BZAM Ltd., a leading Canadian cannabis producer, is pleased to announce its financial and operating results for the three months ended March 31, 2023 (“Q1 2023”). These filings are available for review on the Company’s SEDAR profile at www.sedar.com. All financial information is provided in Canadian dollars except where otherwise indicated.
Q1 2023 Highlights:
- Achieved record quarterly gross revenues of $35.0 million for Q1 2023, an increase of 41% quarter-over-quarter (Q1 2023 vs. Q4 2022);
- Achieved record quarterly net revenues of $24.1 million for Q1 2023, an increase of 40% quarter-over-quarter (Q1 2023 vs. Q4 2022);
- Expanded market share to be ranked as the 6th largest producer in Canada according to Hifyre;
- Reduced adjusted selling, general and administrative expenses (“SG&A”) to 43% of sales, down from 59% Q4 2022.
Management Commentary
Matt Milich, CEO of the Company, stated: “We delivered strong net revenue growth in Q1 2023, from both the full impact of our November merger and the Company’s organic sales growth. Further to the progress we made in Q1 2023, we continue to execute on our plans to improve margin and reduce SG&A, including the headcount rationalization and cost savings measures we have just implemented this month, which we expect to generate about $2.5M in annual savings across both cost of goods sold and SG&A.”
“We are looking forward to a robust second half of the year. We continue to leverage our industry leading lab and innovation folks, with the launch of over 20 new products across Canada in the next six months. And, we continue to build momentum in the export market, having received our EU GMP certification earlier this month, we are executing on distribution agreements in Germany and the UK – with branded products expected to land in the UK market by Q4 this year.”
Q1 2023 Financial Highlights:
|
Select Key Financial Metrics |
Q1 2023 |
Q4 2022 |
% Change |
|
Gross Revenue |
34,970 |
24,789 |
41 % |
|
Net Revenue |
24,097 |
17,227 |
40 % |
|
Total Cost of Sales |
21,138 |
24,380 |
(13 %) |
|
Gross Profit/(Loss) |
2,959 |
(7,153) |
141 % |
|
Adjusted SG&A (1) |
10,436 |
10,084 |
3 % |
|
Adjusted SG&A as a % of Net Revenue(1) |
43 % |
59 % |
(26 %) |
|
Adjusted EBITDA (1) |
(3,904) |
(6,828) |
43 % |
|
Adjusted EBITDA as a % of Net Revenue(1) |
(16 %) |
(40 %) |
(59 %) |
|
(1) Adjusted SG&A and Adjusted EBITDA are non-IFRS financial measures not defined by and do not have any standardized meaning under IFRS; please refer to “Non-IFRS Financial Measures” in this press release for more information. |
Gross and Net Revenue: The increase in gross revenue quarter-over-quarter was primarily driven by the dramatic growth in the Company’s brand and product portfolio as a result of the merger between BZAM Holdings Ltd. and The Green Organic Dutchman Holdings Ltd. in November 2022 (the “November Merger”), as well as organic sales growth and increased demand for products under the TGOD and Highly Dutch brands. Following their transition to the Company’s inhouse sales team, Highly Dutch and TGOD sales increased by 22% and 33% from Q4 2022, respectively.
Gross Margin/Profit: Overall gross margin for Q1 was 12%, which represents an increase in gross profit of 141% quarter-over-quarter as a result of increased revenue resulting in better cost absorption and reduced inventory provisions in the quarter.
SG&A: Achieved an adjusted SG&A (excluding one-time non-recurring costs) of 43% of sales in Q1 2023, down from 59% in Q4 2023. This was primarily as the result of increasing revenues while driving costs down by reducing headcount, renegotiating service level agreements with its respective vendors, and maintaining cost discipline in line with corporate objectives.
Operational Highlights & Outlook:
The Company is focused on improving operating cash conversion from streamlining operations, continuing to implement cost containment initiatives, and continuing the evolution of automation. The Company believes it can continue to increase its topline revenue, improve margins and generate positive cash flow as a result of the synergistic impacts of the November Merger.
During the first quarter, the Company:
- Expanded its recreational market share to 5.2% in March 2023 from 2.0% in March 2022, as per Hifyre data;
- Transitioned Wyld production to the Company’s Pitt Meadows Facility and ceased all production at the Puslinch Facility in readiness for its sale. The Company expects to complete that sale within the next 12 months;
- Progressed negotiations with prospective buyers for the Company’s Maple Ridge Facility. The Company expects to receive gross proceeds of $3 to $4 million for the sale.
Following quarter end, on May 11, 2023, the Company announced that its subsidiary, The Green Organic Dutchman Ltd., received EU-GMP certification for its facility in Ancaster, Ontario. This certification permits the Company to export certain medicinal cannabis products to numerous global markets, and allows the Company to execute on existing strategic distribution agreements that were established in anticipation of the certification, including agreements in Germany and the United Kingdom.
On May 29, 2023, the Company received a waiver with respect to the EBITDA financial covenant, requiring achievement of positive EBITDA (as defined by the lender), under the Fourth Amendment for its Revolver Loan. Under the waiver, the effective date of the requirement to achieve positive EBITDA was moved from April 30, 2023 to July 31, 2023.
About BZAM Ltd.
BZAM Ltd. is a leading Canadian cannabis producer with a focus on branded consumer goods, innovation, quality, consistency, integrity, sustainability and transparency. The BZAM family includes core brands BZAM™, TGOD™, ness™, Highly Dutch Organic™, TABLE TOP™, and partner brands Dunn Cannabis, FRESH and Wyld. BZAM operates facilities in BC, Alberta, Ontario and Quebec, as well as retail stores in Winnipeg, Manitoba and Regina, Saskatchewan.
