National Access Cannabis Generates $17 million in Revenue in Q3 2019

Published: July 31, 2019

National Access Cannabis Generates $17 million in Revenue in Q3 2019

National Access Cannabis Corp., a private retailer of recreational cannabis in Canada3, announced its financial results for the third quarter ended May 31, 2019. All amounts are expressed in Canadian dollars.

Q3-2019 Highlights –– Continued expansion in retail cannabis store financial results

  • Sequential quarterly revenue growth (compared to Q2-2019) of 5.2% at a gross profit margin of 33% compared to 32% in Q2-2019
  • The Company’s retail cannabis stores generated $16.8 million in revenue in Q3-2019, or 5.5% growth compared to Q2-2019. Gross profit margin was 32% in Q3-2019, compared to 31% in Q2-2019.
  • Retail cannabis stores produced $2.3 million in adjusted EBITDA in Q3-2019, growth of 32.4% compared to Q2-2019. Adjusted EBITDA margin expanded to 14% in Q3-2019, compared to 11% in Q2-2019.
  • As of the date of this press release, the Company has received AGLC approval for 24 of its 34 retail cannabis store license applications, all of which are operating under the NewLeaf brand.
  • The Company currently has a portfolio of 34 licensed recreational cannabis retail stores, 24 in Alberta, 9 in Manitoba, and 1 in Saskatchewan.

“In Q3 2019, the efforts of our team translated into steady growth in the Company’s top line while a focus on optimizing working capital and driving higher profitability drove significantly improved adjusted EBITDA on a sequential basis,” said Mark Goliger, CEO of NAC. “We are just at the beginning of NAC’s growth trajectory with a target of growing to 40 total stores by the end of calendar 2019. We expect the Canadian cannabis market to continue to find its footing through the remainder of 2019 after a rocky start in late 2018. We expect to see supply issues continue to abate and we anticipate seeing a lifting of restrictions on new licences in new jurisdictions and the ability to offer our customers a wider selection of products. As the Canadian cannabis market matures, NAC is positioned to continue to gain share and drive continued growth in financial performance out of both existing and new stores.”

Summary Tables – Three Months Ended May 31, 2019

Medical Cannabis
Education Clinics

Retail Cannabis 
Stores

Research

Corporate

Total

Revenue

286,163

16,759,606

17,045,769

Cost of goods sold

(32,447)

(11,470,303)

(11,502,750)

Gross profit

Gross profit margin (%)

253,716

89%

5,289,303

32%

5,543,019

33%

Operating expenses

(636,140)

(5,812,588)

(257,950)

(4,025,597)

(10,732,275)

Loss from operations

(382,424)

(523,285)

(257,950)

(4,025,597)

(5,189,256)

Adjusted EBITDA

Adjusted EBITDA %

(215,949)

2,343,072

14%

(257,950)

(2,432,987)

(563,814)

Other expenses

(16,064)

(84,418)

(100,482)

Deferred tax recovery

509,589

509,589

Net loss

(398,488)

(607,703)

(257,950)

(3,516,008)

(4,780,149)

Summary Tables – Nine Months Ended May 31, 2019

Medical Cannabis
Education Clinics

Retail Cannabis 
Stores

Research

Corporate

Total

Revenue

1,101,157

35,933,941

37,035,098

Cost of goods sold

(170,778)

(24,755,208)

(24,925,986)

Gross profit

Gross profit margin (%)

930,379

84%

11,178,733

31%

12,109.112

33%

Operating expenses

(1,833,394)

(13,025,502)

(562,410)

(14,120,994)

(29,542,300)

Loss from operations

(903,015)

(1,846,769)

(562,410)

(14,120,994)

(17,433,188)

Adjusted EBITDA

Adjusted EBITDA %

(583,184)

4,705,960

13%

(562,410)

(7,590,270)

(4,029,904)

Other expenses

(16,064)

(84,418)

(1,642,857)

(1,743,339)

Deferred tax recovery

876,567

876,567

Net loss

(919,079)

(1,931,187)

(562,410)

(14,887,284)

(18,299,960)

Financial Measures

There are measures included in this news release that do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures and metrics presented by other publicly traded companies. The Company includes these measures because it believes certain investors use these measures and metrics as a means of assessing financial performance. EBITDA (earnings before interest, taxes, depreciation and amortization) is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies.

Three months ended May 31, 2019

Medical Cannabis 
Education Clinics

Retail 
Cannabis
Stores

Research

Corporate

Total

Loss from operations

(382,425)

(523,284)

(257,950)

(4,025,597)

(5,189,256)

Amortization of property and equipment

166,475

435,650

602,125

Amortization of intangible assets

419,133

419,133

Finance and other costs

734,353

734,353

Professional fees – fundraising and acquisition

161,913

161,913

Integration and restructuring costs

Pre-operating retail expenses

2,430,707

2,430,707

Share based compensation

277,211

277,211

Adjusted EBITDA

Adjusted EBITDA %

(215,949)

2,343,072

14%

(257,950)

(2,432,987)

(563,814)

Nine months ended May 31, 2019

Medical Cannabis
Education Clinics

Retail 
Cannabis 
Stores

Research

Corporate

Total

Loss from operations

(903,015)

(1,846,770)

(562,410)

(14,120,994)

(17,433,188)

Amortization of property and equipment

319,830

864,102

1,183,932

Amortization of intangible assets

1,257,399

1,257,399

Finance and other costs

2,848,253

2,848,253

Professional fees – fundraising and acquisition

1,096,210

1,096,210

Integration and restructuring costs

380,480

380,480

Pre-operating retail expenses

5,688,629

5,699,629

Share based compensation

948,382

948,382

Adjusted EBITDA

Adjusted EBITDA %

(583,184)

4,705,960

13%

(562,410)

(7,590,270)

(4,029,904)

Management defines Adjusted EBITDA as the net loss from operations, as reported, before interest, tax, and adjusted by removing non-cash items, including stock-based compensation expense, depreciation, and further adjusted to remove integration and restructuring related costs, as well as upfront costs required to open a retail store. Management believes Adjusted EBITDA is a useful financial metric to assess its operating performance on a cash adjusted basis before the impact of non-cash items and acquisition related costs. Adjusted EBITDA is a non-IFRS financial measure that does not have any standardized meaning and therefore may not be comparable to similar measures presented by other issuers.

Subsequent Events

On July 15, 2019 the Company entered into a conditional share purchase agreement as previously announced, to acquire 19.9% of Sicamous Trading Company Incorporated (“STC“). Pursuant to the share purchase agreement, the Company will acquire 199,000 common shares in the capital of STC, being 19.9% of the issued and outstanding shares in the capital of STC, in exchange for $200,000, payable by the issuance of common shares of the Company at a price of $0.53 per share.

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