- 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.
- 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.
- Delivered a thirteenth consecutive quarter of positive Adjusted EBITDA1 of $2.8 million.
All financial results are reported in Canadian dollars, unless otherwise stated.
MONTREAL, QUÉBEC – July 23, 2024 – Cannara Biotech Inc. (“Cannara”, “the Company”, “us” or “we”) (TSXV: LOVE) (OTCQX: 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 pro le 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 at 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 ow 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 pro table growth and steady cash ow, 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 Valley Field 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 ow 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 Valley Field 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 Valley eld site, which had previously been intended to be leased out. On April 24, 2024, the Company sold the parcel of land at the Valley eld 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 lings that by visiting the Company’s website at https://www.cannara.ca/en/investor-area or by accessing its pro le pages on SEDAR+ at www.sedarplus.ca.
SELECTED FINANCIAL INFORMATION
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CONTACT
Nicholas Sosiak, CPA, CA
Chief Financial Officer
nick@cannara.ca
Zohar Krivorot
Founder & Chief Executive Officer
zohar@cannara.ca
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.
ABOUT CANNARA
Cannara Biotech Inc. (TSXV: LOVE) (OTCQX: 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 1,600,000 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 cannara.ca.
CAUTIONARY STATEMENT REGARDING “FORWARD-LOOKING” INFORMATION
This news release may contain “forward-looking information” within the meaning of Canadian securities legislation (“forward-looking statements”). These forward-looking statements are made as of the date of this MD&A 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. All statements other than statements of historical facts included in this document constitute forward-looking information, including but not limited to statements with respect to the anticipated benefits of DTC eligibility of the Common Shares and the completion of the Olymbec Share Issuance.
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, anticipated product offerings, 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 forwardlooking 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.
Forward-looking information is based upon a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those that are disclosed in, or implied by, such forward-looking information. These risks and uncertainties include, but are not limited to, the risk factors which are discussed in greater detail under “Risk Factors” in the Company’s AIF available on SEDAR+ at www.sedarplus.ca and under the “Investor Area” section of our website at https://www.cannara.ca/en/investor-area.
Other risks not presently known to the Company or that the Company believes are not significant could also cause actual results to differ materially from those expressed in its forward-looking statements. Although the forward-looking information contained herein is based upon what we believe are reasonable assumptions, readers are cautioned against placing undue reliance on this information since actual results may vary from the forward-looking information. Certain assumptions were made in preparing the forward-looking information concerning the availability of capital resources, business performance, market conditions, as well as customer demand. Consequently, all of the forward-looking information contained herein is qualified by the foregoing cautionary statements, and there can be no guarantee that the results or developments that we anticipate will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business, financial condition or results of operation. Unless otherwise noted or the context otherwise indicates, the forward-looking information contained herein is provided as of the date hereof, and we do not undertake to update or amend such forward looking information whether as a result of new information, future events or otherwise, except as may be required by applicable law.
1 Adjusted EBITDA is a non-GAAP nancial measure. For more details see the Non-GAAP Measures, Non-GAAP Ratios and Segment Measures section of this news release.
2 Free cash ow is a non-GAAP nancial 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.