Le Lézard
Classified in: Business
Subjects: ERN, MAT

Zenabis Announces Fourth Quarter and Year End 2019 Financial Results


2019 gross revenue grew 870% to $72.8 million from $7.5 million in 2018
Q4 2019 net cannabis revenue increased 52.4% to $10.8 million from $7.1 million in Q3 2019
2019 gross margin on cannabis net revenue of 46.9%

VANCOUVER, March 30, 2020 /CNW/ - Zenabis Global Inc. (TSX:ZENA) ("Zenabis" or the "Company") today announced its financial results for the fourth quarter and fiscal year ended December 31, 2019. All amounts, unless specified otherwise, are expressed in Canadian dollars.

Kevin Coft, Chief Executive Officer of Zenabis, stated, "2019 was a transformative year for Zenabis with the substantial completion of the Company's facility build-out.  In addition, the Company achieved significant growth in revenue throughout the year and in particular, in the fourth quarter with 49% quarter-over-quarter revenue growth. I am pleased and thankful for the team's efforts and focus on delivering on our construction and sales results. Zenabis is now a significant licensed producer with Zenabis Atholville being one of the largest indoor facilities in Canada. Although the Canadian recreational market had its challenges, we believe that the continued growth in the Canadian cannabis market remains positive.  For 2020, the Company has pivoted from a facility construction focus to focussing on operational excellence as a consumer packaged goods company.  With significant capital expenditures behind us as well as recently announced cost reduction measures and opportunities to realize additional efficiencies, we feel confident that 2020 will be successful year for Zenabis."

Fiscal 2019 Highlighted Financial Results

Fourth Quarter 2019 Highlighted Financial Results

Fourth Quarter Developments

Selected Financial Data

The following selected financial data with respect to the Company's financial condition and results of operations have been derived from the Consolidated Financial Statements of the Company for the three and twelve months ended December 31, 2019 and 2018, prepared in accordance with IFRS. The selected financial data should be read in conjunction with the Consolidated Financial Statements.

Condensed Statement of Net Loss

For the three months ended


For the twelve months ended



Q4 | 2019


Q4 | 2018


%
Change


Q4 | 2019


Q4 | 2018


%
Change

Financial Results




(iii , iv)






(iii , iv)



Gross revenue


$

20,323,043


$

3,841,445


429


$

72,500,192


$

7,506,224


866

Net revenue

(i)

17,896,601


3,403,089


426


66,505,219


6,985,756


852

Gross margin before FV adjustment


5,441,426


1,710,273


218


22,762,775


2,454,037


828

Operating expenses


52,676,640


12,664,651


316


109,358,526


23,417,310


367

Operating loss


(43,817,16)


(8,543,407)


413


(62,995,957)


(16,120,579)


291

Other (expense) income


(61,968,126)


(16,254,109)


281


(71,588,057)


(16,314,212)


339

Net loss


(98,714,311)


(24,884,485)


297


(127,049,793)


(32,521,760)


291

Adjusted EBITDA

(ii)

$

(10,433,566)


$

(5,947,942)


75


$

(32,878,141)


$

(13,758,227)


139

(i)

Net revenue represents our total gross revenue exclusive of excise taxes levied by the Canada Revenue Agency ("CRA") on the sale of medical and recreational cannabis products effective October 17, 2018.

(ii)

Refer to the "Non-GAAP Financial Measures" section for reconciliation to the IFRS equivalent.

(iii)

Due to the accounting presentation resulting from the RTO, no comparable information is presented for the Propagation and Other segments. For prior period information please refer to the financial statements previously filed by Bevo Agro Inc. on SEDAR.

(iv)

No meaningful comparison can be drawn between 2019 periods and corresponding periods in 2018 due to the fundamental change in the nature of the Cannabis operations (moving from limited medical production to large scale commercial production for adult use recreational and medical markets). 

 

Summary Fourth Quarter 2019 Financial Results

Cannabis Segment

Cannabis net revenue increased to $10.6 million in Q4 2019 compared to $7.1 million during Q3 2019 and $3.4 million in Q4 2018. The Company saw increases in both consumer and wholesale bulk revenues accompanied with a significant increase in overall kg of cannabis product sold. The Company was able to realize increases in revenue even with downward pressures on pricing in the adult-use recreational market as well as due to lower per gram revenue from wholesale bulk sales due to increasing demand for the Company's products and the expansion of sales of value-added products such as pre-rolls.

During Q4, the Company completed construction and licensing of the Atholville Facility with entering steady state production at the end of the quarter. By entering steady state production, the Company will be able to focus on overall process and production efficiencies in order to realize cost optimization and reductions in the per gram cost to cultivate.

In Q4 the Company saw a reduction in realized gross margin before fair value adjustment to 31.6% from 51.1% in the prior quarter and 50.2% in Q4 2018. This reduction is due largely to the increase wholesale bulk sales as a percentage of overall sales volume as well as the downward pressure on adult-use recreational market product pricing. Given the increasingly competitive pricing in the overall cannabis market the Company has focused on overall cost reductions and production efficiencies going into 2020 in order to reduce the per gram cost to cultivate without impacting our ability to produce high quality cannabis products.

Propagation Segment

The Propagation segment achieved net revenues of $7.0 million in Q4 2019 and a gross margin before fair value adjustment of $2.6 million or 37.4% of revenue compared to net revenue of $4.5 million and gross margin before fair value adjustment of $1.1 million or 25.1% of revenue in Q3 2019.  Results from Propagation continue to be positive, with no interruption to existing Propagation customers during the conversion of greenhouses from vegetable and flower propagation to cannabis cultivation. The Company's Propagation operating results are seasonal, driven by the varying levels of activity in the growing cycles of the vegetable greenhouse crops, the bedding plant and flower seasons, as well as the timing of customer orders, the varying cycles of the greenhouse vegetable industry and the seasonality of the customer's planting season, with the majority of revenue typically recorded in the second quarter of the year.

Outlook

Zenabis believes that the Canadian recreational market is positioned for continued growth in 2020 with additional retail store openings planned for Ontario, British Columbia and other provinces. The legalization of edible and derivative products is also expected to significantly expand the Canadian adult-use recreational market.

Zenabis has initially focused on two product categories for the recently legalized derivative products: vaporizers and beverages. Initial shipments of vaporizer products occurred in Q1 2020 and has continued to supply its cannabis concentrates in the form of vaporizing cartridges designed for use in PAX Labs Inc.'s Era vaporizing devices. Further, Zenabis remains on track to launch cannabis-infused beverages in Q2 2020 with its initial launch of cannabis-infused sparkling water beverages.

During 2020 the Company expanded its product offerings and brands to meet the evolving consumer demand. The Company has continued to develop and produce in demand genetic strains as well as focusing on higher THC products which are being sought after by consumers.

In Q3 2020 the Company launched Re-Up, a high value, low cost cannabis brand. Under the Re-Up brand, the Company has provided various cannabis products to consumers at a competitive price. Since initial launching in New Brunswick the Company has expanded distribution channels of this brand to include Ontario, Alberta, British Columbia and Quebec among other provinces.

The Company believes that persistent competition from the low-cost illicit market, as well as new supply from competitor LPs as their facilities reach full production, is likely to result in declines in the wholesale price of cannabis in 2020 and beyond. Zenabis believes it is well-positioned to remain competitive, producing large-scale and high-quality products at a relatively low cost.

Zenabis is focused on achieving and maintaining operational excellence and becoming cash flow positive in 2020. This means a consistent and active review of our operational processes, focusing on continuing to drive down costs and optimizing procedures and expenditures in our supply chain, and to also work closely with our customers to ensure our production is optimized to the market demands of the Canadian consumer. As an example of the various cost efficiency initiatives underway, in Q1 2020, Zenabis rightsized the Company's workforce by reducing the size of the Vancouver head office and its facilities which has resulted in a cost reduction of approximately $2 million per quarter.  Additionally, construction activities at the Company's various facilities has been largely completed as have ongoing material capital expenditures.  The Company continues to aggressively manage its capital allocation decisions and will be guided by market conditions and demand in any and all capital expenditures.

Non-GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA is not a recognized, defined, or standardized measure under IFRS and may not be compared to similar measures presented by other issuers. Adjusted EBITDA is a metric used by management, calculated as net income (loss) before interest expense; finance and investment income; gain (loss) on revaluation of derivative liability; gain (loss) on sale of assets; loss from event; insurance proceeds; current income tax expense; deferred income tax expense (recovery); depreciation and amortization; share-based compensation; acquisition costs; impairment of inventory, plant property and equipment, and intangible assets and goodwill; and the fair value adjustment to biological assets and inventory. Management believes adjusted EBITDA is a useful financial metric to assess the Company's operating performance before the impact of non-cash items and acquisition related activities. The following is a reconciliation of adjusted EBITDA to net loss, being the closest GAAP financial measure, for the periods outlined:


For the three months ended


For the twelve months ended


Q4 | 2019


Q4 | 2018


Q4 | 2019


Q4 | 2018

Net loss

$

(98,714,311)


$

(24,884,485)


$

(127,049,793)


$

(32,521,760)

Changes in fair value of inventory sold

18,014,038


1,734,445


38,191,060


2,483,021

Unrealized gain on changes in fair value of








biological assets

(21,432,091)


(4,145,416)


(61,790,854)


(7,325,715)

Acquisition costs

?


74,900


4,398,646


74,900

Share-based compensation

5,995,345


4,600,719


12,220,958


6,003,105

Depreciation and amortization

2,090,304


330,817


8,382,007


1,127,041

(Gain) loss on revaluation of derivative








liabilities

(22,993)


13,131,068


(3,860,426)


12,942,773

Finance and investment expense (income)

316,621


1,924,319


(527,156)


1,625,959

Interest (income) expense

(335,248)


1,193,367


12,658,330


1,742,975

(Gain) Loss on sale of assets

(55,417)


5,355


157,909


2,505

Loss due to event

982,560


?


5,253,045


?

Insurance proceeds

(520,526)


?


(3,697,062)


?

Foreign exchange (gain) loss

122,880


?


123,168


?

Impairment of inventory

874,734


?


874,734


?

Impairment of plant, property and equipment

27,841,265


?


27,841,265


?

Impairment of intangible assets and goodwill

61,480,249


?


61,480,249


?

Current income tax (recovery) expense

(126,856)


86,969


798,750


86,969

Deferred income tax (recovery) expense

(6,944,120)


?


(8,332,971)


?









Adjusted EBITDA

$

(10,433,566)


$

(5,947,942)


$

(32,878,141)


$

(13,758,227)

 

About Zenabis

Zenabis is a significant Canadian licensed cultivator of medical and recreational cannabis, and a propagator and cultivator of floral and vegetable products. Zenabis employs staff coast-to-coast, across facilities in Atholville, New Brunswick; Delta, Aldergrove, Pitt Meadows and Langley, British Columbia; and Stellarton, Nova Scotia. Zenabis currently has 96,400 kg of licensed cannabis cultivation space across four licensed facilities. Zenabis has 3.5 million square feet of total facility space dedicated to a mix of cannabis production and cultivation and its propagation and floral business.

Zenabis expects its Zenabis Atholville, Zenabis Stellarton and Zenabis Langley facilities to be in steady state production in 2020. The Zenabis brand name is used in the cannabis medical market, the Namaste, Blazery, and Re-Up brand names are used in the cannabis adult-use recreational market, and the True Büch brand name is used for Zenabis' kombucha products.

Forward Looking Information

This news release contains statements that may constitute "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking information may include, among others, statements regarding the future plans, costs, objectives or performance of Zenabis, or the assumptions underlying any of the foregoing. In this news release, words such as "may", "would", "could", "will", "likely", "believe", "expect", "anticipate", "intend", "plan", "estimate" and similar words and the negative form thereof are used to identify forward-looking statements. In this news release, forward-looking statements relate, among other things, to: the Company's organizational and strategic review and forecast of demand; the Company's focus on aligning its resources to meet the needs of consumers; the expected timing and completion of current and planned conversion, expansion and optimization of our facilities, including Zenabis Langley; our plans for Zenabis Delta; the expected submissions of license amendment applications and site evidence packages; the licensing of our facilities and projected timing thereof; our expectations for our extraction projects, equipment and capacity; our expectations for processing output; our expectations regarding our packaging equipment; and the expected content of future operational updates. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether, or the times at or by which, such future performance will be achieved. No assurance can be given that any events anticipated by the forward-looking information will transpire or occur. Forward-looking information is based on information available at the time and/or management's good-faith belief with respect to future events and are subject to known or unknown risks, uncertainties, assumptions and other unpredictable factors, many of which are beyond Zenabis' control. These risks, uncertainties and assumptions include, but are not limited to, those described in the shelf prospectus dated April 9, 2019, a copy of which is available on SEDAR at www.sedar.com and could cause actual events or results to differ materially from those projected in any forward-looking statements. Furthermore, any forward-looking information with respect to available space for cannabis production is subject to the qualification that management of Zenabis may decide not to use all available space for cannabis production, and the assumptions that any construction or conversion would not be cost prohibitive, required permits will be obtained and the labour, materials and equipment necessary to complete such construction or conversion will be available. Forward-looking statements or information involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements or information contained in this news release. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Zenabis does not intend, nor undertake any obligation, to update or revise any forward-looking information contained in this news release to reflect subsequent information, events or circumstances or otherwise, except if required by applicable laws

For more information, visit: https://www.zenabis.com.

SOURCE Zenabis Global Inc.


These press releases may also interest you

at 06:35
Apogee Enterprises, Inc. will report its fiscal 2024 fourth quarter and full-year results on Thursday, April 18, 2024, before the market opens. The company will also host a conference call to discuss its financial results. This conference call will...

at 06:35
Metals Acquisition Limited ARBN 671 963 198 , a private limited company incorporated under the laws of Jersey, Channel Islands ("MAC" or the "Company") announces its Annual Report for the financial year ended 31 December 2023 ("2023 Annual Report")....

at 06:31
Hangzhou Tigermed Consulting Co., Ltd. ("Tigermed" or the "company") (Stock code: 300347.SZ / 3347.HK), a leading global provider of integrated research and development solutions for biopharmaceutical and medical device industry, announced its annual...

at 06:30
Verde AgriTech Ltd ("Verde" or the "Company") announces its financial results for the full year ended December 31, 2023 ("FY 2023") and the fourth quarter 2023 ("Q4 2023"), as audited by Ernst & Young ("EY"). The FY 2023 audited results were...

at 06:30
Hut 8 Corp. ("Hut 8" or the "Company"), a leading, vertically integrated operator of large-scale energy infrastructure and one of North America's largest Bitcoin miners, today announced its financial results for the six months ended...

at 06:30
Three clinical programs present diversified opportunities in and outside the existing anti-VEGF market and are being progressed toward Phase 3 value inflection points  New Phase 3 GLOW2 study of tarcocimab in diabetic retinopathy actively...



News published on and distributed by: