Generated
Excluding portfolio restructuring charges in Q2 2020, Net Revenue up 13%
Achieved Gross Margin of 34%
Total Operating Expenses down 14% versus the prior quarter
Adjusted EBITDA loss decreases to
Third Quarter Fiscal 2020 Financial Summary | |||||
Gross revenue1 | Net revenue | Gross margin2 | Adjusted EBITDA3 | Free cash flow4 | |
Reported | 34% | ||||
% change vs. Q2 2020 | 15% | 62% | NM | 41% | 16% |
% change vs. Q3 2019 | 39% | 49% | 800 bps | -23% | -20% |
1 Excludes the impact of other revenue adjustments in Q2 2020, which represent the Company's determination of returns and pricing adjustments. |
2 Gross margin is before fair value impacts in cost of sale, and is a non-IFRS measure. See "Non-IFRS Measures" below. |
3 Adjusted EBITDA is a non-IFRS measure. See "Non-IFRS Measures" below. |
4 Free cash flow is defined as operating cash flow less capital expenditures, and is a non-IFRS measure. See "Non-IFRS Measures" below. |
Third Quarter Fiscal 2020 Corporate Financial Highlights
- Revenues: Reported Net Revenues increased 62% over Q2 2020, or 13% excluding the impact of portfolio restructuring charges. Gross Recreational B2B revenue increased 8% over prior quarter due, in part, to over 140 stores becoming active in the quarter and higher sales of premium dried flower and pre-roll joints. Our acquired businesses including Storz & Bickel and This Works also performed well, contributing to organic growth this quarter.
- Gross margin: Gross margin before fair value impacts was 34%. Gross margin performance in quarter benefited from lower period costs due to higher facility utilization
- Operating expenses: Total operating expenses decreased 14% versus Q2 2020 primarily due to a
$20 million reduction in G&A expenses and over$31 million lower stock-based compensation versus the prior quarter - Adjusted EBITDA: Adjusted EBITDA loss of
$92 million , a$64 million narrower loss versus Q2 2020 driven by higher sales, improved gross margins and lower operating expenses - Cash Position: Gross cash balance was
$2.3 billion , down from$2.7 billion in Q2 2020, reflecting the EBITDA loss, capital investments and M&A
Third Quarter Fiscal 2020 Business & Operational Highlights
- Maintained leading market share in retail, at an estimated 22%, of the Canadian recreation market as we saw a strong demand for both premium and value priced dried flower and pre-rolled joints
- Continued market share gains and increase in the number of patients, to over 76,700, in the Canadian medical cannabis market
- Named
David Klein as new Chief Executive Officer - Completed first shipments of cannabis-infused edible chocolates and
JUJU Power 510 batteries inDecember 2019 - Storz & Bickel expanded product line with launch of Crafty+ vaporizer in
November 2019 - Announced initial line of First & Free Hemp-derived CBD products and began sales online through www.firstandfree.com, one quarter ahead of Q4 2020 target
"In Q3 we executed across
"We delivered significant gross improvement in the third quarter driven by stronger revenues and higher capacity utilization. Actions taken earlier this year are expected to meaningfully reduce stock-based compensation in FY21, and we have started to implement tighter cost controls across the organization," said
Third Quarter Fiscal 2020 Financial and Operational Review | |||||
Q3 2020 | Q2 2020 | % Change | Q3 2019 | % Change | |
Canadian recreational cannabis | |||||
- Business to business1 | 8% | -11% | |||
- Business to consumer | 16% | 32% | |||
Canadian medical cannabis | 5% | -7% | |||
Canadian cannabis | 9% | -5% | |||
International medical cannabis | 3% | 593% | |||
Cannabis gross revenue excluding other revenue adjustments | 8% | 13% | |||
Other revenue | 42% | 345% | |||
Gross revenue excluding other revenue adjustments | 15% | 39% | |||
Other revenue adjustments2 | $- | -100% | $- | NM | |
Excise taxes3 | 31% | -20% | |||
Net revenue | 62% | 49% |
1 Excludes the impact of other revenue adjustments. |
2 Other revenue adjustments represent the Company's determination of returns and pricing adjustments. |
3 Excise taxes is presented net of the impact from other revenue adjustments. |
Canadian Cannabis
- Recreational B2B sales increased 8% over Q2 2020, due to over 140 stores becoming active in the quarter and higher sales of premium dried flower and pre-roll joints
- Recreational B2C sales increased 16% over prior quarter, due in part to an 11% increase in same store sales
- Medical sales increased 5% over the prior quarter primarily attributable to the broadening of our brand and product offerings, including the availability of products from additional CraftGrow partners, as well as an increase in number of customers to over 76,700.
International Cannabis
- C3 revenue increased 5% over Q2 2020
Germany cannabis sales higher than expected due to opportunistic sales into the German market to fill a supply gap that resulted from a regulatory enforced sales halt of cannabis products offered by another vendor
Strategic Acquisitions
- Storz & Bickel vaporizer revenue increased 46% over Q2 2020 due to solid organic growth and seasonal sales
- This Works revenue increased 42% over prior quarter due to strong organic growth
Third Quarter Fiscal 2020 Cannabis Product Revenue Highlights | |||||||
Q3 2020 | Q2 2020 | % Change | Q3 2019 | % Change | |||
Canadian recreational - Business to business | |||||||
Dry cannabis | 18% | 42% | |||||
Cannabis oil and softgels excluding other revenue adjustments | 50% | -86% | |||||
Other revenue adjustments1 | -84% | $- | NM | ||||
220% | -11% | ||||||
Canadian recreational - Business to consumer | |||||||
Dry cannabis | 16% | 24% | |||||
Cannabis oil and softgels | 13% | 183% | |||||
16% | 32% | ||||||
Canadian medical | |||||||
Dry cannabis | -4% | -35% | |||||
Cannabis oil and softgels | 10% | 22% | |||||
5% | -7% | ||||||
International medical | |||||||
Dry cannabis | -5% | 44% | |||||
Cannabis oil and softgels | 6% | $- | NM | ||||
3% | 593% |
1 Other revenue adjustments represent the Company's determination of returns and pricing adjustments. |
Third Quarter Fiscal 2020 Adjusted EBITDA | |||||
Q3 2020 | Q2 2020 | % Change | Q3 2019 | % Change | |
Adjusted EBITDA1 | 41% | -23% | |||
Attributed as follows: | |||||
- Operations and corporate overhead | 59% | 16% | |||
- Strategic investments and business development | -8% | -339% | |||
- Non-operating or under-utilized facilities | 22% | 37% |
1 Adjusted EBITDA is a non-IFRS measure. See "Non-IFRS Measures" below. |
Non-IFRS Measures
Gross margin percentage, before fair value impacts in cost of sales, a non-IFRS measure, is a key operational metric that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. This measure is calculated as net revenue less inventory production costs expensed to cost of sales, divided by net revenue, and may be computed from the consolidated statements of operations presented within this news release.
Adjusted EBITDA, a non-IFRS measure, is a key operational metric that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. Adjusted EBITDA is calculated as earnings before interest, tax, depreciation and amortization, share-based compensation expense, fair value changes and other non-cash items, and further adjusted to remove acquisition-related costs. The Company attributes Adjusted EBITDA to its operations and corporate overhead, strategic investments and business developments, and non-operating or under-utilized facilities. The Adjusted EBITDA reconciliation is presented within this news release and explained in Management's Discussion & Analysis under "Adjusted EBITDA (Non-IFRS Measure)", a copy of which will be filed on SEDAR.
Free Cash Flow, a non-IFRS measure, is a key operational metric that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. This measure is calculated as net cash provided by (used in) operating activities less purchases and deposits of property, plant and equipment.
Transition to
As part of our
Therefore, as of
This press release is intended to be read in conjunction with the Company's Unaudited Condensed Interim Consolidated Financial Statements ("Financial Statements) and Management Discussion & Analysis ("MD&A) for the three and nine months ended
Webcast and Conference Call Information
The Company will host a conference call and audio webcast with
Webcast Information
A live audio webcast will be available at:
https://event.on24.com/wcc/r/2171215/8311836AC24F7988B042B4BB0FA5622A
Replay Information
A replay of the call will be accessible by webcast, until
https://event.on24.com/wcc/r/2171215/8311836AC24F7988B042B4BB0FA5622A
About
The Company's medical division, Spectrum Therapeutics is proudly dedicated to educating healthcare practitioners, conducting robust clinical research, and furthering the public's understanding of cannabis, and has devoted millions of dollars toward cutting edge, commercializable research and IP development. Spectrum Therapeutics sells a range of full-spectrum products using its colour-coded classification Spectrum system as well as single cannabinoid Dronabinol under the brand Bionorica Ethics.
The Company operates retail stores across
From our historic public listing on the
Notice Regarding Forward Looking Statements
This news release contains "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation. Often, but not always, forward-looking statements and information can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements or information involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||||
UNAUDITED | ||||
(Expressed in CDN | 2019 | 2019 | ||
Assets | ||||
Current assets | ||||
Cash and cash equivalents | $ | 1,561,664 | $ | 2,480,830 |
Marketable securities | 705,921 | 2,034,133 | ||
Amounts receivable | 108,822 | 106,974 | ||
Biological assets | 59,107 | 78,975 | ||
Inventory | 622,575 | 262,105 | ||
Prepaid expenses and other current assets | 114,637 | 107,123 | ||
3,172,726 | 5,070,140 | |||
Investments in equity method investees | 123,077 | 112,385 | ||
Other financial assets | 351,952 | 363,427 | ||
Property, plant and equipment | 1,725,333 | 1,096,340 | ||
Intangible assets | 567,185 | 519,556 | ||
2,068,696 | 1,544,055 | |||
Other long-term assets | 37,073 | 25,902 | ||
$ | 8,046,042 | $ | 8,731,805 | |
Liabilities | ||||
Current liabilities | ||||
Accounts payable and accrued liabilities | $ | 225,181 | $ | 226,533 |
Current portion of long-term debt | 21,652 | 103,716 | ||
Other current liabilities | 171,476 | 81,414 | ||
418,309 | 411,663 | |||
Long-term debt | 536,107 | 842,259 | ||
Deferred tax liability | 65,733 | 96,031 | ||
Share repurchase credit liability | 1,301,322 | - | ||
Other long-term liabilities | 194,737 | 140,404 | ||
2,516,208 | 1,490,357 | |||
Shareholders' equity | ||||
Share capital | 6,359,643 | 6,026,618 | ||
Other reserves | 2,768,725 | 1,673,472 | ||
Accumulated other comprehensive income | (45,904) | 28,630 | ||
Deficit | (3,826,095) | (777,087) | ||
Equity attributable to | 5,256,369 | 6,951,633 | ||
Non-controlling interests | 273,465 | 289,815 | ||
Total equity | 5,529,834 | 7,241,448 | ||
$ | 8,046,042 | $ | 8,731,805 |
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||
FOR THE THREE AND NINE MONTHS ENDED | |||||||||
UNAUDITED | Three months ended | Nine months ended | |||||||
(Expressed in CDN $000's except share amounts) | 2019 | 2018 | 2019 | 2018 | |||||
(Restated - see note 2(d)) | (Restated - see note 2(d)) | ||||||||
Revenue | |||||||||
Excise taxes | 11,782 | 14,655 | 33,699 | 14,655 | |||||
Net revenue | 123,764 | 83,048 | 290,859 | 132,291 | |||||
Inventory production costs expensed to cost of sales | 81,953 | 61,329 | 241,456 | 90,358 | |||||
Gross margin before the undernoted | 41,811 | 21,719 | 49,403 | 41,933 | |||||
Fair value changes in biological assets included in inventory sold and other charges | 60,546 | 28,105 | 175,765 | 105,989 | |||||
Unrealized gain on changes in fair value of biological assets | (78,964) | (22,267) | (300,303) | (90,500) | |||||
Gross margin | 60,229 | 15,881 | 173,941 | 26,444 | |||||
Sales and marketing | 62,104 | 48,324 | 171,814 | 107,199 | |||||
Research and development | 20,795 | 5,264 | 41,191 | 7,964 | |||||
General and administration | 67,385 | 46,088 | 217,517 | 102,777 | |||||
Acquisition-related costs | 3,256 | 4,520 | 19,000 | 9,606 | |||||
Share-based compensation expense | 56,763 | 40,062 | 217,611 | 108,159 | |||||
Share-based compensation expense related to acquisition milestones | 4,916 | 23,849 | 24,311 | 81,674 | |||||
Depreciation and amortization | 16,530 | 5,015 | 42,953 | 11,640 | |||||
Operating expenses | 231,749 | 173,122 | 734,397 | 429,019 | |||||
Loss from operations | (171,520) | (157,241) | (560,456) | (402,575) | |||||
Loss on extinguishment of warrants | - | - | (1,176,350) | - | |||||
Other income (expense), net | 24,903 | 233,142 | (51,759) | 54,445 | |||||
Total other income (expense), net | 24,903 | 233,142 | (1,228,109) | 54,445 | |||||
(Loss) income before income taxes | (146,617) | 75,901 | (1,788,565) | (348,130) | |||||
Income tax recovery (expense) | 22,451 | (1,041) | 8,611 | 1,398 | |||||
Net (loss) income | |||||||||
Net (loss) income attributable to: | |||||||||
Non-controlling interests | (3,197) | 7,278 | (1,746) | 3,099 | |||||
(Loss) earnings per share, basic | |||||||||
Net (loss) income per share, basic: | |||||||||
Weighted average number of outstanding common shares: | 348,530,622 | 303,281,549 | 346,877,660 | 241,806,351 | |||||
Loss per share, diluted | |||||||||
Net loss per share, diluted: | |||||||||
Weighted average number of outstanding common shares, diluted: | 348,530,622 | 315,974,639 | 346,877,660 | 242,044,821 |
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
FOR THE NINE MONTHS ENDED | ||||
UNAUDITED | ||||
(Expressed in CDN | 2019 | 2018 | ||
Net inflow (outflow) of cash related to the following activities: | ||||
Operating | ||||
Net loss | $ | (1,779,954) | $ | (346,732) |
Adjustments for: | ||||
Depreciation of property, plant and equipment | 57,926 | 15,703 | ||
Amortization of intangible assets | 26,680 | 7,869 | ||
Share of loss on equity investments | 6,668 | 9,021 | ||
Fair value changes in biological assets included in inventory sold and other charges | 175,765 | 105,989 | ||
Unrealized gain on changes in fair value of biological assets | (300,303) | (90,500) | ||
Share-based compensation | 241,922 | 194,686 | ||
Other assets | - | (16,908) | ||
Loss on extinguishment of warrants | 1,176,350 | - | ||
Other income and expense | 93,162 | (44,476) | ||
Income tax recovery | (8,611) | (1,398) | ||
Non-cash foreign currency | (3,945) | 1,394 | ||
Changes in non-cash operating working capital items | (233,918) | (129,547) | ||
Net cash used in operating activities | (548,258) | (294,899) | ||
Investing | ||||
Purchases and deposits of property, plant and equipment | (610,858) | (495,236) | ||
Purchases of intangible assets | (7,800) | (40,140) | ||
Redemption (purchase) of marketable securities, net | 1,324,682 | (802,247) | ||
Investments in equity method investees | (4,719) | (27,201) | ||
Investments in other financial assets | (46,647) | (74,071) | ||
Premium paid for Acreage Call Option | (395,190) | - | ||
Net cash outflow on acquisition of non-controlling interests | - | (1,996) | ||
Net cash outflow on acquisition of subsidiaries | (511,080) | (344,472) | ||
Payment of acquisition related liabilities | (29,837) | - | ||
Net cash used in investing activities | (281,449) | (1,785,363) | ||
Financing | ||||
Payment of share issue costs | (245) | (18,617) | ||
Proceeds from issuance of common shares and warrants | - | 5,072,500 | ||
Proceeds from issuance of shares by Canopy Rivers | 1,062 | 91,218 | ||
Proceeds from exercise of stock options | 39,149 | 28,730 | ||
Proceeds from exercise of warrants | 446 | 18,684 | ||
Issuance of long-term debt | 10,268 | 600,000 | ||
Payment of long-term debt issue costs | - | (16,380) | ||
Payment of interest on long-term debt | (13,738) | - | ||
Repayment of lease obligations | (9,331) | (2,728) | ||
Repayment of long-term debt | (112,705) | (3,499) | ||
Net cash (used) provided by financing activities | (85,094) | 5,769,908 | ||
Effect of exchange rate changes on cash and cash equivalents | (4,365) | 103,664 | ||
Net cash (outflow) inflow | (919,166) | 3,793,310 | ||
Cash and cash equivalents, beginning of period | 2,480,830 | 322,560 | ||
Cash and cash equivalents, end of period | $ | 1,561,664 | $ | 4,115,870 |
Adjusted EBITDA1 Non-IFRS Measure | Three months ended | |||
(In | 2019 | 2018 | ||
Adjusted EBITDA1 Reconciliation | ||||
Loss from operations - as reported | $ | (171,520) | $ | (157,241) |
IFRS fair value accounting related to biological assets and inventory | ||||
Fair value changes in biological assets included in inventory sold and other charges | 60,546 | 28,105 | ||
Unrealized gain on changes in fair value of biological assets | (78,964) | (22,267) | ||
(18,418) | 5,838 | |||
Share-based compensation expense (per statements of cash flows) | 61,679 | 64,179 | ||
Acquisition-related costs | 3,256 | 4,520 | ||
Depreciation and amortization (per statements of cash flows) | 33,342 | 7,890 | ||
98,277 | 76,589 | |||
Adjusted EBITDA | $ | (91,661) | $ | (74,814) |
Nine months ended | ||||
(In | 2019 | 2018 | ||
Adjusted EBITDA1 Reconciliation | ||||
Loss from operations - as reported | $ | (560,456) | $ | (402,575) |
IFRS fair value accounting related to biological assets and inventory | ||||
Fair value changes in biological assets included in inventory sold and other charges | 175,765 | 105,989 | ||
Unrealized gain on changes in fair value of biological assets | (300,303) | (90,500) | ||
(124,538) | 15,489 | |||
Share-based compensation expense (per statements of cash flows) | 241,922 | 194,686 | ||
Acquisition-related costs | 19,000 | 9,606 | ||
Depreciation and amortization (per statements of cash flows) | 84,606 | 23,572 | ||
345,528 | 227,864 | |||
Adjusted EBITDA | $ | (339,466) | $ | (159,222) |
1 Adjusted EBITDA is earnings before interest, tax, depreciation and amortization, share-based compensation expense, fair value changes and other non-cash items, and further adjusted to remove acquisition-related costs. |
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