Earnings Recap: Supreme, Village Farms and Jushi Holdings

The Supreme Cannabis Co.

The Supreme Cannabis Company, Inc. (TSX: FIRE) (OTCQX: SPRWF) reported a year-over-year increase in net revenue, growing 122% from $5.1 million in Q1 2019 to $11.4 million in Q1 2020. The net revenue achieved during Q1 2020 was comprised of $10.5 million from 7ACRES and $0.9 million from Blissco.

Sequentially, net revenue decreased by 40% from $19 million in Q4 2019. The quarter-over-quarter decrease in net revenue is predominately attributable to the combination of a rapid deterioration of pricing and demand in the wholesale market and the previously announced 7ACRES mechanical failure in grow rooms 1, 2 and 3, which was an isolated one-time event with all three grow rooms recommissioned and replanted in September 2019.

In Q1 2020, in response to wholesale market conditions, the company prioritized its annual performance objectives by product planning for future quarters and holding back product from wholesale channels. In the second half of fiscal 2020, the company expects this inventory of high-quality products to serve as inputs for flower convenience products and select cannabis derivative products, including pre-rolled joints, CBD oils and vaporizer oils.

The company continues to reduce its reliance on the wholesale market as it increases packaging capacity at its 7ACRES facility and transitions 7ACRES to solely recreational sales. In Q1 2020, wholesale sales accounted for 57% of cannabis flower sales, as compared to 65% in Q4 2019 and 100% in Q1 2019.  As Supreme Cannabis transitions into a CPG company, sales from recreational markets continue to increase. In Q1 2020, the company saw strong demand for its consumer-facing brands, with net revenue from recreational sales increasing 68% quarter-over-quarter.

Village Farms International, Inc.

Village Farms International, Inc.  (TSX: VFF) (NASDAQ: VFF) reported net sales (before Village Farms’ 50% share), which consisted entirely of dried cannabis sold predominantly to other licensed producers, were C$24.0 million (US$18.1 million).  Sales for the third quarter did not include C$7.2 million that was invoiced to Emerald Health Therapeutics. The company delivered net loss (before Village Farms’ 50% share) of (C$2.4 million) ((US$1.8 million)) which included the non-cash impact of a net charge of (C$12.6 million) due to a change in value of the biological asset.

Michael DeGiglio, Chief Executive Officer, Village Farms said,  “Pure Sunfarms’ achieved its fourth consecutive quarter of positive EBITDA, with an industry leading all-in cost of production of C$0.63, gross margin of 69% and EBITDA margin of 56%.  In the 12 months since adult-use cannabis was legalized in Canada in October 2018, Pure Sunfarms has already generated C$47 million in EBITDA, an especially impressive number given that its operations were ramping up throughout most of that period.”

“In our U.S. outdoor hemp program, we recently completed harvest of our 2019 crop, highlighted by yields that were well above our projections.  We remain on track to begin generating profitable hemp sales as early as the fourth quarter of this year.  Importantly, our first growing season has provided significant learnings that will be invaluable going forward.  In our greenhouse hemp program, we continue to work with Texas Department of Agriculture on the implementation of its hemp regulatory framework subject to the recently published US Department of Agriculture rules and are optimistic that licensing could commence in the first quarter of 2020.  As we did in Canada with Pure Sunfarms, we are building a rock-solid foundation of exceptional growing operations from which to aggressively pursue our objective to launch our own white-labeled and branded CBD products in 2020.”

Jushi Holdings

Jushi Holdings Inc. (NEO: JUSH.B) (OTCQX: JUSHF) reported its financial results for the third quarter ended September 30, 2019. The company delivered revenue for the third quarter of 2019 increased 2871% to $3.6 million, compared to $0.1 million in the third quarter of 2018 due to revenue from operations. Net income for the third quarter of 2019 was $4.2 million, or $0.04 per diluted share, compared to a net loss of $2.3 million, or $0.05 per share, in the third quarter of 2018. During the quarter, the company reported a gain on a financial asset of approximately $9.2 million and a one-time other income of approximately $5 million.

Gross profit for the third quarter of 2019 was $1.5 million, resulting in gross margin of 43%, compared to $0.1 million for the third quarter of 2018. The increase over the prior year was primarily due to the increase in retail sales.

“During the third quarter of 2019, we generated revenue of $3.6 million, an increase sequentially from $0.2 million, due primarily to commencement of retail operations in Pennsylvania and New York, and cultivation and manufacturing in Nevada. Additionally, we reported a net gain of $13.2 million in other income primarily from sale of our minority stake in Gloucester Street Capital resulting in net income of $4.2 million for the quarter,” stated Jim Cacioppo, CEO and Chairman of Jushi.

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