Last week, WeedMD Inc. (WMD.V) (WDDMF) reported second quarter financial results for the period that ended on June 30th that missed expectations but had several bright spots. Although 2020 has been a challenging year for the Canadian cannabis producer, there have signs of improvement and we are favorable on the potential for WeedMD to be a turnaround story.
During the quarter, WeedMD recorded a $5 million adjusted EBITDA loss on $5.9 million of revenue. When compared to the prior quarter as well as the same quarter of 2019, the Canadian cannabis producer reported a decline in revenue. The primary reason for the decline is related to an increased focus on higher margin direct-to-consumer revenue instead of wholesale revenue.
When analyzing the improvement in the amount of direct-to-consumer revenue on a comparative basis, WeedMD reported strong growth on a year-over-year basis. In the second quarter, the company generated $2.4 million of direct-to-consumer revenue which is substantially higher than the $327,000 that was reported during the same period last year.
The growth on the direct-to-consumer side of the business so far this year is attributable to WeedMD reporting a full period of results from the acquisition of Starseed in December 2019, growth in recreational market, and a significant sale of dried cannabis to a license holder in early 2020.
During the quarter, WeedMD sold 976,860 grams of dried cannabis at a price, net of excise taxes, of $4.96 per gram. During the second quarter of 2019, the company sold 1,978,628 grams at a price, net of excise taxes, of $3.76 per gram. The increase in average sale price was due to the high proportion of direct-to-consumer sales and this is a trend that we will follow on a going forward basis.
Over the next year, WeedMD plans to continue to realize additional synergies that should result in greater cost efficiencies. If the management team can execute on a cost reduction strategy, the business should recognize margin appreciation in future quarters and this trend could play an important role in how the operation advances from here.
When WeedMD announced second quarter financial results, it also reported to have entered into a $30 million credit facility with the LiUNA Pension Fund of Central and Eastern Canada. The facility provides the company with financial flexibility to drive commercial initiatives during its next stage of growth and we are favorable on how this development.
In the current quarter, WeedMD reported to have seen increasing customer activity and sales in the majority of its markets. The company believes that this reflects the re-opening of the Canadian economy and gradually decreasing impact of COVID-19. According to the management team, these trends have persisted and continue to improve, and we find this to be of the utmost importance as it relates to the near and long-term opportunity.
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