- Ultra-low-cost production at $0.08 cost per gram at the outdoor facility
- Average net revenue per gram equivalent of $15.11 for medical cannabis sales
- Medical cannabis sales up 43% Q/Q, adult-use cannabis sales up 53% Q/Q
- Active, registered medical cannabis patients increase 48% Q/Q
- $57M in cash/marketable securities, $83M in working capital
- Total expenses decreased by 30% Q/Q
- Net income improves to $1.9M, from $11.5M loss Q/Q
- Adjusted EBITDA improves 44% Q/Q
TORONTO – Aleafia Health Inc. (TSX: ALEF, OTC: ALEAF, FRA: ARAH) (“Aleafia Health” or the “Company”) is pleased to report its financial results for the period ended September 30, 2019.
MANAGEMENT COMMENTARY
“Aleafia Health has now reached the next phase in our development as we report our first profitable quarter. It saw us realize substantial improvements in all critical financial metrics, as we scale our cannabis health and wellness ecosystem in Canada and globally. Over the last year, we have overseen major cannabis facility build-outs, all of which are now substantially complete. During this industry transition period, our prudent allocation of capital and focus on sustainable growth sets us apart,” said Aleafia Health CEO Geoffrey Benic.
“Today, we believe that with our outdoor grow facility, we are among the lowest-cost Canadian producers while realizing a strong average revenue per gram sold. These results demonstrate the execution capabilities of our management team, with a clear path towards continued profitability for our young company.”
THIRD QUARTER CONDENSED INCOME STATEMENT
| Financial Results ($,000s) | 30-Sep-19 | 30-Jun-19 | % Change |
| Total Revenue | 5,290 | 3,951 | 34% |
| Gross Cannabis Revenue | 4,157 | 2,532 | 64% |
| Clinics Revenue1 | 1,133 | 1,419 | -20% |
| Gross Profit before fair value adjustment | 2,032 | 557 | 265% |
| Total Expenses | 8,460 | 12,069 | -30% |
| Adjusted EBITDA2 (loss) | (2,526) | (4,538) | -44% |
| Net Income (loss) | 1,859 | (11,477) | n/a |
- Combined research and consultation revenue
- These terms and non-IFRS measures are defined or reconciled in Aleafia Health’s Q3 2019 MD&A
Revenue Growth: A robust increase in cannabis sales drove record revenue in the quarter. During the reporting period, revenues from the sale of packaged consumer products represented 94 percent of net cannabis revenue.
| Cannabis Revenue ($,000s) | 30-Sep-19 | 30-Jun-19 | % Change | |
| Net medical cannabis revenue | 1,450 | 1,011 | 43% | |
| Net adult-use revenue | 2,152 | 1,409 | 53% | |
| Net bulk LP-to-LP revenue | 224 | 0 | n/a | |
| Total net cannabis revenue | 3,826 | 2,420 | 58% | |
Ultra-low-cost production: As previously announced and subsequent to the reporting period, the all-in cash cost per gram to harvest at our Outdoor Grow facility was $0.10, including capital costs, amortized over a five-year period. The Company now boasts among the industry’s lowest-cost production and, during the reporting period, maintaining among the highest average net selling price per gram of its peers.
- Average net selling price per gram (medical): $15.11
- Average net selling price per gram (adult-use): $6.40
- Average net selling price per gram (bulk wholesale): $6.00
Balance Sheet: Strengthened balance sheet during the reporting period, as total expenses declined substantially for the second consecutive quarter, despite significantly increasing the scale of the business.
| Balance Sheet ($,000s) | 30-Sep-19 | 30-Jun-19 | % Change |
| Cash, cash equivalents & marketable securities | 57,172 | 63,533 | -10% |
| Cannabis Inventory & Biological Assets | 21,474 | 7,217 | 198% |
| Working Capital | 83,411 | 75,935 | 10% |
The Company believes that its current cash position is more than adequate to fund all operating and capital activities.
Growth in Medical Patients: Growth inactive, registered medical patients increased by 48 percent over the preceding period.
| Operational Results | Sep-30 | Jun-30 | Q/Q% change |
| Active, Registered Medical Patients | 10,298 | 6,959 | 48% |
The Company has served over 70,000 clinic patients to date through its national network of medical cannabis clinics and education centers. The Company believes it is well-positioned to capture increased medical cannabis sales market share due to its unique, integrated health and wellness ecosystem including clinics.
FACILITY AND PRODUCTION UPDATE
In the last year, Aleafia Health has overseen three major construction projects. The Port Perry Outdoor Grow facility, the Niagara Greenhouse, and the Paris Phase II Expansion are now substantially complete, while construction is ongoing at the Phase II expansion of the Outdoor Grow facility. At an annualized run-rate basis, cultivation capacity is anticipated to reach 129,500 kg across the Company’s completed wholly-owned facilities, upon receipt of regulatory approval for the Niagara Greenhouse and expanded outdoor grow. The current licensed and operational capacity is 32,600 kg.
Port Perry Outdoor Grow: Subsequent to the reporting period, the 2019 Outdoor Harvest was completed at our 1.1 million sq. ft. (26 acres) outdoor grow facility. Despite commencing planting in the middle of the growing season, following regulatory approval, the inaugural harvest yielded approximately 10,300 kg of dried flower, with an all-in cash cost per gram to the harvest of $0.10. Critical quality control tests conducted to date have been successful.
- 2.6M sq. ft. Phase II Expansion: On September 4, 2019, the Company announced that it had acquired the farmland directly adjacent to its Port Perry facility for a cash purchase price of $1.2 million. The expansion adds an additional 2.6 million sq. ft. (60 acres) of cultivation area, for a total of 3.7 million sq. ft (86 acres). Fencing and the security infrastructure at the expanded site have been largely completed and the Company expects to formally submit its Licence Amendment application and Site Evidence Package to Health Canada during Q4 2019.
OUTDOOR PHASE II EXPANSION PHOTO
Paris Processing Facility Phase II Expansion: The Company has secured full occupancy for the new building, which is a 30,000 sq. ft. facility entirely dedicated to the extraction, production, packaging, and distribution of high-margin, value-added cannabis health and wellness products. Its 115,000 kg of dried flower equivalent extraction capacity, once licensed and fully operational, can process all dried flower grown at the Company’s cultivation facilities.
Niagara Greenhouse: Material capital improvements of the Niagara Greenhouse are now complete and the facility can be operationalized within two weeks of securing its Health Canada Cultivation Licence. The modern 160,000 sq. ft. the greenhouse features the most advanced automation and a moving container bench system that allows for a perpetual, year-round harvest.
About Aleafia Health:
Aleafia Health is a leading, vertically integrated cannabis health and wellness company with four primary business units: Cannabis Cultivation & Products, Health & Wellness Clinics, Cannabis Education, and Consumer Experience with eCommerce, retail distribution and provincial supply agreements.
Aleafia Health owns three major cannabis product & cultivation facilities, two of which are licensed and operational, including the first large-scale, operational 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 centers 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.