The Supreme Cannabis Company, Inc. (“Supreme Cannabis” or the “Company”) (TSX: FIRE) (OTCQX: SPRWF) (FRA: 53S1) today announced its financial and operating results for the three and nine months ended March 31, 2020.
“In our third quarter, we made significant progress towards our goal of improving the Company’s cost structure while creating opportunities for near-term revenue growth. Although much of this progress is not reflected in our Q3 financial results, we did begin to see the early impacts of our rightsizing and revenue generation efforts,” said Colin Moore who recently served as interim President and CEO of Supreme Cannabis. “Excluding restructuring charges, we reduced our operating expenses by 23% quarter-over-quarter and improved our speed to market introducing 10 new SKUs since the beginning of calendar year 2020. We expect to continue to see improvements to our cost structure as we realize further production efficiencies at our completed facilities and anticipate improved recreational sales with our enhanced product portfolio. In my current short-term role as an advisor to our new CEO, Beena Goldenberg, and in my position as a director, I look forward to supporting the Company as it continues to progress toward near-term profitability.”
As previously announced on April 27, 2020, Beena Goldenberg, former CEO of Hain-Celestial Canada, a leading organic and natural products company, was appointed as the Company’s new President and CEO to drive Supreme Cannabis’ long-term profitable growth as a premium cannabis CPG company.
“In my short time with the Company, I have quickly come to appreciate our distinct advantages and near-term opportunities; we have completed infrastructure at the cusp of being optimized, a curated portfolio of brands that are gaining traction through an advanced distribution strategy and a high-quality offering of products that is growing every day,” said Beena Goldenberg, President and CEO of Supreme Cannabis. “In the remainder of fiscal 2020 and in fiscal 2021, I will implement and quickly action changes that capitalize on these existing advantages and create opportunities to showcase our strengths. I see a clear path to increased revenue generation and profitable growth that will benefit our investors, consumers and employees.”
Select Financial and Operational Results.
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Financial Highlights (in 000’s $)
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Q3 2020
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Q2 2020
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Q3 2019
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Gross revenue
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11,022
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10,261
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10,331
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Net revenue
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9,725
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9,059
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9,970
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Gross margin, excluding fair value items
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(1,473)
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2,633
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5,238
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Gross margin
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448
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10,828
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3,507
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Operating expenses
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17,450
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19,755
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10,322
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Impairment on assets
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57,519
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–
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–
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Net loss
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(72,328)
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(17,315)
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(7,139)
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Adjusted EBITDA
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(11,679)
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(10,439)
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(1,598)
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Cash
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23,128
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48,705
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75,025
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Revenue
Gross Revenue increased year-over-year from $10.3 million in Q3 2019 to $11.0 million in Q3 2020 and increased quarter-over-quarter from $10.3 million in Q2 2020. Net revenue decreased marginally year-over-year from $10.0 million in Q3 2019 to $9.7 million in Q3 2020 and increased quarter-over-quarter from $9.1 million in Q2 2020. In Q3 2020, net revenue was impacted by actual and expected sales discounts and return provisions of $1.3 million, compared to $0.5 million in Q2 2020. The year-over-year decrease in net revenue was partially offset by an approximately 245% increase in revenues from recreational cannabis sales during the three months ended March 31, 2020.
In Q3 2020, recreational net revenue reached $5.7 million, remaining flat quarter-over-quarter. Quarter-over-quarter, a 26% increase in recreational sales volumes was offset by a 20% decrease to the recreational average selling price from $5.39 per gram in Q2 2020 to $4.32 per gram in Q3 2020. In the quarter, the Company’s recreational average selling price was impacted by the introduction of new cannabis products at lower price points that address new consumer segments, as well as planned price reductions to cannabis flower products in certain Canadian Provinces as the recreational market competition matures. Lower priced products introduced under new brands like sugarleaf, utilize cannabis inputs that are not designated for 7ACRES branded products and thus drive incremental revenue.
In Q3 2020, wholesale net revenue reached $4.0 million and accounted for 41% of net revenue compared to 37% in Q2 2020. The Company’s medical cannabis export to Israel under the Truverra brand is included in the wholesale sales segment and accounted for the quarter-over-quarter increase in wholesale revenue. Despite market-wide wholesale price compression, Supreme Cannabis continued to achieve favourable wholesale average pricing of $3.36 per gram in Q3 2020, a quarter-over-quarter increase from $3.26 in Q2 2020. While Supreme Cannabis advances its transition to a CPG focused business, given delays to the cannabis retail rollout in Canada, the Company will continue to opportunistically supplement recreational sales with attractive domestic wholesale and international medical transactions.
