(Image via Aleafia Health Inc. Click image to enlarge)
It’s easy for a company to
say that it’s growing. Seasoned investors know that actually
demonstrating that growth with solid results and a concrete path forward is where the money is at.
On Wednesday,
Aleafia Health Inc.(T.ALEF, ALEAF, Forum) demonstrated that growth. The vertically integrated cannabis operator
reported its financial results for the second fiscal quarter of 2019 on Wednesday. They include record revenues of $3.95 million, increased registered patients to 8,861 from 6,959, and a stronger balance sheet with approximately $58 million cash on hand. In doing so, the Company substantially beat analysts adjusted EBITDA estimates.
Digging deeper into the results, the story of the Company’s Q2 2019 is significant quarter over quarter growth. Those record revenues were an increase of 159% over the previous quarter, with
sales of cannabis revenue alone increasing by 377% ($2.5 million from $0.5 million). Gross profit jumped to $2.9 million from a loss of $0.1 million in Q1 2019.
Many long-term shareholders will also be thrilled to see Aleafia Health continued to reduce expenses and stay on-track towards profitability.
Total expenses were down 41% from the previous quarter to approximately $12.1 million, and the Company’s adjusted EBITDA improved by 43% to a loss of $2.7 million.
Aleafia Health’s CEO, Geoffrey Benic, commented on the Company’s strong quarter over quarter growth:
“The foundation that our team has built over the last year is now beginning to prove its worth as we report marked improvements with record revenue generated, significant cost reductions and a growing base of active, registered medical cannabis patients. And despite these substantial improvements, there remains a tremendous amount of room to grow. Leveraging our global distribution platform, brands and data-driven production expertise requires a significant increase in cannabis supply and extraction capacity. This has been the strategy we have executed on since day one and 2019 will see this objective become reality.”
The biggest takeaway from the results, as well as CEO Benic’s statement, is that Aleafia Health ticked all the boxes for a growing cannabis operator. The focus now turns to how the Company can keep that momentum going and push profitability.
(Image via Aleafia Health Inc. Click image to enlarge)
A big boost should come in the form of a sizeable harvest from Aleafia Health’s new 1.1 million ft
2 outdoor growing facility in Port Perry, Ontario.
Stockhouse previously covered the Company’s facility, the first legal large-scale outdoor crop in Canada. A new drying building is also being constructed at the facility, expected to be ready in time for the outdoor harvest.
The Company’s existing processing facility in Paris, Ontario is undergoing further expansion as well in anticipation of the rollout of Cannabis 2.0. And If that’s not enough production capacity, an additional cultivation license is under review by Health Canada for an automated greenhouse in Grimsby, Ontario.
As production continues to ramp up, Aleafia Health’s management has been busy expanding its sales avenues in anticipation, especially on the international front. The Company secured export and import permits for its products to be
distributed in Australia through partner
CannaPacific, of which it owns a 10% stake. Aleafia Health also
entered the lucrative German medical market via subsidiary
Emblem Cannabis Corporation expanding a joint venture with
Acnos Pharma GmbH, which has access to approximately 20,000 pharmacies and 110 distribution centres in the country.
On the Canadian retail front, the Company is already well positioned ahead of the Province of Ontario starting to roll out new cannabis stores. Aleafia Health owns a stake in the joint-venture
OnePlant Corp. which entered into agreements with one of the cannabis retail license operators in Ontario, and it also has a supply agreement with cannabis retailer
Fire & Flower (T.FAF, FFLWF, Forum).
Potentially the biggest avenue for growth, however, is in continuing to streamline operations. Cutting down expenses by over 40% was a big step forward, and Aleafia Health has indicated that further refinement is a priority. Equally important is growing the number of registered medical patients, a reliable revenue stream that grew at a rate of more than 1,000 new patients/month.
All-in-all, it’s no wonder that Aleafia Health managed to improve quarterly results so significantly when you consider the breadth of the Company’s growth plans. The seeds that are being sowed show investors that everything is on the right track, and are a major reason why Aleafia Health was able to
recently raise $40 million in a public offering.
It’s too early to say how many of the seeds that Aleafia Health planted will bloom with profit. But given how well the Company performed this quarter in carrying out its strategy, it’s safe to bet that it will be able to deliver a bountiful harvest.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing. Fire & Flower is also a client of Stockhouse Publishing.