TORONTO, Nov. 11, 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 and nine months ended September 30, 2020 (“ Q3 2020 ”).
“We expect to have our strongest quarter to date in Q4 2020 as we progress towards significant sequential growth in medical, adult-use, wholesale and international cannabis sales. The strategic path we’ve executed upon, from building out facilities, to receiving three major licences in 2020, to formulating new products, is now bearing fruit. With the introduction of vape cartridges, sublingual strips, and with many more launches to come, the commercialization of our business at scale is truly in full swing,” said Aleafia Health CEO Geoffrey Benic. “We look forward to continuing to launch dynamic, innovative formats, while greatly expanding our dried flower portfolio.”
“With respect to the most recent quarter, the successful sale of our entire 2019 outdoor crop was completed earlier in the year, which led to a significant sequential decline in cannabis revenue, due to lack of available product. This was coupled with a number of significant product launches that only began generating revenue following the end of the reporting period.”
| Quarterly Condensed Income (Loss) Statement | |||||||||||||
| Three months ended |
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| ($,000s) | Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2020 | Sep 30, 2019 | |||||||||
| Net revenue | 4,968 | 4,958 | 29,339 | 10,323 | |||||||||
| Cannabis net revenue (1)(3) | 4,245 | 3,825 | 26,966 | 6,777 | |||||||||
| Consolidated cost of sales | 4,261 | 2,679 | 13,055 | 7,261 | |||||||||
| Gross profit before fair value (“FV”) adjustments on net revenue | 707 | 2,279 | 16,284 | 3,062 | |||||||||
| Gross margin before FV adjustments on net revenue (1) | 14 | % | 46 | % | 56 | % | 30 | % | |||||
| Fair value changes in biological assets and changes in inventory sold | (10,708 | ) | 10,118 | (18,027 | ) | 12,178 | |||||||
| Selling, general & administrative expenses (“SG&A”) | (6,736 | ) | (5,209 | ) | (21,340 | ) | (24,629 | ) | |||||
| Adjusted EBITDA (1)(2) | (5,652 | ) | (2,498 | ) | 3,772 | (18,811 | ) | ||||||
| Net income (loss) | (19,761 | ) | 1,859 | (29,937 | ) | (29,848 | ) | ||||||
| 1. | See “Cautionary Statements Regarding Certain non-IFRS Measures” section of the associated MD&A for term definition. | ||
| 2. | See “Adjusted EBITDA” section of the associated MD&A for reconciliation to IFRS equivalent. | ||
| 3. | See “Revenue” section of MD&A for reconciliation to IFRS equivalent. |
Revenue Catalysts & Product Launch Roadmap
| Quarterly Financial Highlights | |||||||||||
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| ($,000s) | Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2020 | Sep 30, 2019 | |||||||
| Balance Sheets | |||||||||||
| Cannabis inventory & biological assets | 36,689 | 21,474 | – | – | |||||||
| Cash, cash equivalents and marketable securities | 43,342 | 57,172 | – | – | |||||||
| Other current assets | 20,970 | 15,637 | – | – | |||||||
| Accounts payable | 25,348 | 10,246 | – | – | |||||||
| Working capital | 51,441 | 83,411 | – | – | |||||||
| Property, plant & equipment | 77,611 | 62,128 | – | – | |||||||
| Total assets | 454,737 | 457,337 | – | – | |||||||
| Total liabilities | 83,959 | 64,305 | – | – | |||||||
| Operational results – Cannabis | |||||||||||
| Active, registered patients | 17,526 | 10,298 | – | – | |||||||
| Average net selling price of medical (1) | $ | 7.91 | 10.61 | $ | 7.94 | $ | 11.46 | ||||
| Average net selling price of adult-use (1) | $ | 4.92 | 8.06 | $ | 5.56 | $ | 7.59 | ||||
| Average net selling price of wholesale (1) | $ | 3.85 | 7.08 | $ | 2.61 | $ | 2.98 | ||||
| Kilograms sold | 835 | 435 | 7,537 | 410 | |||||||
| 1. | See “Cautionary Statements Regarding Certain non-IFRS Measures” section for term definition. |
Revenue
For the three and nine months ended September 30, 2020 net revenue was $5.0 million and $29.3 million, flat and an increase of 184%, respectively, over the same periods in the prior year. The increase over the nine month period was primarily derived from a $20.2 million increase in cannabis net revenue.
For the three and nine months ended September 30, 2020, cannabis net revenue was $4.2 million and $27.0 million, an increase of 11% and 298%, respectively, over the same periods in the prior year. As previously disclosed in the Company’s MD&A for the quarters ended March 31, 2020 and June 30, 2020, cannabis net revenue may fluctuate due to the seasonal nature of outdoor cultivation, which was the primary reason for a sequential decline in cannabis net revenue during Q3 2020. However, the Company’s exposure to seasonality is reduced with the recent licensing of the Niagara Facility and Paris Phase II expansion, that together support consistent, standardized input material, processing and packaging capacity for medical and adult-use sales channels.
The Company expects to see net cannabis revenue in the medical, adult-use and wholesale channels increase sequentially in Q4 2020. By Q1 2021, the Company expects that the sale of packaged cannabis products in the medical and adult-use sales channels will represent a majority of total cannabis revenue.
| Net Income & Adjusted EBITDA | ||||||||
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| ($,000s) | Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2020 | Sep 30, 2019 | ||||
| Net income (loss) | (19,761 | ) | 1,859 | (29,937 | ) | (29,848 | ) | |
| Current income tax expense (recovery) | (1,400 | ) | – | – | – | |||
| Deferred income tax expense (recovery) | (2,994 | ) | – | (5,394 | ) | (658 | ) | |
| Share-based payments | 648 | 411 | 2,108 | 12,582 | ||||
| Business transaction costs | 816 | 403 | 3,322 | 3,582 | ||||
| Amortization and depreciation | 3,273 | 2,840 | 7,515 | 3,712 | ||||
| Interest expense | 3,062 | 2,405 | 8,538 | 4,298 | ||||
| Fair value changes in biological assets and changes in inventory sold | 10,708 | (10,118 | ) | 18,027 | (12,178 | ) | ||
| Non-operating income | (4 | ) | (298 | ) | (407 | ) | (301 | ) |
| Adjusted EBITDA (1) | (5,652 | ) | (2,498 | ) | 3,772 | (18,811 | ) | |
| 1. | See “Cautionary Statements Regarding Certain non-IFRS Measures” section for term definition. |
Q3 2020 adjusted EBITDA was a loss of $5.7 million. For the nine months ended September 30, 2020, the Company reported positive adjusted EBITDA of $3.8 million, compared to a loss of $2.5 million and $18.8 million, respectively, for the same periods in 2019.
Net loss for the three and nine months ended September 30, 2020 was $19.8 million and $29.9 million, compared to positive net income of $1.9 million and a loss of $29.8 million, in the same periods in the prior year. The net loss was primarily due to the non-cash $14.3 million adjustment of saleable inventory to net realizable value during the quarter, to reflect a significant decline in cannabis wholesale prices.
Key Developments During the Three Months Ended September 30, 2020
a) Launch of AssureHome Delivery Same-Day Service
On July 29, 2020 the Company announced that it would offer same-day shipments through AssureHome Delivery, a direct-to-door delivery service for medical cannabis products. Providing patients with fast and complementary service, it is available exclusively to Emblem patients in the Greater Toronto Area and surrounding communities. Medical cannabis orders received before noon on any business day are shipped and delivered the same day by dedicated couriers.
b) Appointment of Pharmaceutical Executive Tricia Symmes as Chief Commercial Officer
During the reporting period, Aleafia Health announced the appointment of pharmaceutical executive Tricia Symmes as Chief Commercial Officer, effective August 27, 2020. Symmes brings over 20 years of experience as a senior executive in the pharmaceutical, consumer packaged goods, and cannabis industries. Reporting to Aleafia Health CEO Geoffrey Benic, she will lead the development and execution of the Company’s product launches, sales, marketing and corporate development initiatives in the adult-use, medical and international cannabis markets.
c) Regulatory Approval to Commence Cannabis Sales in Germany
On September 1, 2020, the Company announced that its indirect subsidiary, Aleafia Health Germany GmbH (“ Aleafia Germany ”) will commence distributing medical cannabis products to German pharmacies following regulatory approvals. Aleafia Germany received a controlled drug licence from the Federal Institute for Drugs and Medical Devices and a European Union Good Distribution Practice certification from the Cologne district government. Together, these approvals authorize Aleafia Germany to purchase and distribute medical cannabis products within Germany from its cannabis distribution centre in Aachen Brand.
d) Launch of Cannabis 2.0 Portfolio with 510 Vape Cartridges
On September 29, 2020, Aleafia Health announced the launch of its first Cannabis 2.0 product, 510 vape cartridges. The vapes are inspired by Aleafia Health’s signature cultivars. The custom-made, unique terpene blends deliver robust flavours and consistent effects. They contain CO2-extracted distillate mixed with a custom blend of botanically sourced terpenes. No fillers or artificial flavours are used, offering consumers and patients an authentic experience. Vape shipments to Emblem medical patients and provincial wholesalers commenced subsequent to the reporting period.
Key Developments Subsequent to September 30, 2020
a) Outdoor Grow Results
On November 6, 2020, the Company reported its Port Perry Facility’s preliminary outdoor cannabis harvest results, where 50,000 plants have yielded approximately 31,200 kgs of dried cannabis flower at a cash cost per gram to harvest of $0.10. Included in the total yield is 7,200 kgs of THC-dominant dried flower, much of which will be used to accelerate the expansion of the Company’s adult-use product portfolio. Preliminary test results indicate that cannabinoid content is again comparable to the results of identical cultivars grown indoor. While these results are extremely encouraging, the Company cautions that, as with the previous year’s harvest, potency and quality control tests for the entire crop will not be completed for another two to three weeks following the announcement.
b) Disposition of Shares Held in Aphria Inc.
On June 25, 2020, the Company announced that Emblem and Aleafia Health entered into a settlement agreement (the “ Settlement Agreement ”) with Aphria Inc. (” Aphria “) to resolve their outstanding dispute in respect of the termination of the parties’ wholesale cannabis supply agreement. Under the terms of the Settlement Agreement, Emblem received common shares of Aphria with an aggregate market value of $10.0 million. During, and subsequent to the reporting period, the Company disposed of the Aphria shares, for cash proceeds of approximately $11.5 million.
Conference Call & Webcast
Date: November 11, 2020 Time: 8:30 a.m. EST
USA/Canada Toll-Free Participant Call-in: (866) 679-9046; Passcode: 6997217
International Toll-Free Participant Call-in: (409) 217-8323; Passcode: 6997217
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.
For Investor & Media Relations
Nicholas Bergamini VP Investor Relations 1-833-879-2533
Learn More: www.AleafiaHealth.com
About Aleafia Health
Aleafia Health is a vertically integrated and federally licensed Canadian cannabis company offering cannabis health and wellness services and products in Canada and in international markets. The Company operates medical clinics, education centres and production facilities for the production and sale of cannabis.
Aleafia Health owns three significant licensed cannabis production facilities, including the first large-scale, legal 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 operates internationally in three continents.
Innovation, the heart of Aleafia Health’s competitive advantage, has led to the Company maintaining 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; the TSX Venture Exchange named Aleafia the 2019 top performing company prior to its 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 and are expressly qualified by this cautionary statement. 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 statements in this news release include, but are not limited to, statements with respect to injection of value this settlement brings to the Company’s business. 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 dated March 18, 2020 which is 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 is 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.
