Emerald Health Therapeutics Reports Second Quarter 2019 Financial Results; Sales Double Second Quarter in a Row
- Emerald’s 2Q19 sales of
$5.1 millionrepresents an increase of 94% over the prior quarter and 348% over 4Q18
- Net loss significantly improved in 2Q19 to
$0.5Mfrom $3.7Mthe previous quarter, driven partly by the marketing of cannabis products with higher margin, like SYNC 25 CBD oil, and strong performance of Pure Sunfarms
- Adjusted EBITDA of
$1.9M, up $5.4Mfrom Q1
- G&A stable at
$3.3Mover prior quarter, showing more efficiency across all processes
- S&M was
$1.1M, up $0.2Mover Q1 as sales channel infrastructure and staff increased
- R&D expenses increased, permitting advancement of differentiated defined-dose products targeting next legalisation phase
- Emerald’s share of income from Pure Sunfarms joint venture was
$14.5M, up from $5.8Min previous quarter
- Net loss per common share was
$0.003, compared to $0.043in 1Q19.
Pure Sunfarms 50%-owned joint venture 2Q19
- 2Q19 sales increased 125% to
$32.4Mover prior quarter
- Gross margin was 84% before non-cash adjustments to the fair valuation of inventory and biological assets
- EBTIDA was
$25Mor 78%; adjusted EBITDA (to eliminate the profit component of inventory held by EHT at June 30, 2019) was $18.3M, or 57%
- Net income before tax exceeded
$43.8 million, representing a third consecutive quarter of profitability
- Emerald reported
$14.5Mas share of net income from Pure Sunfarms compared to $5.8Min 1Q19 and $1.4Min 4Q18
- Net cash flow from operating activities exceeded
$6 million. Achieved full run-rate in the first 1.1 million square-foot greenhouse, with all-in production cost at $0.65per gram based on increased production volume and lower seasonal costs.
In 2Q19, Emerald has been focusing its efforts on:
- Helping drive the success of Pure Sunfarms. We believe that this JV will continue to achieve significant growth from its leadership in the wholesale cannabis market and the expansion of its business model and capabilities to enhance its ability to capture market share in the retail segment of the cannabis market.
- Completing the licensing efforts and a substantial amount of the build-out of its 100%- owned facilities in Metro Vancouver focused on indoor and outdoor organic cultivation of cannabis; and,
St. Eustache, Quebec, for the production of indoor cultivation of high quality, differentiated craft cannabis strains. These facilities are both expected to be fully licensed, fully operational, and revenue-generating by the end of the year.
- Sales in eight provinces and
Yukon, facilitating revenue growth from $2.1 millionin all of 2018 to $7.7 millionin the first half of 2019.
- Enabling the extraction of THC and CBD oil and resin at Emerald’s facilities, while concurrently securing third party, large scale extraction and cannabis value-added product manufacturing relationships, a key part of Emerald’s Cannabis 2.0 strategy.
- Strengthening its intellectual property portfolio and advancing novel products under development that are scheduled for release starting in 4Q19.
- Commencing the distribution of novel and proprietary non-cannabis products (
Endoproduct line with proprietary Phytocann® Complex) that can modulate the endocannabinoid system to improve health and wellness. The Endoproduct line is being marketed through Emerald Health Naturals (51%-owned) with a management team that is very experienced in the nutraceutical business.
“Emerald has a deliberate and sequential strategy for sustainable growth. The completion of our Pure Sunfarms joint venture’s first greenhouse and its significant revenue and net income growth make this operation one of our most valuable assets. Combining this with the foundation we have built to synchronize and scale every aspect of our business from production to post-harvest processing and product development positions Emerald to see continued financial growth of the company,” said Dr.
“During the second quarter, we appointed
“Emerald is strategically positioned to be a leader in the cannabis industry. As we enter the second half of 2019, we will focus our efforts on refining our business model and scaling our operations to fully leverage and further enable the success of our PSF JV while sharpening our own business strategy, operations and core areas of business. We will complete the build out and licensing of our two other 100%-owned facilities, allowing them to become revenue generating in 2020, enhance our brand, as well as our targeted research efforts in novel, proprietary product development, and continue to build on value-added strategic partnerships to enhance profitability, speed up market entry, or provide enhanced expertise in specific areas,” said
Financials Results & Capital Resources
Selected quarterly financial information
The following table summarizes selected quarterly financial information for the Company, which was derived from annual financial statements prepared in accordance with IFRS or interim financial statements prepared in accordance with IFRS applicable to the preparation of interim financial statements, IAS 34, Interim Financial Reporting:
The Company’s unaudited condensed, interim consolidated financial statements and MD&A for the three months ended
During 1Q19 the Company filed a short form base shelf prospectus in each of the provinces of
Each Convertible Debenture Unit is comprised of one 5.0% secured convertible debenture of the Company in the principal amount of
The Convertible Debentures will have a maturity date of 24 months from their date of issue (the “Maturity Date”) and will bear interest (at the option of the Company payable in cash or, pursuant to TSXV rules, in common shares of the Company (“Common Shares”)) from their date of issue at 5.0% per annum, accrued and payable semi-annually on
The Convertible Debentures will be convertible, at the option of the holder, into Common Shares at any time prior to the close of business on the last business day immediately preceding the Maturity Date. The Convertible Debentures will have a conversion price of
Each Warrant will be exercisable to purchase one Common Share at an exercise price of
The Company intends to use the net proceeds of the Offering to repay the outstanding loan to
Production & Sourcing
Pure Sunfarms, Emerald’s 50%-owned joint venture
Pure Sunfarms (PSF) completed planting of the final quadrants of its 1.1 million square foot
PSF received its processing license for
New organic cannabis operation
Emerald received its
This 20-acre operation includes 156,000 square feet in two greenhouses and 12 acres of outdoor cultivation, with the goal to organically produce over 20,000 kg of proprietary cannabis strains annually. It is also equipped for cultivation, trimming, drying and bulk bagging. The facility received its outdoor cultivation license and planted 45,000 organic cannabis seedlings on
Emerald has submitted its final evidence package to
Emerald has dedicated a significant area in the Verdélite facility for advanced post-harvest processing and is planning to have on-site extraction capacity operational in the fourth quarter of this year to augment and expand Emerald’s existing extraction capacity in
Hemp for CBD oil
Emerald has entered into a purchase agreement with
Sales & Marketing
Cannabis sales – adult-use market
Emerald has become an established recreational cannabis supplier to government authorities in
Emerald began distribution of its indica-dominant CBD oil, SYNC 25, which offers consumers a smoke-free alternative to standard cannabis products. In the last quarter, Emerald shipped 6,000 40 ml units of SYNC 25 to the British Columbia Liquor Distribution Branch and shipped 9,960 40 ml units to
Emerald Health Naturals
Emerald’s 51%-owned joint venture, Emerald Health Naturals (EHN), introduced a cannabis-free herbal and botanical endocannabinoid-supporting health supplement product line in
Emerald’s strategic manufacturing partner,
The Company also announced that it had appointed
To access the audio broadcast, please dial (866) 652-5200, or via the Internet at: https://services.choruscall.com/links/emhtf190829.html. An archived version of the presentation will be available for 90 days on the "Investors" section of Emerald's website: https://ir.emeraldhealth.ca/events-and-presentations.
Please visit www.emeraldhealth.ca for more information or contact:
(800) 757 3536 Ext. # 5
Emerald Investor Relations
(800) 757 3536 Ext. #5
Non-GAAP Financial Measures
This press release contains references to EBITDA and Pro Forma Sales. These financial measures are not measures that have any standardized meaning prescribed by IFRS and are therefore referred to as “non-GAAP measures”. Non-GAAP measures used by the Company may not be comparable to similar measures used by other companies. EBITDA is defined as “income (loss) before interest expenses, taxes, depreciation and amortization. Pro
The Company uses these non-GAAP measures because they provide additional information regarding performance of the Company’s overall business that are not otherwise reflected under IFRS.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Cautionary Note Regarding Forward-Looking Statements: Certain statements made in this press release that are not historical facts are forward-looking statements and are subject to important risks, uncertainties and assumptions, both general and specific, which give rise to the possibility that actual results or events could differ materially from our expectations expressed in or implied by such forward-looking statements. Such statements include production and processing capacity of various facilities; conversion of facilities; expansion of facilities; use of proceeds of financings; commencement of production; sales volumes; receipt of licenses; execution of final agreements with
We cannot guarantee that any forward-looking statement will materialize, and readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements involve risks and uncertainties related to, among other things, changes of law and regulations; changes of government; failure to obtain regulatory approvals; failure to obtain necessary financing; results of production and sale activities; results of scientific research; regulatory changes; changes in prices and costs of inputs; demand for labour; demand for products; failure of counter-parties to perform contractual obligations; as well as the risk factors described in the Company’s annual information form and other regulatory filings. The forward-looking statements contained in this press release represent our expectations as of the date hereof. Forward-looking statements are presented for the purpose of providing information about management's current expectations and plans and allowing investors and others to obtain a better understanding of our anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes. The Company undertakes no obligations to update or revise such statements to reflect new circumstances or unanticipated events as they occur, unless required by applicable law.
Source: Emerald Health Therapeutics Inc.