% increase in the average online basket spend compared to in-store purchases during the initial four weeks post-launch, highlighting the significant basket growth opportunity through e-commerce. The current site supports click-and-collect. However, we are currently looking into different options to enhance customer conversion and accessibility. We anticipate strong results in the seasonally busy Q4 and look forward to observing how the e-commerce platform further drive sales during this key period. We remain committed to achieving continuous and incremental growth throughout 2023. Our focus remains on expanding our customer reach and exceptional product offerings to ensure we created tailored in-store and digital experiences.

Thank you, and I will now turn the call over to Tyler to cover our cannabis operations segment.

Tyler Robson -- President, Cannabis

Thank you, Tank. In Q3, we have implemented significant strategic initiatives to strengthen our cannabis segment. This included the centralization of all production, manufacturing, processing, and testing activities to Kelowna. Following the quarter's end, we saw the streamlining of all cultivation activities at our facility in Atholville, New Brunswick. We have also completed the bulk of our portfolio rationalization to focus on top-performing SKUs and make way for innovation, including 41 new offerings this past quarter.

These pivotal maneuvers solidify our position to drive top-line growth and set us on the course to achieve profitability within the cannabis operations segment. This quarter, our cannabis segment generated 21 million in net revenue, marking a healthy 77% increase from the same period in 2022. This substantial growth is primarily attributed to the acquisition of Valens. Gross margin for the quarter was negative 8.7 million, compared to 0.2 million in the third quarter of 2022, largely due to inventory impairment associated with the company's strategic changes [Inaudible]. This quarter's outcome reflects the impact of our facility footprint reorganization causing material constraints in our adult recreation segment. This was a transitional phase essential for operational and financial efficiencies.

These vital steps lay the groundwork to achieve positive cash flow and expand margins in the cannabis segment. I'm happy to report the majority of these constraints are now behind us. SNDL expects by optimizing its facility footprint to result in over $10 million in annual savings from its cannabis operations segment through reduced fixed overhead, power costs, labor efficiency. Moving our cultivation to Atholville has cut our production costs per gram by nearly 80% compared to the old facility, which will materially increase our margin moving forward. The team at Atholville has also made immense improvements in both yield and average THC, which we expect to continue those improvements through 2024.

With our facility reorganization in place, we are prepared to scale capacity and drive stability in key categories to increase total revenue in forthcoming quarters. Following this heavy lift, we can better focus on product growth. Looking to product innovation. In Q3, SNDL optimizes brand portfolio by streamlining nearly 50% of its total offerings across all brands. This tactical move enables us to be hyper-focused on high-performing SKUs, key consumer categories, and leading market innovations, focusing on depth versus breadth.

The primary goal of the portfolio rationalization is to enhance revenue and margin growth, elevating the profitability of cannabis operations segment and capturing increased market share. Through a rigorous tightening of our demand planning processes and a substantial increase in production capacity in the coming quarters, we are well positioned to fully leverage our vertical integration platform. Finally, to provide an update on our international and B2B opportunities. Our B2B segment is healthy. We are already exceeding our targets for Q4. We are focused on a fewer, bigger, better approach for our B2B partnerships to ensure we deliver exceptional and consistent quality to our partners.

This refined focus empowers us to scale with our most reliable partners while not compromising total outcome. We are committed to expanding internationally, looking to emerging markets like the U.K. and Germany where we see growth opportunities potentially matching or exceeding our domestic B2B opportunities. We are confident that the decisive strategic measures we have implemented will firmly establish our cannabis segment for growth and sustain profitability in the quarters ahead. Our streamlined operations in tandem with our robust production capabilities, deep consumer insights, and cost-effective operating platform place SNDL in a strong position to realize our objectives in 2024 and beyond.

I will now pass the call back to Zach for closing remarks.

Zach George -- Chief Executive Officer

Reflecting on the past quarter, I want to acknowledge the dedication and effort of my colleagues that has been essential to our progress. We know that considerable work lies ahead as we strive toward realizing sustainable free cash flow and increased shareholder value. Our strong balance sheet and improved operations set us apart in a competitive market, enabling SNDL to focus on long-term strategic growth rather than short-term fixes or aspirational claims. I want to thank our team for their commitment and our shareholders for their trust and support.

Thank you.

Questions & Answers:

Operator

We will now begin the analyst question-and-answer session. [Operator instructions] Our first question comes from Frederico Gomes of ATB Capital Markets. Please go ahead.

Frederico Gomes -- ATB Capital Markets -- Analyst

Good morning. Thank you for -- for taking my questions. Congrats on the free cash flow generation this quarter. My first question is on your liquor retail segment.

So, obviously, very strong margins in the segment this quarter, and you mentioned your sales mix, procurement, the private label program. I'm curious, you know, you think you have a lot of material, I guess, efficiency to be achieved from those three areas going forward that could support even higher margins? And then, to that point as well, on the data licensing program that you're launching next year, what -- what impact could that have in those margins going forward, just taking as a base your cannabis retail segment? And that that seems very substantial, so just curious on the magnitude of that data licensing program for liquor retail. Thank you.

Zach George -- Chief Executive Officer

Morning, Fred, and thanks for the question. We are really heads down right now in the midst of our 2024 budgeting process. So, we're not going to give too much detail on guidance for individual programs. But I would -- I would say that when it comes to liquor segment, we are seeking margin improvement north of 100 basis points, and we'll be able to get more granular on that as we finalize our process and have our 2024 budgets approved by a board.

Frederico Gomes -- ATB Capital Markets -- Analyst

Perfect, thank you. Looking at your -- your, I guess, U.S. investment and exposure and just thinking about how -- you know, how that news about the potential rescheduling of cannabis. So, just curious how -- how does that impact your strategy in that market.

You know, does it change your thesis and your willingness to allocate more capital there?

Zach George -- Chief Executive Officer

It's a great question. In terms of the impact of rescheduling, it will have a material impact on the -- the free cash flow being generated by those entities. But in terms of our willingness to deploy more capital, we've got a lot on our plate right now, and we're really focused on ensuring that we're bringing efficiencies and optimizing current operations. We're also cognizant of the cash on our balance sheet. So, I would never say never, but we have a lot of work to do in terms of what's on our plate today.

Frederico Gomes -- ATB Capital Markets -- Analyst

Thank you. And then, finally, just the last one for me, the same thing with USA structure, is that already, you know, being under review by the NASDAQ, or how long do you think that process could take? And then, meanwhile, while that's not complete, does that have any impact on your day-to-day operations of the Parallel and Skymint assets?

Zach George -- Chief Executive Officer

So, all of my comments here are going to be subject to review and support by NASDAQ. We've stated publicly that we expect both of these transactions while the restructuring terms have been completed. There are still a few minor conditions precedent and both license transfer and exchange approvals that are required. So, we believe that we'll be able to bring this to resolution sometime in Q1, and we don't expect that process to have any material negative impact in terms of day-to-day operations.

Both -- both businesses are -- are being transformed currently, and a lot of progress has been made to improve their operations.

Frederico Gomes -- ATB Capital Markets -- Analyst

Thank you very much. I'll hop back in the queue. Thanks.

Operator

Our next question comes from Yewon Kang with Canaccord Genuity. Please go ahead.

Yewon Kang -- Canaccord Genuity -- Analyst

Hi, good morning. Thanks for the question. This is Yewon Kang on behalf of Matt Bottomley. I wanted to ask about the $11 million charge under corporate operations under consolidated net revenues.

Could you provide more color or granularity behind what was -- what was in relation to that $11 million charge in terms of which business operations it was related to and what specific events happened throughout the quarter that led to this? Thanks.

Zach George -- Chief Executive Officer

Alberto, do you want to take this one?

Alberto Paredero -- Chief Financial Officer

Yeah, absolutely. Thank you for the question, Yewon. So, actually, the chart is related to the revenue that we have in our cannabis operations and our cannabis retail where there is an overlap between the two of them. We just noticed, as we were stepping into the third quarter, that the size of those revenues being producing cannabis operations that end up being as well sold in our retail business, after they -- they go through the provincial boards, was gaining size as we're expanding our business.

And as we reached a certain level of materiality, we decided to start eliminating that inter-company -- we could call it inter-company double count of revenue. So, this is the first quarter that we're doing that entry. We will continue doing it going forward. And we have provided as well in our financial statements a table that shows by how much would be the amounts that we have adjusted as well for Q1 and Q2 of this year.

And as I said, it's purely related to the -- the volumes and the revenue that goes through our cannabis operations segment that end up being as well sold through our cannabis retail segment after they go through the boards.

Yewon Kang -- Canaccord Genuity -- Analyst

Got it. Thank you. And just to add on to that same -- under cannabis operations segment, specifically related to the authorizing initiatives and other operational efficiency initiatives that you guys have been implementing there. Gross margins seem to be continuing to remain in the negative territory up until Q3.

But with now all of these initiatives kind of being completed, could we expect these margins to show improvement going forward in Q4 and into 2024?

Zach George -- Chief Executive Officer

Yeah, so you're still seeing the impact of biomass revaluations and with the rationalization of our cultivation and processing footprint. We're expecting to be in a position to have those reduced materially, if not eliminated, in 2024. And so, we'll still likely see some noise impacts our Q4 results. But we're trying to leave as much of that noise behind in 2023 and are looking forward to a much -- presenting a much cleaner view on operations in 2024.

Yewon Kang -- Canaccord Genuity -- Analyst

Perfect. Thank you.

Operator

[Operator instructions] Our next question comes from Pablo Zuanic at Zuanic and Associates. Please go ahead.

Pablo Zuanic -- Zuanic and Associates -- Analyst

Thank you. Good morning, everyone. Just first on the liquor segment, Zach. When you look at, you know, some of your Canadian LP peers, one of them has been very acquisitive in the U.S., right, in terms of buying beer brands and liquid assets.

As you continue to build the liquor business, I understand right now it's retail, but now you're going to start, you know, producing your own wines, it seems, or buying, I suppose, for the private label. Would be -- would buying beer brands outside -- or wine brands outside of Canada or in Canada be part of a strategy as you grow that business?

Zach George -- Chief Executive Officer

Good morning, Pablo, and thanks for the question. Look, it's a possibility if we were outside of Canada given tight house and other regulations that would restrict us from doing so inside of Canada. But we're very focused on owning the consumer and creating strong retail experiences. And so, there's nothing on our plate today that would suggest that we're taking a hard look at acquiring liquor brands in the U.S.

or abroad.

Pablo Zuanic -- Zuanic and Associates -- Analyst

OK, thank you. And then, just moving on to cannabis operations, right, you're talking about becoming a major player. Obviously, you have the balance sheet to do so. I don't know if you want to give an update in the need to scale up the M&A.

I can tell from the filings where you still own the stake in Village Farms. But, you know, outside of VF, I mean it just seems to me that you need to scale up, especially if you're talking about -- about trying to become a relevant player in international. Any comments on that?

Zach George -- Chief Executive Officer

Yeah, it's a great question. I think the long-term requirements for SNDL in terms of ownership or contracting to acquire a quality, reasonably priced biomass is still somewhat up in the air. You see a lot of volatility in the Canadian market. Price compression has made procurement a very attractive opportunity for us.

We're certainly committed to eliminating any exposure to high-cost cultivation and may look at other opportunities. We have disclosed that we've exited all of our material equity investments, but we will continue to look at strong, low-cost, high-quality producers for potential opportunities in the future.

Pablo Zuanic -- Zuanic and Associates -- Analyst

Got it. Thank you. And then, just one last one in terms of SunStream USA. If I hear right, I think you mentioned that SunStream is sponsored by SNDL, but I mean, obviously, SNDL still owns 50% of SunStream, right? So -- so, the question would be, I guess, of the 550.5 million, how many are in assets that you're taking ownership of, right? It's Parallel and Skymint but -- but not all of the portfolio you are equitizing, I suppose.

And if you can -- if you can give some color there, that would be helpful in terms of 550.5. But -- but more important than that, if in the end -- you know, when we look at, you know, how Canopy Growth has gone back and forth in terms of their own plans to -- for Canopy USA, if in the -- in the end, you -- you hit a wall in terms of trying to be a NASDAQ-listed, equitizing those assets, and having them in your books, would you -- would you consider just selling them to comply with the -- with the NASDAQ rules? Thank you.

Zach George -- Chief Executive Officer

Thanks, Pablo. Obviously, we're -- we're -- we're all working through an environment that is -- is -- is not a seller's market, OK? So, let's just start with that regardless of the scenario. But in this case, we are highly confident we have -- we have very reputable counsel that has worked on these issues with NASDAQ and sought and received approval under similar structures. I just want to remind you and the audience that our SunStream joint venture is structured such that SNDL, as required, does not engage in any plant-touching activities in the United States, and we are a non-control participant in SunStream.

So, think of it as a conventional sort of GP-LP, general partner, limited partner arrangement, where both staff and SNDL are owners of the general partnership, but SNDL the sole LP in that scenario. And so, we report based on a structure that would be similar to any alternative credit portfolio that you would see in the marketplace. And for that reason, we haven't broken out a ton of detail on individual positions. If you look at the filings that are available in the U.S., you'll see that of that -- of that total balance, which again has also been adjusted for the fair market value where we have written it down, over half of that balance would be dedicated to positions that are going through equitization processes.

And as you -- as you aptly point out, we will likely see resolution in the other cases where we have large principal balances that should be coming back to us over the next 24 months. Some of these things are amortizing principal back to us today. So, that will be a source of cash for us in the future, and we don't really -- we don't see a scenario where we aren't able to get this done. I would just point to some of the differences between your reference to Canopy.

The types of businesses that Canopy is acquiring is very different than the exposure that we have, right? So, if you take Skymint and Parallel, for example, these are two -- one's an SSO and one is an MSO. Both started their lives as vertically integrated operators. So, not the same as, you know, tackling a product brand or -- or producer in vape or edible categories which has been a focus for -- for Canopy as well. So, the path is one that has been well trodden, and we believe that we will have all the requisite support and consents from regulators and including -- that would include our exchange, NASDAQ.

So, again, look forward to wrapping this up and closing in Q1, but we still have some -- some wood to chop and a few more steps to take to close these transactions and finalize support from the NASDAQ.

Pablo Zuanic -- Zuanic and Associates -- Analyst

Thank you. That's very helpful. Good -- good color there. If I may ask -- add one on -- in terms of Nova, I mean the outside date keeps on being extended, but obviously, that's more a regulatory issue.

I mean the parties have agreed to do the deal, right? But is it more about, you know, you being plant-touching in Canada and now, you know, owning a retail chain? Is that the issue? And how do you want to deal with that? That's the last one. Thank you.

Zach George -- Chief Executive Officer

Pablo, it's a great question. Look, in terms of both parties, our tolerance for further delays is reaching its limits. Anyone who studies this industry or operates within it understands just how frustrating the state-by-state and province-by-province sort of regulatory ground game can be. So, we're not going to make additional comments at this time, but we are looking forward to updating investors in the near future.

Pablo Zuanic -- Zuanic and Associates -- Analyst

Thank you.

Operator

This concludes the question-and-answer session. I would like to turn the conference back over to Zach George for any closing remarks.

Zach George -- Chief Executive Officer

Thanks to all for attending our third-quarter conference call. Look forward to updating you in the future. Thanks.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Zach George -- Chief Executive Officer

Alberto Paredero -- Chief Financial Officer

Tank Vander -- President, Liquor Retail

Tyler Robson -- President, Cannabis

Frederico Gomes -- ATB Capital Markets -- Analyst

Yewon Kang -- Canaccord Genuity -- Analyst

Pablo Zuanic -- Zuanic and Associates -- Analyst

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