Net revenues increase to $8 million representing a quarter-over-quarter increase of 139%, with a gross margin of 46%
Management to host a Conference Call on Thurs. August 29th at 10:00AM Eastern Time
WeedMD Inc. (TSX-V: WMD) (OTCQX: WDDMF) (FSE: 4WE)(“WeedMD” or the “Company”), a federally-licensed producer and distributor of medical-grade cannabis, is pleased to report its financial and operating results for the three months ended June 30, 2019, including net revenue of $8.0 million and a gross margin of 46%.
“WeedMD continues to make solid progress and we’re proud to post another record quarter that highlights the strength of our operations and the demand for our products,” said Nichola Thompson, CFO of WeedMD. “Our gross margins improved to 46% as we realized scale in our cultivation operations and continued optimizing our supply chain. With another 10 newly-licensed 10,000 sq. ft. cultivation rooms coming online alongside our 27-acre outdoor harvest, we expect to realize some of the best cultivation margins in the industry.” Latest Outdoor Grow video here.
Key Financial Highlights
- For the three months ended June 30, 2019, WeedMD recorded net sales of $8.0 million, representing a quarter-over-quarter increase of 139% and a 282% increase from the same period last year.
- Gross profit before changes in fair value was $3.7 million, representing a 46% gross margin compared to 15% in the prior quarter.
- The Company sold 1,979 kgs of dried cannabis, representing an increase of 150% from the previous quarter.
- WeedMD holds $29.5 million in inventory and biological assets as of June 30, 2019, an increase of $15.6 million or 113% from the prior quarter.
- The weighted average cost per gram, inclusive of all costs, direct and indirect, to produce and package finished cannabis products for Q2 2019 was $1.84, compared to $2.90 for Q1 2019 and $3.59 in Q2 2018. Cultivation cost per gram was $0.96 per gram for the quarter, a 30% improvement from Q1 2019 of $1.37.
Summary of Results
|Q2 2019||Q1 2019|
|Gross profit before changes in fair value||3,663,089||489,094|
|Gross margin (before changes in fair value)||46%||15%|
|As at||June 30, 2019||March 31, 2019|
|Cash and cash equivalents||11,349,687||16,853,647|
*Adjusted EBITDA is not a recognized measurement under International Financial Reporting Standards (“IFRS”) and this data may not be comparable to data presented by other companies. Management believes Adjusted EBITDA to be an important measure of the Company’s day-to-day operations, by excluding interest, tax, and depreciation, stock compensation, fair value changes and other non-cash items, and non-recurring items. This measurement is useful in assessing the results of operating and strategic decisions.
“This quarter was indicative of WeedMD’s long-standing drive for execution and quality,” said Keith Merker, CEO of WeedMD. “Consistent product, efficient operations and capital discipline remain our core focus. We are delivering on our commitments to build an industry-leading cannabis production platform with our low-cost outdoor cultivation platform. Additionally, with the licensing of 10 more precision cultivation rooms that are now being planted at our Strathroy facility, and through the introduction of CX Industries, we continue on our path to become Canada’s best source for premium cannabis flower, oils and extracts at scale.”
Corporate Highlights During and Subsequent to the Quarter Ended June 30, 2019
Purchased 60-acre Property in Strathroy, Ontario. The Company purchased the 60-acre property directly adjacent to its Strathroy property which allows it to increase its outdoor cultivation to 100 acres in 2020.
Health Canada Licensing. WeedMD secured the following:
- Processing Licence. April 2019 – Health Canada processing licence for its Strathroy facility, the first phase in obtaining its finished goods sales licence.
- Outdoor Grow Licence. May 2019 – Outdoor cultivation licence from Health Canada to grow on 27-acres at its Strathroy facility. The Company completed the planting of more than 20,000 clones in June using over 30 strains from its genetic library with plans to harvest in October & November 2019.
- Licence Amendment for 20 Additional Cultivation & Processing Rooms. August 2019 – Health Canada’s approval for an additional 20 cannabis cultivation and processing rooms in Strathroy. The amendment allows another ten 10,000 sq. ft. cultivation rooms to be utilized along with 10 more processing and drying rooms.
Outdoor Grow. WeedMD completed planting more than 20,000 clones in early June becoming one of the first LPs to introduce outdoor cultivation in Canada. With the low-cost input material that outdoor harvest is expected to yield, the Company is positioned to process and market significant quantities of extracts and concentrates through its subsidiary CX Industries.
Aylmer Optimization & CX Industries. In May, the Company announced its plans to convert and optimize its fully-licensed Aylmer facility into a focused extraction and processing hub. WeedMD has since launched CX Industries, a wholly-owned subsidiary that will specialize in extraction, toll processing, white labeling services and third-party product formulation.
Adult-use Brand Color Cannabis. The Company launched Color Cannabis in June, a dedicated premium adult-use brand exclusively available to distributors and select retailers across Canada. Product shipments commenced in the summer, quickly becoming one of the best-selling products across multiple retailers.
Retail Initiative. WeedMD and Pita Pit signed a Master Cannabis Retail and Licensing Agreement with an Ontario cannabis retail lottery winner who now owns and operates the first Pioneer Cannabis store located at 1200 Brant Street in Burlington, Ontario. The store opened on August 2, 2019, becoming one of the initial 25 cannabis stores in Ontario.
Appointment of Jeff Keyes, Vice President, Operations. WeedMD is pleased to announce the appointment of Jeff Keyes as Vice President, Operations. A seasoned leader with over 30 years of management experience in the areas of manufacturing, continuous improvement, food safety, and quality, Jeff will provide direct oversight in areas of production, inventory control and distribution.
Q2 Conference Call
The Company will host a conference call with management on Thursday August 29, 2019 at 10 a.m. Eastern Time to report its Q2-2019 financial results and operational outlook. The call will be hosted by Keith Merker, CEO and Nichola Thompson, CFO of WeedMD.
Management will be available for analyst and media questions following opening remarks.
Conference Call Details:
Date: Thursday August 29, 2019
Time: 10 a.m. Eastern Time
Dial-in Number: Canada/USA: 1-800-319-4610. International Toll: +1-604-638-5340 Participants, please dial in and ask to join the WeedMD call.
Replay Dial – in: Canada/USA: 1-800-319-6413. International Toll: +1-604-638-9010 Replay Access Code: 3544 Replay will be available after 12:00 p.m. Eastern Time, until September 29, 2019.
The Company’s financial statements and related management’s discussion and analysis for the period are available under the Company’s profile on SEDAR at www.sedar.com. All amounts are expressed in Canadian dollars and are in accordance with International Financial Reporting Standards unless otherwise noted.
About WeedMD Inc.
WeedMD Inc. is the publicly-traded parent company of WeedMD Rx Inc., a federally-licensed producer of cannabis products for both the medical and adult-use markets. The Company owns and operates a 158-acre state-of-the-art greenhouse and outdoor facility located in Strathroy, ON. The Company also operates CX Industries, a wholly-owned subsidiary of WeedMD Inc. CX operates out of the Company’s fully-licensed 26,000 sq. ft. Aylmer, Ontario production facility which specializes in cannabis extraction and processing. WeedMD has a multi-channeled distribution strategy that includes selling directly to medical patients, strategic relationships across the seniors’ market and supply agreements with Shoppers Drug Mart as well as six provincial distribution agencies where WeedMD’s adult-use brand Color Cannabis is sold.