TORONTO, May 13, 2020 (GLOBE NEWSWIRE) -- Aleafia Health Inc. (TSX: ALEF, OTC: ALEAF, FRA: ARAH) (“Aleafia Health” or the “Company”), is pleased to report its financial results for the three months ended March 31, 2020 (“Q1 2020”).
Management Commentary
“Our disciplined, sustainable growth has resulted in a breakthrough quarter for Aleafia Health. Our patient-centric approach remains at the core of our business as we build our cannabis health and wellness ecosystem,” said Aleafia Health CEO Geoffrey Benic.
“The prudent allocation of capital instituted over the course of 2019 is reflected in streamlined expenses, a fifth consecutive quarter of solid revenue growth, and industry-leading gross margin among North American cannabis industry reporting issuers. With a fully licensed infrastructure now in place, we look forward to leveraging our lean, integrated production ecosystem for operational and financial success. In the second half of 2020 we look forward to introducing an exciting roster of new Cannabis 2.0 product formats tailored to health and wellness consumers while further expanding the reach of our existing product portfolio.”
Condensed Income Statement
($,000s) | Three months ended | |||||
Mar 31, 2020 | Dec 31, 2019 | Mar 31, 2019 | ||||
Net revenue | 14,596 | 6,028 | 1,525 | |||
Net cannabis revenue(1) | 13,726 | 4,852 | 531 | |||
Consolidated cost of sales | 2,521 | 1,527 | 1,787 | |||
Gross profit (loss) before fair value ("FV") adjustments on net revenue | 12,075 | 4,501 | (262 | ) | ||
Gross margin before FV adjustments on net revenue(1) | 83 | % | 75 | % | -17 | % |
Selling, general & administrative expenses ("SG&A") | 6,104 | 5,924 | 11,566 | |||
Adjusted EBITDA(1)(2) | 6,379 | 207 | (10,921 | ) | ||
Adjusted EBITDA margin(1)(2) | 44 | % | 3 | % | -716 | % |
Changes in fair value of inventory sold | 6,179 | 1,323 | - | |||
Unrealized gain on fair value of biological assets | (38 | ) | 2,364 | 205 | ||
Gross profit | 5,857 | 5,542 | (58 | ) | ||
Net (loss) income | (6,156 | ) | (9,759 | ) | (20,230 | ) |
1. See "Cautionary Statements Regarding Certain non-IFRS Measures" section of the associated MD&A for term definition. | ||||||
2. Adjusted EBITDA is calculated as operating income (loss), excluding (i) amortization and depreciation, (ii) changes in fair value of inventory sold, (iii) unrealized gain on fair value biological assets, (iv) share-based payments and (v) one-time business transaction fees. |
For the three months ended March 31, 2020 (“Q1 2020”) net revenue was $14.6 million, an increase of 143% over the previous quarter. The increase was primarily derived from a $8.9 million increase in cannabis net revenue. Compared to the three months ended March 31, 2019 (“Q1 2019”), net revenue increased by 859%.
Net loss was $6.2 million, compared to a loss of $9.8 million in the previous quarter. The net loss was primarily due to non-cash items including: i) changes in fair value of inventory sold, expense of $6.2 million, ii) amortization and depreciation expense of $2.0 million, and iii) deferred income tax expense of $1.7 million.
Cannabis Operational Results
Operational Results - Cannabis | Mar 31, 2020 | Dec 31, 2019 | Mar 31, 2019 | |||
Active, registered patients | 10,983 | 10,249 | 7,030 | |||
Average net selling price of medical cannabis(1) | $ | 8.04 | $ | 9.80 | $ | 8.00 |
Average net selling price of adult-use cannabis(1) | $ | 6.88 | $ | 6.14 | $ | 6.48 |
Average net selling price of bulk wholesale cannabis(1) | $ | 2.47 | $ | 2.50 | $ | 2.98 |
Kilograms sold | 4,992 | 1,398 | 142 | |||
1. See "Cautionary Statements Regarding Certain non-IFRS Measures" section of the associated MD&A for term definition for term definition. |
Gross profit before fair value adjustments for cannabis net revenue was $11.7 million in Q1 2020, an increase of 203% over the previous quarter. Gross margin on cannabis net revenue for Q1 2020 was 85%, compared to 80% in Q3 2019. Gross margin by market type in Q1 2020 was:
(i) Medical cannabis: 67%
(ii) Adult-use cannabis: 30%
(iii) Wholesale bulk cannabis: 91%
Active registered patients increased by 7% during the reporting period to 10,983 and subsequently increased to over 12,000 as at May 12, 2020.
Adjusted EBITDA
($,000s) | Three months ended | |||||
Mar 31, 2020 | Dec 31, 2019 | Mar 31, 2019 | ||||
Operating (loss) income | (3,330 | ) | (3,511 | ) | (20,452 | ) |
Amortization and depreciation | 2,014 | 2,200 | 868 | |||
EBITDA | (1,316 | ) | (1,311 | ) | (19,584 | ) |
Changes in FV of inventory sold | 6,179 | 1,323 | - | |||
Unrealized gain on FV of biological assets | 38 | (2,364 | ) | (205 | ) | |
Share-based payments | 966 | 929 | 7,961 | |||
One-time business transaction fees | 510 | 1,630 | 907 | |||
Adjusted EBITDA | 6,379 | 207 | (10,921 | ) |
The Company has reported its second consecutive quarterly positive adjusted EBITDA, of $6.4 million, an increase of 2,979% over the previous quarter. Due to a disciplined cost structure and a fifth consecutive quarter of strong revenue growth, the Company has realized substantial, sequential adjusted EBITDA improvements. The increase in adjusted EBITDA was primarily due to significant increases in cannabis net revenue, improved gross margins along with holding SG&A expenses to an increase of 3%.
Selected Balance Sheet Information
($,000s) | Mar 31, 2020 | Dec 31, 2019 | Mar 31, 2019 |
Cannabis inventory & biological assets | 29,518 | 35,086 | 5,564 |
Cash, cash equivalents and marketable securities | 34,978 | 42,699 | 43,527 |
Other current assets | 38,121 | 39,993 | 11,919 |
Accounts payable | 10,723 | 20,267 | 9,554 |
Working capital | 67,686 | 96,903 | 51,267 |
Property, plant & equipment | 71,345 | 64,338 | 61,352 |
Total assets | 449,449 | 462,493 | 420,774 |
Total liabilities | 70,126 | 77,978 | 33,216 |
Key Events During the Reporting Period
KEY DEVELOPMENTS SUBSEQUENT TO MARCH 31, 2020
CONFERENCE CALL & WEBCAST
Date: May 13, 2020
Time: 8:30 a.m. EDT
USA/Canada Toll-Free Participant Call-in: (866) 679-9046; Passcode: 5378454
International Toll-Free Participant Call-in: (409) 217-8323; Passcode: 5378454
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-TSX-ALEF (879-2533)
IR@AleafiaHealth.com
LEARN MORE: www.AleafiaHealth.com
About Aleafia Health:
Aleafia Health is an industry leading, 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. 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.