Cannara Biotech Inc. ("
Cannara" or the
"
Company") (TSXV: LOVE) (OTCQB: LOVFF) (FRA:
8CB0), a vertically integrated producer of premium-grade cannabis
and derivative product offerings at affordable prices with two mega
facilities based in Quebec spanning over 1,650,000 sq. ft., today
announced its fiscal third quarter 2024 financial and operating
results for the three and nine-month periods ended May 31, 2024.
The full set of Condensed Interim Consolidated Financial Statements
for the three and nine-month periods ended May 31, 2024, and the
accompanying Management’s Discussion and Analysis can be accessed
by visiting the Company’s website at
https://www.cannara.ca/en/investor-area or by accessing its profile
pages on SEDAR+ at www.sedarplus.ca.
"We're delighted to share that Cannara continues
to show strong performance, with net revenues reaching $19.5
million this quarter, a 22.6% increase from the previous year,"
commented Zohar Krivorot, President & Chief Executive Officer
of Cannara. "Historically, our sales growth has been driven by
great customer loyalty and strong demand for our products,
amplified by organic word-of-mouth promotion. However, as indicated
by our flat quarter-to-quarter results, this can only take us so
far. To continue our expansion across the country, we have begun
enhancing our sales force and infrastructure. These strategic
investments are expected to drive significant returns. As we
achieve greater sales volumes, it's crucial to deploy more
sophisticated sales and marketing strategies to enhance our
distribution and market share and we have begun to do so. By
investing in these areas and preparing for our next cultivation
expansion phase, we are confident in Cannara's ability to thrive.
Our innovative products under Tribal, Nugz, and Orchid CBD will
continue to deliver premium quality at accessible prices, ensuring
our position as a leading licensed producer in Canada."
"The cannabis industry is navigating a highly
competitive landscape with significant price compression due to
challenging conditions," stated Nicholas Sosiak, Chief Financial
Officer of Cannara. "Despite these pressures, Cannara's resilience
is evident in our increased net revenues of $19.5 million versus
this time last year and our thirteenth consecutive quarter of
positive Adjusted EBITDA, totaling $2.8 million this quarter. We
also achieved an operating income of $3.6 million and generated
$1.2 million in free cash flow this quarter. While price
compression has impacted our growth quarter over quarter, we
believe current industry conditions are unsustainable for many of
our competitors with less scale and higher costs. We fully expect a
return to stronger pricing and demand as those who cannot compete
cease to operate. Cannara's ability to generate positive cash flows
in this environment helps us navigate these dynamic market
conditions and is a testament to our strength to succeed. We are
investing in sales and marketing to expand our distribution and
capture more market share from competitors, setting the stage for
future success as market conditions improve. Our focus remains
committed to profitable growth and steady cash flow, delivering
high-quality, innovative products to Canadians through our leading
brands."
Third Quarter Financial Highlights
- Gross cannabis revenues before
excise taxes increased to $26.2 million in Q3 2024 from $20.6
million in Q3 2023, a $5.6 million or 27.6%, increase. The increase
is attributable to Cannara’s entrance into new provinces in Canada,
as well as the launch of several new SKUs and sales generated from
the wholesale market.
- Total revenues, net of excise
taxes, increased to $19.5 million in Q3 2024 from $15.9 million in
Q3 2023, a $3.6 million or 22.6% increase.
- Gross profit, before fair value
adjustments, decreased to $5.7 million in Q3 2024 from $6.1 million
in Q3 2023, representing a 6.1% decline. This decrease was
primarily due to a reduction in yields resulting from cultivation
changes implemented during Q2 2024, which impacted the cost of
goods sold in Q3 2024. During the quarter, the Company reversed
these changes and focused on stabilizing its production yields,
successfully restoring them to previous levels. Cannara is
dedicated to advancing research and development, harnessing our
expertise to strengthen the knowledge and core competencies in
large-scale cannabis production. Through these ongoing investments,
we aim to consistently elevate our cultivation techniques, maximize
production yields, and enhance the overall quality of our
products.
- Gross profit percentage before fair
value adjustments in Q3 2024 was 29% compared to 38% in Q3
2023.
- Operating income of $3.6 million in
Q3 2024 compared to $4.3 million in Q3 2023, mainly due to an
increased costs of goods sold this quarter as mentioned above, as
well as increases in selling and marketing expenses to promote and
grow our market share across Canada. These impacts were reduced by
a gain of $2 million resulting from the sale of a parcel of unused
land at the Valleyfield site.
- Net income of $2.0 million in Q3
2024 compared to $2.9 million in Q3 2023, as a result of the items
mentioned above.
- Adjusted EBITDA of $2.8 million in
Q3 2024, compared to $3.9 million in Q3 2023.
- The Company generated operating
cash flow amounting to $4.3 million in Q3 2024 compared to $2.5
million in Q3 2023, an increase of 72%.
- Free cash flow2 for Q3 2024
increased to $1.2 million from ($37,000) in Q3 2023.
- Generated earnings per share of
$0.02 in Q3 2024 compared to $0.03 in Q3 2023.
Third Quarter Operational Highlights
Expansion in Manitoba, Canada:
In March 2024, the Company secured authorization from the Manitoba
Liquor & Lotteries Corporation (MBLL) to introduce its branded
cannabis products within the province of Manitoba. This approval
marks a significant milestone in Cannara’s expansion efforts,
allowing the Company to extend its market reach in Canada. The
Company successfully completed its first sale into Manitoba at the
end of May 2024 with 35 listings.
Successful Launch of 3 New Genetics for
Cannara’s House of Brands: Cannara completed its most
recent pheno-hunt program, unlocking 3 new high-powered genetics
for its house of brands. The Company launched two genetics under
Tribal (Neon Sunshine and Bubble Up) and one under Nugz (Guava Jam)
in Q3 2024. Cannara is now focused on its FY 2025 pheno-hunt
program that will aim to unlock more exotic genetics.
Sale of Parcel of Land at Valleyfield
Site: In January 2024, the Company’s Board of
Directors decided to pursue the sale of a currently unused parcel
of land, in addition to an adjacent building under construction at
its Valleyfield site, which had previously been intended to be
leased out. On April 24, 2024, the Company sold the parcel of land
at the Valleyfield Facility for $2.1 million, generating a gain on
disposal of asset held for sale of $2.0 million. The building under
construction and the land on which it is being constructed remains
to be sold and is currently being actively marketed.
Cannara enters East Coast Recreational
Market With 4/20-Themed Offer with NSLC: Cannara
successfully launched its consumer favourite Tribal Cuban Linx
pre-rolls with the Nova Scotia Liquor Corporation (NSLC) for a
4/20-themed holiday limited time offer. As a result of its success,
the NSLC has now accepted the SKU, in addition to a 28g offering of
Cuban Linx set to launch in early Fall 2024 as general listings,
with more SKUs to be accepted in the quarters to come.
Continued Expansion in Quebec and Other
Provinces: Cannara’s continued efforts to
develop a unique portfolio of brands, tailored to appeal to
consumers across various categories, demonstrated positive consumer
response in the third quarter of 2024. Notably, in Quebec,
according to Weedcrawler data, the Company saw a 7.8% increase in
market share, and by June, its market share had risen to 11.6%,
marking a 19.6% growth3. We believe these gains are driven by our
strong portfolio of SKUs, highly appreciated by customers in
Quebec, highlighting our ability to continually achieve high
customer demand, market penetration, and satisfaction. Going
forward, Cannara will focus on strategic production expansion,
product innovation and ultimately, focusing its sales and marketing
efforts on increasing distribution and sales velocity within its
provincial product portfolios.
Capital Transactions
During the third quarter of 2024, the Company
granted 25,000 stock options at an exercise price of $1.80 to
employees subject to certain vesting conditions in accordance with
the Company’s employee share option plan.
Outstanding Shares
As at the date of this news release, the Company
had 90,018,952 common shares, 4,549,927 stock options and 1,504,183
RSUs issued and outstanding. For further information, the complete
Condensed Interim Consolidated Financial Statements and
Management’s Discussion and Analysis, along with additional
information about the Company and all of its public filings that by
visiting the Company’s website at
https://www.cannara.ca/en/investor-area or by accessing its profile
pages on SEDAR+ at www.sedarplus.ca.
SELECTED FINANCIAL
INFORMATION
|
Three-month periods ended |
|
|
Nine-month periods ended |
|
Selected Financial
Highlights |
May 31, 2024 |
|
May 31, 2023 |
|
|
May 31, 2024 |
|
May 31, 2023 |
|
|
|
|
|
|
|
Net revenue 1 |
$ |
19,475,137 |
|
$ |
15,840,140 |
|
|
$ |
58,563,040 |
|
$ |
38,929,458 |
|
Other
income |
|
69,779 |
|
|
96,688 |
|
|
|
148,373 |
|
|
354,731 |
|
Total revenues |
|
19,544,916 |
|
|
15,936,828 |
|
|
|
58,711,413 |
|
|
39,284,189 |
|
|
|
|
|
|
|
Gross profit, before fair
value adjustments |
|
5,747,047 |
|
|
6,120,878 |
|
|
|
20,824,040 |
|
|
14,174,905 |
|
Gross profit |
|
6,958,256 |
|
|
8,594,235 |
|
|
|
19,334,110 |
|
|
17,688,552 |
|
Operating expenses |
|
3,404,212 |
|
|
4,311,958 |
|
|
|
14,300,967 |
|
|
11,632,065 |
|
Operating income |
|
3,554,044 |
|
|
4,282,277 |
|
|
|
5,033,143 |
|
|
6,056,487 |
|
Net finance expense |
|
1,530,658 |
|
|
1,353,634 |
|
|
|
4,349,098 |
|
|
3,742,948 |
|
Net income |
|
2,023,386 |
|
|
2,928,643 |
|
|
|
684,045 |
|
|
2,313,539 |
|
Adjusted EBITDA 2 |
|
2,776,397 |
|
|
3,887,634 |
|
|
|
11,447,529 |
|
|
8,825,357 |
|
|
|
|
|
|
|
Percentages of Total
revenues |
|
|
|
|
|
Gross profit, before fair
value adjustments as a percentage of Total revenues 3 |
|
29 |
% |
|
38 |
% |
|
|
35 |
% |
|
36 |
% |
Gross profit as a percentage
of Total revenues 4 |
|
36 |
% |
|
54 |
% |
|
|
33 |
% |
|
45 |
% |
Operating income as a
percentage of Total revenues 5 |
|
18 |
% |
|
27 |
% |
|
|
9 |
% |
|
15 |
% |
Net income as a percentage of
Total revenues 6 |
|
10 |
% |
|
18 |
% |
|
|
1 |
% |
|
6 |
% |
Adjusted EBITDA as a
percentage of Total revenues 7 |
|
14 |
% |
|
24 |
% |
|
|
19 |
% |
|
22 |
% |
|
|
|
|
|
|
Earnings per
share |
|
|
|
|
|
Basic earning per share |
$ |
0.02 |
|
$ |
0.03 |
|
|
$ |
0.01 |
|
$ |
0.03 |
|
Diluted
earning per share |
$ |
0.02 |
|
$ |
0.03 |
|
|
$ |
0.01 |
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31, 2024 |
|
August 31, 2023 |
|
Cash |
|
|
|
$ |
5,464,378 |
|
$ |
4,270,517 |
|
Accounts receivable |
|
|
|
|
11,829,419 |
|
|
10,592,705 |
|
Biological assets |
|
|
|
|
4,852,449 |
|
|
5,774,121 |
|
Inventory |
|
|
|
|
32,603,729 |
|
|
27,997,589 |
|
Working capital 8 |
|
|
|
|
35,242,622 |
|
|
30,513,009 |
|
Total assets |
|
|
|
|
148,768,302 |
|
|
141,522,254 |
|
Total current liabilities |
|
|
|
|
26,777,902 |
|
|
21,182,827 |
|
Total non-current
liabilities |
|
|
|
|
40,222,572 |
|
|
40,595,383 |
|
Net assets |
|
|
|
|
81,767,828 |
|
|
79,744,044 |
|
Free
cash flow 9 |
|
|
|
|
1,242,527 |
|
|
1,107,464 |
|
1 |
Net revenue included revenue from sale of goods, net of excise
taxes, services revenues and lease revenues. |
2 |
Adjusted EBITDA is a non-GAAP financial measure. |
3 |
Gross profit before fair value adjustments as a percentage of Total
revenues is a non-GAAP financial ratio. For more details see the
Non-GAAP and Other Financial Measures section of this news
release. |
4 |
Gross profit as a percentage of Total revenues is a non-GAAP
financial ratio. For more details see the Non-GAAP Measures section
of this news release. |
5 |
Operating income as a percentage of Total revenues is a non-GAAP
financial ratio. For more details see the Non-GAAP Measures section
of this news release. |
6 |
Net income as a percentage of Total revenues is a non-GAAP
financial ratio. For more details see the Non-GAAP Measures section
of this news release. |
7 |
Adjusted EBITDA as a percentage of Total revenues is a non-GAAP
financial ratio. For more details see the Non-GAAP Measures section
of this news release. |
8 |
Working capital is a non-GAAP financial measure. For more details
see the Non-GAAP Measures section of this news release |
9 |
Free cash flow is a non-GAAP financial measure. For more details
see the Non-GAAP Measures section of this news release. |
|
|
Non-GAAP Measures, Non-GAAP Ratios and Segment
Measures
The Company reports its financial results in
accordance with International Financial Reporting Standards
(“IFRS”). Cannara uses a number of financial
measures when assessing its results and measuring overall
performance. Some of these financial measures are not calculated in
accordance with IFRS. National Instrument 52-112 respecting
Non-GAAP and Other Financial Measures Disclosure (“NI
52-112”) prescribes disclosure requirements that apply to
the following types of measures used by the Company: (i) non-GAAP
financial measures (ii) non-GAAP financial ratios and (iii) total
of segments measures. In this news release, the following non-GAAP
measures, non-GAAP ratios and segment measures are used by the
Company: adjusted EBITDA, free cash flow, working capital, segment
gross profit before fair value adjustments as a percentage of
segment net revenue, segment gross profit as a percentage of
segment net revenue, segment operating income as a percentage of
segment net revenue, and adjusted EBITDA as a percentage of net
revenue. There are no total of segments measures included in this
press release. Additional details for these non-GAAP and other
financial measures can be found in the section entitled “Non-GAAP
Financial Measures, Non-GAAP Ratios and Segment Measures” of
Cannara’s MD&A for the three and nine-months ended May 31,
2024, which is posted on Cannara’s website at www.cannara.ca and
filed on SEDAR+ at www.sedarplus.ca. Reconciliations of non-GAAP
financial measures and non-GAAP ratios to the most directly
comparable IFRS measures are provided below. Management believes
that these non-GAAP financial measures and non-GAAP ratios provide
useful information to investors regarding the Company’s financial
condition and results of operations as they provide key metrics of
its performance. These measures are not recognized under IFRS, do
not have any standardized meanings prescribed under IFRS and may
differ from similar computations as reported by other issuers, and
accordingly may not be comparable. These measures should not be
viewed as a substitute for the related financial information
prepared in accordance with IFRS.
Reconciliation of Adjusted EBITDA
Adjusted EBITDA is a non-GAAP Measure and can be
reconciled with net income, the most directly comparable IFRS
financial measure, as detailed below. Management has changed the
composition of Adjusted EBITDA since the second quarter of 2024 to
add the gain on disposal of asset held for sale in the adjustments
made to calculate the EBITDA. These changes are intended to allow
investors and analysts to understand Company's operational
performance by excluding non-recurring transactions.
Adjusted EBITDA as a percentage of Total
revenues is a non-GAAP financial ratio, determined as adjusted
EBITDA divided by total revenues.
|
Three-month periods ended |
|
|
Nine-month periods ended |
|
Reconciliation of
adjusted EBITDA |
May 31, 2024 |
|
May 31, 2023 |
|
|
May 31, 2024 |
|
May 31, 2023 |
|
|
|
|
|
|
|
Net income |
$ |
2,023,386 |
|
$ |
2,928,643 |
|
|
$ |
684,045 |
|
$ |
2,313,539 |
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
Changes in fair value of inventory sold |
|
5,137,341 |
|
|
4,023,826 |
|
|
|
17,161,049 |
|
|
9,971,578 |
|
Unrealized gain on changes in fair value of biological assets |
|
(6,348,550 |
) |
|
(6,497,183 |
) |
|
|
(15,671,119 |
) |
|
(13,485,225 |
) |
Amortization, including amortization of cost of goods sold |
|
1,785,153 |
|
|
1,187,620 |
|
|
|
4,134,592 |
|
|
2,918,501 |
|
Write-down of inventory to net realizable value |
|
283,244 |
|
|
474,654 |
|
|
|
1,206,613 |
|
|
1,886,363 |
|
Gain on disposal of asset held for sale |
|
(2,039,007 |
) |
|
- |
|
|
|
(2,039,007 |
) |
|
- |
|
Loss on disposal of property, plant and equipment |
|
- |
|
|
- |
|
|
|
5,380 |
|
|
63,247 |
|
Share-based compensation |
|
404,172 |
|
|
416,440 |
|
|
|
1,616,878 |
|
|
1,414,406 |
|
Net finance expense |
|
1,530,658 |
|
|
1,353,634 |
|
|
|
4,349,098 |
|
|
3,742,948 |
|
Adjusted EBITDA* |
$ |
2,776,397 |
|
$ |
3,887,634 |
|
|
$ |
11,447,529 |
|
$ |
8,825,357 |
|
Adjusted EBITDA as a percentage of Total
revenues** |
|
14 |
% |
|
24 |
% |
|
|
19 |
% |
|
22 |
% |
*Non-GAAP financial measure**Non-GAAP financial
ratio
Reconciliation of Free Cash Flow
Free cash flow is a non-GAAP measure and can be
reconciled with cash from operating activities, the most directly
comparable IFRS financial measure, as detailed below.
|
Three-month periods ended |
|
|
Nine-month periods ended |
|
Reconciliation of free
cash flow |
May 31, 2024 |
|
May 31, 2023 |
|
|
May 31, 2024 |
|
May 31, 2023 |
|
|
|
|
|
|
|
Cash from operating activities |
$ |
4,325,380 |
|
$ |
2,540,852 |
|
|
$ |
7,496,392 |
|
$ |
3,023,289 |
|
|
|
|
|
|
|
Adjustment: |
|
|
|
|
|
Capital expenditures |
|
3,082,853 |
|
|
2,577,685 |
|
|
|
6,975,869 |
|
|
8,099,061 |
|
Free cash flow* |
$ |
1,242,527 |
|
$ |
(36,833 |
) |
|
$ |
520,523 |
|
$ |
(5,075,772 |
) |
*Non-GAAP financial measure
Reconciliation of working capital
Working capital is a non-GAAP Measure and can be
reconciled with total current assets and total current liabilities,
the most directly comparable GAAP financial measure, as detailed
below.
|
As at |
|
As at |
|
Reconciliation of
working capital |
May 31, 204 |
|
August 31, 2023 |
|
|
|
|
Total current assets |
$ |
62,020,524 |
|
$ |
51,695,836 |
|
Total current liabilities |
|
26,777,902 |
|
|
21,182,827 |
|
Working capital* |
$ |
35,242,622 |
|
$ |
30,513,009 |
|
*Non-GAAP financial measure
Contact:
Nicholas Sosiak, CPA, CAChief Financial
Officernick@cannara.ca
Zohar Krivorot President & Chief Executive
Officer zohar@cannara.ca
About Cannara Biotech Inc.
Cannara Biotech Inc. (TSXV:
LOVE) (OTCQB: LOVFF) (FRA: 8CB0), is a vertically integrated
producer of affordable premium-grade cannabis and
cannabis-derivative products for the Canadian markets. Cannara owns
two mega facilities based in Québec spanning over
1,650,000 sq. ft., providing the Company with 100,000 kg
of potential annualized cultivation output. Leveraging Québec’s low
electricity costs, Cannara’s facilities produce premium-grade
cannabis products at an affordable price. For more information,
please visit https://www.cannara.ca/en/.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in policies
of the TSX Venture Exchange) accepts responsibility for the
adequacy or accuracy of this release.
Cautionary Statement Regarding “Forward-Looking”
Information
This news release may contain “forward-looking
information” within the meaning of applicable securities
legislation (“forward-looking statements”). These forward-looking
statements are made as of the date of this news release and the
Company does not intend, and does not assume any obligation, to
update these forward-looking statements, except as required under
applicable securities legislation. Forward-looking statements
relate to future events or future performance and reflect Company
management’s expectations or beliefs regarding future events and
include, but are not limited to, the Company and its operations,
its projections or estimates about its future business operations,
its planned expansion activities, the adequacy of its financial
resources, the ability to adhere to financial and other covenants
under lending agreements, future economic performance, and the
Company’s ability to become a leader in the field of cannabis
cultivation, production, and sales.
In certain cases, forward-looking statements can
be identified by the use of words such as “plans,” “expects” or
“does not expect,” “is expected,” “budget,” “scheduled,”
“estimates,” “forecasts,” “intends,” “anticipates” or “does not
anticipate,” or “believes,” or variations of such words and phrases
or statements that certain actions, events or results “may,”
“could,” “would,” “might” or “will be taken,” “occur” or “be
achieved” or the negative of these terms or comparable terminology.
In this document, certain forward-looking statements are identified
by words including “may,” “future,” “expected,” “intends” and
“estimates.” By their very nature, forward-looking statements
involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance, or achievements of
the Company to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements.
Such factors include, but are not limited to,
the factors discussed in the section “Risk Factors” of the MD&A
as well as those factors detailed from time to time in the
Company’s interim and annual financial statements and the related
MD&A of those statements. Although the Company has attempted to
identify important factors that could cause actual actions, events,
or results to differ materially from those described in
forward-looking statements, there may be other factors that cause
actions, events or results not to be as anticipated, estimated or
intended.
The Company provides no assurance that
forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements. Historical
results of operations and trends that may be inferred from the
following discussions and analysis may not necessarily indicate
future results from operations.
1 Adjusted EBITDA is a non-GAAP financial
measure. For more details see the Non-GAAP Measures, Non-GAAP
Ratios and Segment Measures section of this news release.2 Free
cash flow is a non-GAAP financial measure. For more details see the
Non-GAAP Measures, Non-GAAP Ratios and Segment Measures section of
this news release.3 Based on estimated sales data provided by Weed
Crawler and ST Analytics, for the period of June 2024.
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