Net revenue, increased to $19.7 million in Q2 2024 from $13.0 million in Q2 2023, a 51.0%
increase.
Gross profit, before fair value adjustments,
increased to $7.1 million in Q2 2024
from $4.0 million in Q2 2023, a 77.2%
increase.
Delivered a twelfth consecutive quarter of
positive Adjusted EBITDA1 of $3.5 million.
All financial results are reported in Canadian
dollars, unless otherwise stated.
MONTREAL, April 29,
2024 /CNW/ - Cannara Biotech Inc. ("Cannara"
or the "Company") (TSXV: LOVE) (OTCQB: LOVFF) (FRA: 8CB0), a
vertically integrated producer of premium-grade cannabis and
derivative product offerings at affordable prices with two mega
facilities based in Quebec
spanning over 1,650,000 sq. ft., today announced its fiscal second
quarter 2024 financial and operating results for the three and
six-month periods ended February 29,
2024. The full set of condensed interim consolidated
financial statements for the three and six-month periods ended
February 29, 2024, and the
accompanying management's discussion and analysis can be accessed
by visiting the Company's website at investors.cannara.ca, and/or
accessing its profile pages on SEDAR+ at www.sedarplus.ca.
"This past quarter, despite a challenging market
environment, Cannara continued to demonstrate continued positive
execution towards becoming one of the leading cannabis companies in
Canada. With our tenth grow zone
now operational, our annual production capability has increased to
33,500 kg, underlining our dedication to increasing capacity to
meet the growing market demand for our product," expressed Zohar
Krivorot, President & CEO. "Our footprint is expanding robustly
across Alberta and BC, bolstered
by the introduction of new SKUs and the approval from the Manitoba
Liquor & Lotteries Corporation, paving the way for a stronger
market presence in Q3 2024. The outpouring of positive feedback
from our diverse clientele across Canada reaffirms our success in delivering
unparalleled premium quality at affordable pricing. My gratitude
goes to our dedicated team, whose relentless pursuit of operational
excellence positions Cannara on our strategic objective of becoming
Canada's premier cannabis
producer."
"I am thrilled to share a remarkable 68% surge in
our year-over-year revenues for the six months ended February 29, 2024, a testament to our growing
influence in the Quebec,
Ontario, Alberta, and BC markets," noted Nicholas Sosiak, CFO. " With a sharp focus on
efficiency, we've seen our gross profit margin increase to 36.3%
from 30.9%, alongside a notable 8.7% increase in adjusted EBITDA to
$3.5 million and free cash
flow2 of $1.2 million in
Q2 2024 compared to the negative cash flow in the same period of
prior year. Some headwinds were faced this quarter, including a net
loss of $3.4 million primarily due to
non-cash fair value changes, which is expected to reverse next
quarter following improvements in our cultivation yields, in
addition to a minimum adjusted EBITDA covenant breach on our term
loan, for which a waiver was successfully obtained in addition to
removing this EBITDA covenant from our term loan conditions for
future periods. Our proactive steps towards streamlining assets
align with our ambition to fortify our financial foundation as we
relentlessly stay focused on gaining market share and becoming the
leader in Canada, the second
largest cannabis market in the world. As for our long-term vision,
we do see our future extend beyond our borders where Cannara is a
globally recognized brand synonymous with excellence and value in
cannabis."
_____________________________
|
1
Free cash flow is a non-GAAP financial measure. For more details
see the see the Non-GAAP Measures, Non-GAAP Ratios and
Segment Measures section of this news release.
|
2
Free cash flow is a non-GAAP financial measure. For more details
see the see the Non-GAAP Measures, Non-GAAP Ratios and
Segment Measures section of this news release.
|
Fiscal Second Quarter Financial Highlights
- Gross cannabis revenues before excise taxes increased to
$26.3 million in Q2 2024 from
$15.9 million in Q2 2023, a
$10.4 million or 65.4%,
increase. The increase is attributable to increase in market share
across Canada, as a result of
continued growing demand for its products and launch of new
SKUs.
- Total revenues, net of excise taxes, increased to $19.7 million in Q2 2024 from $13.0 million in Q2 2023, a $6.7 million or 51.0% increase.
- Gross profit, before fair value adjustments, increased to
$7.1 million in Q2 2024 from
$4.0 million in Q2 2023, a 77.2%
increase.
- Gross profit percentage before fair value adjustments in Q2
2024 was 36.3% compared to 30.9% in Q2 2023.
- Operating loss of $2.0 million in Q2 2024 compared to an
operating income of $631,335 in Q2
2023, mainly due to a $3.0 million
non-cash net impact of the change in fair value of inventory sold
and an unrealized gain on change in fair value of biological
assets.
- Net loss was $3.4 million in
Q2 2024 compared to a net loss of $618,055 in Q2 2023.
- Adjusted EBITDA increased by 8.7%, from $3.2 million in Q2 2023 to $3.5 million in Q2 2024.
- As at February 29, 2024, the
Company breached a minimum adjusted EBITDA covenant on its term
loan, which was subsequently waived in addition to amending its
credit facility to remove the minimum EBITDA requirement on a going
forward basis.
- The Company generated positive operating cash flow amounting to
$2.3 million in Q2 2024 compared
to $376,962 in Q2 2023.
- Free cash flow for Q2 2024 increased to $1.2 million from $(1.3) million in Q2
2023.
Second Quarter Operational Highlights
- Robust Market Share Growth Across Key
Regions:
-
- Québec: The Company ranks as the 3rd largest
licensed producer in Québec, holding approximately 9.0% of the
provincial market during Q2 2024. 3
- Alberta: The Company
significantly increased its market share in Alberta by 40.6%, from a 2.3% market share in
Q1 2024 to 3.2% in Q2 2024.4
- Ontario: In Ontario, Cannara
is the 9th top licensed producer by market share, with a 2.98%
share of Canada's largest cannabis
market5.
- Expansion in Manitoba,
Canada: In March 2024,
the Company received approval from the Manitoba Liquor &
Lotteries Corporation to list its branded cannabis products, with a
scheduled market entry in the third quarter of 2024. This
development not only diversifies Cannara's geographical footprint
but also underscores the Company's commitment to enhancing product
accessibility for its customers.
- Innovative Strain Development: February 2024 saw the successful completion of
the Company's 2023 pheno-hunt, unveiling three new cannabis strains
for Cannara's brand portfolio. Cannara plans to launch two strains
under the Tribal brand (Neon Sunshine and Bubble Up) and one under
the Nugz brand (Guava Jam).
- Operational Expansion at Valleyfield Facility: As
of January 2024, the Cannara
activated a tenth growing zone at the Valleyfield Facility,
enhancing production capacity to an estimated 33,500 kg of
cannabis annually across its operations.
- Sale of Parcel of Land and Building in Construction at
Valleyfield Site: In January
2024, the Company's Board of Directors decided to pursue the
sale of a currently unused parcel of land, in addition to an
adjacent building under construction at its Valleyfield site, which had previously been
intended to be leased out. The assets are being actively marketed.
On April 24, 2024, the Company
received an offer to purchase the parcel of the land at the
Valleyfield site for $2.1 million. The transaction is expected to
close in the next 10 days.
- SKU Expansion Across Key Canadian Markets: From
December 2023 to February 2024, Cannara continued to expand in
Québec, Ontario, British Columbia, and Alberta, significantly increasing its SKU
offerings from 97 in August 2023 to
132 as of February 2024, reflecting
the growing confidence in Cannara's product portfolio among
provincial distributors.
- Cannara Enters East-Coast Recreational Market With 4/20
Themed Offer with Nova Scotia Liquor
Corporation: Cannara successfully launched
its consumer favourite Tribal Cuban Linx pre-rolls with the Nova
Scotia Liquor Corporation (NSLC) for a 4/20-themed holiday limited
time offer with the potential to expand market offerings in Q3
and Q4 of fiscal year 2024.
- Legislative Changes Boost Global Cannabis Market:
Cannara sees a promising future for the cannabis industry with
significant legislative changes in Germany and Israel:
-
- Germany: Effective
April 1, 2024, cannabis is legalized
for adult use, marking a significant shift in the European
market.
- Israel: Despite initial delays
due to regional conflicts, the Israeli Ministry of Health announced
the phased implementation of a medical cannabis reform, starting
April 1, 2024.
Although the main focus of revenues for the
Company remains its Canadian client base, Germany and Israel's announced cannabis legalization
strategies further validates the potential for increased demand in
legal cannabis markets and aligns with Cannara's proven capability
to sale at an international level.
_____________________________
|
3
Based on estimated sales data provided by Weed Crawler, for the
period of December 2023 to February 2024.
|
4
Based on Headset Data for the periods of December 2023 to February
2024 and March 2024.
|
5
Trellis Distribution Insights, March 2024.
|
Capital Transactions
During the second quarter of 2024, the Company
purchased 5,000 common shares having a book value of $4,890 for cash consideration of $4,312. All shares purchased were cancelled.
During the second quarter of 2024, the Company
granted a total of 625,000 stock options at an exercise price of
$1.20, 99,000 stock options at an
exercise price of $1.80 and 715,000
restricted share units to employees and board members, which are
subject to certain vesting conditions in accordance with the
Company's employee share option and restricted share units plan.
During the second quarter of 2024, the Company also extended the
term of 2,435,000 stock options exercisable at $1.80 per share and 750,000 stock options
exercisable at $1.00 per share by 2
years. Subsequent to quarter-end, the Company granted 25,000 stock
options at an exercise price of $1.80
to employees subject to certain vesting conditions in accordance
with the Company's employee share option plan.
Security Based Compensation Plans
At the Company's recently held Assembly General
Meeting, shareholders approved amendments to the Company's security
based compensation plans to ensure conformance with TSX-V Policies
by a) specifying that any restricted share units issued must
vest a minimum of one year following the grant date, b) indicating
that employees must perform a minimum of 20 hours per week for the
Company in order to be granted options c) adding additional
restrictions to the vesting schedule for options recipients who are
investor relations service providers, and d) specifying that
shareholder approval only needs to be obtained to extend the
options expiry date for insiders as opposed to all option
holders.
Outstanding Shares
As at the date of this news release, the Company had 90,018,952
common shares, 4,563,300 stock options and 1,504,183 restricted
share units issued and outstanding. The complete Condensed Interim
Consolidated Financial Statements and Management's Discussion and
Analysis, along with additional information about the Company and
all of its public filings that are available at sedarplus.ca and
the Company's investor website, investors.cannara.ca.
Selected Financial Highlights
Non-GAAP Measures, Non-GAAP Ratios and Segment
Measures
The Company reports its financial results in
accordance with International Financial Reporting Standards
("IFRS"). Cannara uses a number of financial measures when
assessing its results and measuring overall performance. Some of
these financial measures are not calculated in accordance with
IFRS. National Instrument 52-112 respecting Non-GAAP and Other
Financial Measures Disclosure ("NI 52-112") prescribes
disclosure requirements that apply to the following types of
measures used by the Company: (i) non-GAAP financial measures (ii)
non-GAAP financial ratios and (iii) total of segments measures. In
this press release, the following non-GAAP financial measures and
ratios are used by the Company: adjusted EBITDA, free cash flow,
working capital, and adjusted EBITDA as a percentage of total
revenues. There are no total of segments measures included in this
press release. Additional details for these non-GAAP and other
financial measures can be found in the section entitled "Non-GAAP
Financial Measures, Non-GAAP Ratios and Segment Measures" of
Cannara's MD&A for the three and six-months ended February 29, 2024, which is posted on Cannara's
website at www.cannara.ca and filed on SEDAR+ at www.sedarplus.ca.
Reconciliations of non-GAAP financial measures and non-GAAP ratios
to the most directly comparable IFRS measures are provided below.
Management believes that these non-GAAP financial measures and
non-GAAP ratios provide useful information to investors regarding
the Company's financial condition and results of operations as they
provide key metrics of its performance. These measures are not
recognized under IFRS, do not have any standardized meanings
prescribed under IFRS and may differ from similar computations as
reported by other issuers, and accordingly may not be comparable.
These measures should not be viewed as a substitute for the related
financial information prepared in accordance with IFRS.
Reconciliation of Adjusted
EBITDA
Adjusted EBITDA is a non-GAAP Measure and can be
reconciled with net income (loss), the most directly comparable
IFRS financial measure, as detailed below.
Adjusted EBITDA as a percentage of total revenues
is a non-GAAP financial ratio, determined as adjusted EBITDA
divided by total revenues.
Reconciliation of Free Cash
Flow
Free cash flow is a non-GAAP measure and can be
reconciled with cash from (used) in operating activities, the most
directly comparable IFRS financial measure, as detailed below.
Reconciliation of working
capital
Working capital is a non-GAAP Measure and can be
reconciled with total current assets and total current liabilities,
the most directly comparable GAAP financial measure, as detailed
below.
Negative working capital results from classifying
the Company's term loan as a current liability due to a covenant
breach. Subsequent to quarter end, the Company obtained a waiver
related to the breach of the financial covenant and amended its
facility to remove the minimum EBITDA requirement on a going
forward basis.
About Cannara Biotech Inc.
Cannara Biotech Inc. (TSXV: LOVE) (OTCQB: LOVFF)
(FRA: 8CB0) is a vertically integrated producer of affordable
premium-grade cannabis and cannabis-derivative products for the
Canadian markets. Cannara owns two mega facilities based in Québec
spanning over 1,650,000 sq. ft., providing the Company with
100,000 kg of potential annualized cultivation output.
Leveraging Québec's low electricity costs, Cannara's facilities
produce premium-grade cannabis products at an affordable price. For
more information, please visit cannara.ca.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in policies
of the TSX Venture Exchange) accepts responsibility for the
adequacy or accuracy of this release.
Cautionary Statement Regarding
"Forward-Looking" Information
This news release may contain "forward-looking
information" within the meaning of applicable securities
legislation ("forward-looking statements"). These forward-looking
statements are made as of the date of this news release and the
Company does not intend, and does not assume any obligation, to
update these forward-looking statements, except as required under
applicable securities legislation. Forward-looking statements
relate to future events or future performance and reflect Company
management's expectations or beliefs regarding future events and
include, but are not limited to, the Company and its operations,
its projections or estimates about its future business operations,
its planned expansion activities, the adequacy of its financial
resources, the ability to adhere to financial and other covenants
under lending agreements, future economic performance, and the
Company's ability to become a leader in the field of cannabis
cultivation, production, and sales.
In certain cases, forward-looking statements can
be identified by the use of words such as "plans," "expects" or
"does not expect," "is expected," "budget," "scheduled,"
"estimates," "forecasts," "intends," "anticipates" or "does not
anticipate," or "believes," or variations of such words and phrases
or statements that certain actions, events or results "may,"
"could," "would," "might" or "will be taken," "occur" or "be
achieved" or the negative of these terms or comparable terminology.
In this document, certain forward-looking statements are identified
by words including "may," "future," "expected," "intends" and
"estimates." By their very nature, forward-looking statements
involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance, or achievements of
the Company to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements.
Such factors include, but are not limited to, the
factors discussed in the section "Risk Factors" of the MD&A as
well as those factors detailed from time to time in the Company's
interim and annual financial statements and the related MD&A of
those statements. Although the Company has attempted to identify
important factors that could cause actual actions, events, or
results to differ materially from those described in
forward-looking statements, there may be other factors that cause
actions, events or results not to be as anticipated, estimated or
intended.
The Company provides no assurance that
forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements. Historical
results of operations and trends that may be inferred from the
following discussions and analysis may not necessarily indicate
future results from operations.
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SOURCE Cannara Biotech Inc.