TORONTO , Aug. 12, 2020 (GLOBE NEWSWIRE) — Aleafia Health Inc. (TSX: AH, OTC: ALEAF) (“Aleafia Health” or the “Company”) is pleased to report its financial results for the three months ended June 30, 2020 (“Q2 2020”).
“The second quarter saw several major operational breakthroughs for Aleafia Health as we received regulatory approval and operationalized three major facility expansions. Now, with an industry leading production ecosystem, we will be able to produce a broader portfolio of new, differentiated product formats along with unique cultivars, at large scale,” said Aleafia Health CEO Geoffrey Benic.
“Our significant increase in medical cannabis sales and patient growth, coupled with much needed Cannabis 2.0 formats and dried flower products will see us continue to capture market in both the medical and adult-use markets. This coupled with a significantly strengthened balance sheet positions us well for the future.”
|Condense||Three months ended,||% Change
|Jun 30, 2020||Jun 30, 2019|
|Net cannabis revenue(1)||8,995||2,420||272%|
|Consolidated cost of sales||6,273||2,795||124%|
|Gross profit (loss) before fair value (“FV”) adjustments on net revenue||3,502||1,044||235%|
|Gross margin before FV adjustments on net revenue(1)||36%||27%||n/a|
|Selling, general & administrative expenses (“SG&A”)||8,500||7,855||8%|
|Net (loss) income||(4,020)||(11,477)||65%|
|1. See “Cautionary Statements Regarding Certain non-IFRS Measures” section of the associated MD&A for term definition.|
|2. See the “Adjusted EBITDA” section of the associated MD&A for reconciliation to IFRS equivalent.|
For the three months ended June 30, 2020 net revenue was $9.8 million, a decline of 34% over the previous quarter and an increase of 155% over the prior year’s quarter. The year-over-year increase was primarily derived from a $6.6 million increase in cannabis net revenue.
Net medical cannabis revenue for Q2 2020 was $2.0 million, an increase of 44% over the previous quarter and a 94% increase over the prior year’s quarter. The increase was primarily due to improved product availability for top-selling SKUs and a significant increase in the Company’s total number of active registered patients during the reporting period.
Net adult-use cannabis revenue for Q2 2020 was $0.9 million, compared to $0.7 million in the prior quarter and $1.4 million in Q2 2019. The sequential increase was due to increased sales of competitively priced oil-based products. The Company expects to have a strong inventory of dried flower products along with new Cannabis 2.0 formats in market in 2020’s second half, which is expected to have a materially positive impact on adult-use sales.
As previously disclosed in the Company’s MD&A for the quarter ended March 31, 2020, bulk wholesale cannabis net revenue may fluctuate due to the seasonal nature of outdoor cultivation, which was the primary reason for a sequential decline of 34% in cannabis net revenue during Q2 2020. However, the Company’s exposure to seasonality is reduced with the recent licensing of the Niagara Facility and Paris Phase II expansion, that together support consistent, standardized input material, processing and packaging capacity for medical and adult-use sales channels.
Clinic revenue for Q2 2020 was $0.8 million, a decline of 10% over the previous quarter. This was primarily due to a decline in the number of billable patient visits, as the Company shifted its clinic operating model to conducting virtual-only patient consultations during the COVID-19 pandemic.
Selected Balance Sheet Information
|($,000s)||Jun 30, 2020||Jun 30, 2019||% Change|
|Cannabis inventory & biological assets||39,050||7,217||441%|
|Cash, cash equivalents and marketable securities||56,957||63,533||-10%|
|Other current assets||19,970||12,538||59%|
|Property, plant & equipment||74,769||65,325||14%|
Cannabis Operational Results
|Three months ended,|
|Operational Results – Cannabis||Jun 30, 2020||Mar 31, 2020||Jun 30, 2019|
|Active, registered patients||13,285||10,983||6,959|
|Average net selling price of medical cannabis per gram(1)||$7.87||$8.04||$12.36|
|Average net selling price of adult-use cannabis per gram(1)||$4.81||$6.88||$7.59|
|Average net selling price of bulk wholesale cannabis per gram(1)||$2.92||$2.47||n/a|
|1. See “Cautionary Statements Regarding Certain non-IFRS Measures” section of the associated MD&A for term definition for term definition.|
Driving sequential medical cannabis net revenue growth, active registered patients increased to 13,285 at June 30, 2020, compared to 10,983 at March 31, 2020. Active, registered patients further increased to approximately 14,250 at August 11, 2020. The Company expects to see continued patient growth throughout 2020, along with an increase in medical cannabis revenue per patient as it introduces a broader product portfolio.
Medical net revenue per gram equivalent sold was $7.87, compared to $8.04 in the previous quarter. A decline in the price of dried flower sold was offset by an increase in volumes sold of higher-margin product SKUs including capsules and sprays.
Adult-use net revenue per gram equivalent sold was $4.81, a decline from $6.88 in the previous quarter. The decline is attributed to the Company’s adult-use strategy of offering high-quality products at competitive price points to increase sales volume. This has resulted in a significant increase in sales volume beginning in June 2020, which continued subsequent to the reporting period’s close.
Bulk wholesale net revenue per gram equivalent sold was $2.92, compared to $2.47 in the previous quarter. The increase was due to an increased proportion of processed cannabis extracts sold at higher prices per gram equivalent, partially offset by a significantly lower price per gram sold for dried flower relative to the prior quarter.
COVID-19 & Business Operations
On April 17, 2020, the Company provided a comprehensive corporate update on business operations, including changes in operations due to the COVID-19 pandemic. The most significant change in operations to date has been the temporary closure of the physical clinic locations of the Company’s national network of cannabis clinics and education centres since March 16, 2020. Immediately following the clinics’ closures, all patient consultations were completed virtually and all clinic administrative and customer service staff and medical professionals worked from home.
In accordance with provincial and local rules surrounding reopening, the Company has since commenced the phased re-opening of certain clinic locations. Since July, some staff are now working in clinics, but patients continue to primarily receive consultations virtually. All locations are equipped with the appropriate personal protective equipment, cleaning materials and signage, with staff following company-wide standard operating procedures to ensure safety and security.
The Government of Ontario deemed cannabis production an essential service, and as a result all three of the Company’s production facilities have remained open with no material adverse effect on operations.
Key Developments During the Reporting Period
On May 29, 2020, the Company announced that it closed the bought deal offering, including the full exercise of the over-allotment option for a total issuance of 23,000,000 units and gross proceeds of $15.0 million.
Conference Call & Webcast
Date: August 12, 2020
Time: 8:30 a.m. EST
USA/Canada Toll-Free Participant Call-in: (866) 679-9046; Passcode: 4391846
International Toll-Free Participant Call-in: (409) 217-8323; Passcode: 4391846
This conference call will be webcast live over the internet and can be accessed through the link provided. Audio of the call will be available to participants through both the conference call line and webcast; however, the presentation may only be viewed via the webcast. Participants who miss the live call can view a replay at any time via the link provided.
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About Aleafia Health:
Aleafia Health is a leading, vertically integrated cannabis health and wellness company with four primary business units: Cannabis Cultivation & Products, Health & Wellness Clinics, Cannabis Education, and Consumer Experience with ecommerce, retail distribution and provincial supply agreements.
Aleafia Health owns three major cannabis product & cultivation facilities, two of which are licensed and operational including the first large-scale, operational outdoor cultivation facility in Canadian history. The Company produces a diverse portfolio of commercially proven, high-margin derivative products including oils, capsules and sprays. Aleafia Health operates the largest national network of medical cannabis clinics and education centres staffed by MDs, nurse practitioners and educators and has international operations in three continents.
Innovation is at the heart of Aleafia Health competitive advantage. The Company maintains a medical cannabis dataset with over 10 million data points to inform proprietary illness-specific product development and its highly differentiated education platform FoliEdge Academy. The Company is committed to creating sustainable shareholder value and has been named the 2019 top performing company of the year by the TSX Venture Exchange prior to graduation to the TSX.
Forward Looking Information
This news release contains forward-looking information within the meaning of applicable Canadian and United States securities laws. Often, but not always, forward-looking 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 information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information contained in this news release. Risks, uncertainties and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information, including risks contained in the Company’s annual information form filed with Canadian securities regulators available on the Company’s SEDAR profile at www.sedar.com. Although the Company believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information and no assurance can be given that such events will occur in the disclosed time frames or at all. The forward-looking information included in this news release are made as of the date of this news release and the Company does not undertake any obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless required by applicable securities legislation.