WeedMD Inc. (TSX-V:WMD) (OTCQX:WDDMF) (FSE:4WE) (“WeedMD” or the “Company”), a federally-licensed producer and distributor of medical-grade cannabis, announced today its financial results for the three and nine months ended September 30, 2020.
“Our revenue growth quarter-over-quarter demonstrates the current momentum we are seeing in our business, particularly in our adult-use segment where consumer appeal for our Color Cannabis products continues to grow,” said Angelo Tsebelis, CEO. “With our expanded national sales team, we are making steady traction in establishing new retail accounts and shipping product across the country at a faster pace. We remained highly focused on delivery of our expanding quality product portfolio to consumers during the quarter in the adult-use market and our proprietary direct-to-patient medical channel leading to improved margins going forward.”
Summary of Results
|For the Quarter-Ended||Sept. 30, 2020||Sept. 30, 2019|
|Gross (loss) profit before changes in fair value||69||1,902|
|Income (loss) and comprehensive (loss)||8,635||(13,402||)|
|Adjusted EBITDA* (loss)||(5,276||)||(1,971||)|
|As at||Sept. 30, 2020||Dec. 31, 2019|
|Cash and cash equivalents||31,125||8,184|
*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 defines Adjusted EBITDA as EBITDA adjusted to exclude interest, tax, and depreciation, stock compensation, fair value changes and other non-cash items, and non-recurring items. This data is furnished to provide additional information and does not have any standardized meaning prescribed by IFRS. The Company uses this non-IFRS measure to provide shareholders and others with supplemental measures of its operating performance. The Company also believes that securities analysts, investors and other interested parties, frequently use this non-IFRS measure in the evaluation of companies, many of which present similar metrics when reporting their results. As other companies may calculate Adjusted EBITDA differently than the Company, this metric may not be comparable to similarly titled measures reported by other companies. We caution readers that Adjusted EBITDA should not be substituted for determining net loss as an indicator of operating results, or as a substitute for cash flows from operating and investing activities.
“This quarter, our team sharpened its focus to concentrate on capturing long-lasting opportunities and initiatives that will help achieve further cost improvement, margin expansion and drive organic growth across our adult-use and medical channels,” said Lincoln Greenidge, CFO. “With WeedMD’s second year of outdoor harvest now complete and our cultivation rooms cycling consistent yields, we expect continued revenue growth going forward as we introduce new products in 2021.”
Key Financial Highlights
- For the three and nine months ended September 30, 2020, WeedMD recorded net sales of $6.3 million and $24.4 million, respectively, compared to approximately $6.7 million and $18.0 million for the same periods ended September 30, 2019. Net revenue increased 8%, as compared to $5.9 million during the second quarter of 2020.
- Gross profit before changes in fair value was $0.07 million for the third quarter of 2020. The increase of $1.0 million from Q2 2020 was mainly attributable to the higher volume of sales to licence holders in the current quarter. Excluding non-cash items, gross margin increased from 39% in Q2 2020 to 42% during the third quarter, demonstrating management’s continued focus on optimization.
- Cultivation cost during the quarter was $0.34 per gram and $0.53 per gram for the three and nine months ended, respectively compared to $0.72 and $0.84 for the comparative periods in Q3 2019.
- The Company sold 2,088,706 grams of dried cannabis at a weighted average selling price, net of excise taxes, of $2.55 per gram during the third quarter of 2020 as compared to 2,740,217 grams sold during the third quarter of 2019 at a weighted average selling price, net of excise taxes, of $2.36 per gram during the same period the year prior. The increase in weighted average selling price, net of excise taxes, was due to due to a greater proportion of direct-to-patient sales in the quarter compared to same period in the previous year.
- Adjusted EBITDA* loss totalled $5.3 million for the three-month period ended September 30, 2020 compared to an Adjusted EBITDA loss of $2.0 million for the same period in 2019, primarily as a result of an inventory write-off of approximately $1.2 million and expenses incurred related to increased production, selling and general and administrative expenses, prior to the completion of optimization initiatives which are continuing throughout the remainder of 2020.
Corporate Highlights During & Subsequent to Third Quarter Ended September 30, 2020
Adult-Use Product Launches, Expanded Portfolio and Cannabis 2.0
Color Cannabis Vaporizers Make Strong Entry In Ontario: In the fall of 2020, WeedMD commenced shipping its Color Cannabis-branded 510 vaporizer cartridges (“vapes”) to Canada’s largest retail distributor, the Ontario Cannabis Store (“OCS”), giving consumers another way to consume the Company’s Ghost Train Haze and proprietary Pedro’s Sweet Sativa strains. Color vapes landed in the “Top 5” status when compared to over 30 available vape brands during its first week of availability according to OCS-provided data.
Nitrogen-Flushed Flower Pouches: WeedMD transitioned its Color Cannabis whole flower products to nitrogen-flushed pouch packaging to maintain the integrity of freshly packaged flower products, and improving attributes such as moisture and preservation of aromatic terpenes. Additionally, the transition from plastic jars and cartons reduced the total weight of packaging waste by over 80%.
Color Cannabis Pre-Rolls. WeedMD introduced strain-specific pre-roll products available as two-packs of 0.35g pre-rolls. The size and unit count reflects consumer preference for single-session pre-rolls. These brand-trial inspired pre-rolls are made with finely milled Ghost Train Haze and Pedro’s Sweet Sativa whole flower.
Cannabis 2.0 Supply Partnership with PAX Labs®: WeedMD entered into a supply agreement with Pax Labs, Inc. (“PAX”), a leader in premium cannabis vaporizer technology, with award-winning devices for both oil concentrates and flower. WeedMD will become a brand partner and supplier for the PAX® ERA® Collection in Canada, which includes the closed-loop PAX® ERA® and ERA PRO™ devices. The partnership is expected to accelerate the growth of the Company’s Cannabis 2.0 product strategy as it expands into new formats using its low-cost, quality-produced, strain-specific biomass.
Commercial Arrangement with Leading Retailer Fire & Flower Producing CBD Cannabis Products: WeedMD also entered into a commercial arrangement with leading Canadian retailer, Fire & Flower Inc. to manufacture, package and ship the retailer’s Revity CBD™ product line, which is now available at Fire & Flower stores in the province of Saskatchewan.
Medical Marketplace, Expanded Portfolio and Cannabis 2.0
Exclusive Licensing Agreement with Mary’s Medicinals for Premium Line of Self-care Products: WeedMD entered into an exclusive agreement to bring the award-winning products from Mary’s Medicinals (“Mary’s”) to Canada. The Company will sell Mary’s branded topicals and transdermal patches across Canada’s provincial adult-use and direct-to-consumer medical channels as it looks to expand new cannabis offerings to address an underserved market segment. The first products will be introduced exclusively to the Company’s medical patients with products going into production in late 2020.
WeedMD and Starseed Launch Combined Medical Marketplace: In the fall of 2020, the Company announced it was merging its online medical product marketplaces under one platform and expanding its product offerings. The simplified Starseed Medicinal Inc. sales platform provides the Company’s patients with full access to WeedMD-produced dried flower, oil concentrates, softgel capsules and Aurum vape products and services such as same-day delivery.
Starseed Medicinal Expands into Atlantic Canada: In November 2020, WeedMD announced it is expanding access to its Starseed Medicinal products into Atlantic Canada under the purview of New Brunswick-based physician, Dr. Julie Hildebrand. Dr. Hildebrand is widely recognized in the region for specializing in cannabis medicine and education, and is working with patients and benefits providers in New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland. Dr. Hildebrand is connecting with patients in one of the country’s fastest-growing medical cannabis markets, leveraging her extensive clinical expertise in opioid addiction, chronic pain and diabetes.
Licensing, Cultivation and Operations
Outdoor Harvest: In early November 2020, WeedMD completed the harvest of over 16,000 cannabis plants across seven core cultivars on its outdoor field in Strathroy, Ontario. As one of the first cultivators to successfully complete its second-year outdoors in Canada, the Company is pleased with preliminary results. Further analysis and processing is currently underway and WeedMD will share specific details once the final analysis is concluded. The harvest is expected to support extract-based products with terpene-rich, high-cannabinoid, low-cost biomass, as well as provide attractive input material for certain flower formats such as pre-rolls and ready-to-roll products.
Strathroy Facility Secures Expanded Health Canada Sales Licence: The Company secured an amendment to its Strathroy facility sales licence from Health Canada in September 2020, authorizing the sale and distribution of all cannabis products from the site. This gives way for the production, packaging, sale and distribution of new cannabis products from our Strathroy facility such as extracts, topicals and edibles to retail and medical markets.
Enhances Genetics Bank of New Cultivars and Preserves Elite Proprietary Cannabis Strains: WeedMD partnered with Guelph-based CannTx Life Sciences Inc. to add new cultivars to its genetics bank and expand the lifecycle of the Company’s prized cannabis cultivars using cutting-edge tissue culture techniques via Steadystem Solutions. Tissue culture is an innovative and widely-recognized practice in agriculture used for preserving plant integrity, crop health and genetic accuracy.
In September 2020, WeedMD secured a $30 million credit facility with the LiUNA Pension Fund of Central and Eastern Canada, which provides the Company with financial flexibility to drive commercial initiatives during its next stage of growth.
- In July 2020, the Company’s shareholders elected Bruce Croxon to WeedMD’s board of directors (the “Board”). Mr. Croxon, a prominent Canadian entrepreneur and venture capitalist and co-founder of Lavalife, brings to WeedMD his deep expertise as an investor and advisor to growth stage companies.
- In October 2020, WeedMD announced the appointment of veteran finance executive and former Deloitte partner, Lu Cacioppo, FCPA, CA, to the Board as an independent director and chair of WeedMD’s Audit Committee. Mr. Cacioppo is a prominent business and community leader with over 30 years of finance and capital markets experience and is currently the vice chair and managing partner at private equity firm Beringer Capital.
- Also in October 2020, the Company appointed seasoned human resources (HR) executive Deborah Sikkema as its Chief People Officer. A multi-faceted business leader with 20 years of HR experience in some of Canada’s top-tier organizations, such as Shoppers Drug Mart, Canadian Tire, and Holt Renfrew. Deborah was also appointed to WeedMD’s Compensation Committee alongside its Board.
COVID-19 Operational Plan Recognized for Operational Excellence
In response to the ongoing COVID-19 global pandemic, WeedMD established a number of safety protocols and risk mitigation strategies to ensure the health and safety of its employees and communities. The Company recently partnered with the Workplace Safety and Prevention Services (“WSPS”), a not-for-profit health and safety organization to review and analyze WeedMD’s pandemic response program across its sites and offices.
WeedMD’s pandemic response program was one of the most comprehensive the WSPS has reviewed to date and the WSPS acknowledged the Company for “its substantial effort and energy into providing robust controls for COVID-19 specific hazards in the workplace. WeedMD has demonstrated that it is an organizational priority to protect the health and safety of their entire staff at all sites and locations with this emerging hazard.”
Conference Call Information:
WeedMD will host a conference call with Angelo Tsebelis, CEO and Lincoln Greenidge, CFO on December 1st, 2020. Management will be available for questions following opening remarks.
Conference Call Details:
|Date:||Tuesday, December 1st, 2020|
|Time:||10 a.m. Eastern Time|
|Canada/USA: 1-800-319-4610. International Toll: 1-604-638-5340
Participants, please dial in and ask to join the WeedMD call
|Canada/USA: 1-800-319-6413. International Toll: 1-604-638-9010
Replay Access Code: 5599
Available after 12:00 p.m. Eastern Time, until January 1, 2021
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. and Starseed Medicinal Inc., federally-licensed producers of cannabis products for both the medical and adult-use markets. The Company owns and operates a 158-acre state-of-the-art greenhouse, outdoor and processing facility located in Strathroy, Ontario as well as a fully-licensed 26,000 sq. ft. Aylmer, Ontario processing facility, specializing in cannabis extraction. With the addition of Starseed, a medical-centric operator based in Bowmanville, Ontario, WeedMD has expanded its multi-channeled distribution strategy. Starseed’s industry-first, exclusive partnership with LiUNA, the largest construction union in Canada, along with other employers and union groups complements WeedMD’s direct sales to medical patients. The Company maintains strategic relationships in the seniors’ market and supply agreements with Shoppers Drug Mart as well as six provincial distribution agencies where adult-use brands Color Cannabis and Saturday are sold.
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Forward Looking Information This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation which are based upon WeedMD’s current internal expectations, estimates, projections, assumptions and beliefs and views of future events. Forward-looking information can be identified by the use of forward-looking terminology such as “expect”, “likely”, “may”, “will”, “should”, “intend”, “anticipate”, “potential”, “proposed”, “estimate” and other similar words, including negative and grammatical variations thereof, or statements that certain events or conditions “may”, “would” or “will” happen, or by discussions of strategy.
The forward-looking information in this news release is based upon the expectations, estimates, projections, assumptions and views of future events which management believes to be reasonable in the circumstances. Forward-looking information includes estimates, plans, expectations, opinions, forecasts, projections, targets, guidance or other statements that are not statements of fact. Forward-looking information in this news release include, but are not limited to, statements with respect to internal expectations, expectations with respect to actual production volumes, expectations for future growing capacity and the completion of any capital project or expansions. Forward-looking information necessarily involve known and unknown risks, including, without limitation, risks associated with general economic conditions; adverse industry events; loss of markets; future legislative and regulatory developments; inability to access sufficient capital from internal and external sources, and/or inability to access sufficient capital on favourable terms; the cannabis industry in Canada generally; the ability of WeedMD to implement its business strategies; the COVID-19 pandemic; competition; crop failure; and other risks.
Any forward-looking information speaks only as of the date on which it is made, and, except as required by law, WeedMD does not undertake any obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for WeedMD to predict all such factors. When considering this forward-looking information, readers should keep in mind the risk factors and other cautionary statements in WeedMD’s disclosure documents filed with the applicable Canadian securities regulatory authorities on SEDAR at www.sedar.com. The risk factors and other factors noted in the disclosure documents could cause actual events or results to differ materially from those described in any forward-looking information.
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