Aleafia Health Reports 2021 First Quarter Results

Published: May 12, 2021

Aleafia Health Reports 2021 First Quarter Results

Aleafia Health Inc. reported its financial results for the three months ended March 31, 2021 (“Q1 2021”).

“This quarter saw us achieve important executional breakthroughs as we realized the exponential increase of our cannabis product portfolio. Likewise, as we benefit from greater scale, we are demonstrating substantial improvements in the profitability of our core adult-use and medical cannabis product sales, contrasting with the broader industry trend of price and margin compression,” said Aleafia Health CEO Geoffrey Benic.

“To further leverage product portfolio expansion, we have only just begun the deployment of our highly differentiated medical cannabis ecosystem through the trailblazing exclusive agreement with Unifor, Canada’s largest private sector union. The ability to service a captive audience of union members who receive insurance coverage for medical cannabis is an important catalyst. We believe that this sets the table for a strong 2021, driven by repeatable, profitable sales in the medical, adult-use and international markets.

Condensed Income (Loss) Statement

($,000s) Three months ended
Mar 31, 2021 Mar 31, 2020
Net revenue 7,066 14,596
Cannabis net revenue(1)(3) 6,245 13,726
Adjusted gross profit before fair value (“FV”) adjustments on net cannabis revenue 3,702 11,674
Adjusted gross margin before FV adjustments on net cannabis revenue(1) 59% 85%
Selling, general & administrative expenses (“SG&A”) 8,350 6,104
Gross profit 2,364 5,857
Adjusted EBITDA(1)(2) (3,033) 6,762
Net loss (11,248) (6,156)
1. See “Cautionary Statements Regarding Certain non-IFRS Measures” section of associated MD&A for term definition.
2. See “Adjusted EBITDA” section of associated MD&A for reconciliation to IFRS equivalent.
3. See “Revenue” section of associated MD&A for reconciliation to IFRS equivalent.

Cannabis Operational Results

($,000s, except operational results) Three months ended
Mar 31, 2021 Mar 31, 2020 % change
Cannabis net revenue(1)(2) 6,245 13,726 (55%)
Net medical cannabis revenue(1)(2) 2,657 1,365 95%
Net adult-use cannabis revenue(1)(2) 1,722 709 143%
Net bulk wholesale cannabis revenue(1)(2) 1,866 11,653 (84%)
Operational Results – Cannabis      
Active, registered patients 17,637 10,983 61%
Average net selling price per gram of medical cannabis(1) $8.46 $8.04 5%
Average net selling price per gram of adult-use cannabis(1) $4.89 $6.88 (29%)
Average net selling price per gram of bulk wholesale cannabis(1) $0.75 $2.47 (70%)
Kilograms sold 3,155 4,992 (37%)
1. See “Cautionary Statements Regarding Certain non-IFRS Measures” section of associated MD&A for term definition.
2. See “Revenue” section of associated MD&A for reconciliation to IFRS equivalent.

Financial Highlights

  • Medical cannabis net revenue was $2.7 million, an increase of 95% over the prior year’s quarter, in line with the previous quarter, and the Company’s best Canadian medical cannabis revenue reported to date.
    • Active registered patients increased to 17,637, an increase of 61% over the prior year’s quarter
    • Medical cannabis adjusted gross margin before FV adjustments improved for the second consecutive quarter to 53%
    • Revenue per gram equivalent sold improved for the fourth consecutive quarter to $8.46
  • Adult-use cannabis net revenue was $1.7 million, an increase of 22% and 143% over the previous quarter and prior year’s quarter respectively
    • Adult-use cannabis adjusted gross margin before FV adjustments improved substantially to 56%, from 31% and 30% in the previous quarter and prior year’s quarter respectively
    • Adult-use cannabis revenue in the first 41 days of Q2 2021 has surpassed total adult-use cannabis revenue for Q1 2021
  • As previously disclosed in the Company’s fiscal year 2020 MD&A, domestic wholesale was expected to decline, relative to Q4 2020.
  • Repayment of $25.0 million of convertible debt reduces the Company’s total debt by 43%

Product & Operational Highlights

  • Sublingual Strips: The category leading Kin Slips cannabis-infused sublingual strips, launched in Q4 2020 in the medical and adult-use markets. Driven by strong consumer demand, Kin Slips were the Company’s top-selling adult-use product category during the quarter, and a key driver of improved adult-use adjusted gross margin.
  • Omega CBD Soft Gels: Subsequent to the reporting period, the Company launched the trailblazing Omega CBD Soft Gels, which feature full-spectrum, single strain CBD extract, and are the first Canadian cannabis products to be suspended in fish oil containing omega-3.
  • Confectionary Edibles: In March 2021, the Company released THC soft chews, its first cannabis edible product. The initial launch features two SKUs, each with two five milligram chews per package. The Company is currently considering a soft chews line extension to include additional flavours, and a CBD dominant offering.
  • High Potency CBD Oil: In December, the Company launched a high potency cannabis oil, CBD 50, with 50 mg per millilitre of CBD oil, provides greater consumer and patient convenience and has more than twice the potency of traditional high CBD oils.
  • Dried Flower at Scale: Subsequent to the reporting period, leveraging the greater scale of cultivation capacity, the Company launched its high frequency brand Divvy, with new larger format SKUs, including a pre-roll line extension with 12 pre-rolls each of 0.35 grams.
  • Unifor Program and Ford Motor Company of Canada: Entered into an exclusive 10-year agreement with Unifor, Canada’s largest private sector union, to support members securing medical cannabis insurance coverage. Recently, the Company launched the program to employees of the Ford Motor Company of Canada, with the first patients entering the program in May 2021 and purchasing cannabis through Aleafia Health’s medical subsidiary, Emblem Cannabis Corporation. The Company is also in discussions with a number of other large employers to offer similar cannabis wellness products and services to their members through insurance coverage.
  • Distribution Centre Licence: On February 12, 2021, Emblem received a Health Canada Processing Licence for its new Distribution Centre. Located minutes from Toronto Pearson International Airport, the DC greatly strengthens the Company’s downstream supply chain, allowing for expansion of same day delivery service, and eventual direct-to-retailer cannabis distribution.

Aleafia Health is a vertically integrated and federally licensed Canadian cannabis company offering cannabis health and wellness services and products in Canada and in international markets. The Company operates medical clinics, education centres and production facilities for the production and sale of cannabis.

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