VAUGHAN, ON, March 28, 2019 /CNW/ - CannTrust Holdings
Inc. ("CannTrust" or the "Company", TSX:TRST, NYSE:CTST) today
released its financial results for the fourth quarter and year
ended December 31, 2018.
"The CannTrust team has delivered remarkable growth in the
fourth quarter of 2018. We achieved record sales volume, record
revenue and our medical patient count continues to increase,
reflecting the quality of our products and customer service," said
Peter Aceto, Chief Executive
Officer.
"We expect the trajectory of revenue growth to continue in 2019
as we bring additional capacity online through our Phase 2
expansion, realize the potential of investments we have made into
training and crop yield optimization, implement targeted price
increases and distribute our products to more and more consumers.
Additionally, CannTrust expects to take bold action to achieve
leadership in growing cannabis outdoors. We have entered into
Letters of Intent to secure approximately 200 acres of land, which
we estimate will add an additional 100,000kg to 200,000kg of
production in 2020, subject to regulatory approvals. In combination
with our Phase 3 expansion, we estimate our annual production
capacity target to be between 200,000kg and 300,000kg. We also plan
to become an early-mover in vaporization products and develop
further partnerships to bring innovative products to market. These
initiatives are the result of thoughtful and calculated work the
Company has performed in assessing its growth strategy. This is
truly a very exciting time for CannTrust," continued Mr. Aceto.
Fourth Quarter 2018 Highlights
- CannTrust reported record revenue of $16.2 million, a 132% increase from the fourth
quarter of 2017.
- Active patient count increased to 58,000, up from 37,000 at the
end of the prior year, an increase of 57%.
- The Company sold 3,407kg of dried cannabis equivalent, a 4.5x
increase from 758kg in the fourth quarter of 2017.
- Cash costs per gram decreased to $2.94 from $5.16 in
the fourth quarter of 2017.
- CannTrust was voted Top Licensed Producer of the year and
received six other service and product awards at the 2018 Canadian
Cannabis Awards.
- The Company closed the purchase of a 19.4 acre property on land
adjacent to its Perpetual Harvest Facility in the Town of Pelham, which will be used to
construct its Phase 3 expansion and bring total production capacity
to 100,000kg per year upon its completion.
Fourth Quarter and Year Ended 2018 Financial
Summary
Selected Information
(CDN $000's, except per share amounts and unless otherwise
noted)
|
|
Three months
ended
|
|
Year
ended
|
|
|
December
31
|
|
December
31
|
|
|
2018
|
2017
|
|
2018
|
2017
|
|
|
$
|
$
|
|
$
|
$
|
Financial
Data
|
|
|
|
|
|
|
Net
revenue
|
|
16,166
|
6,983
|
|
45,645
|
20,698
|
Gross profit before
unrealized gain on changes in
the fair value of biological assets
|
|
5,677
|
2,406
|
|
25,955
|
13,018
|
Gross margin before
unrealized gain on changes in
the fair value of biological assets
|
|
35%
|
34%
|
|
57%
|
63%
|
Net (Loss)
Income
|
|
(25,522)
|
6,253
|
|
(13,554)
|
6,885
|
Earnings per share
(basic)
|
|
(0.26)
|
0.08
|
|
(0.14)
|
0.09
|
Earnings per share
(diluted)
|
(0.26)
|
0.08
|
|
(0.14)
|
0.09
|
Cashflows used in
operations
|
|
(7,977)
|
924
|
|
(20,447)
|
(502)
|
Adjusted
EBITDA(1)
|
|
(8,547)
|
(851)
|
|
(7,181)
|
2,778
|
|
|
|
|
|
|
|
Operating
Statistics:
|
|
|
|
|
|
|
Canadian
Medical
|
|
|
|
|
|
|
Dried cannabis sold
(grams)
|
|
377,920
|
296,200
|
|
1,387,945
|
1,026,870
|
Average Revenue per
gram
|
|
$7.10
|
$8.14
|
|
$8.02
|
$8.31
|
Total dried cannabis
equivalent sold from
extracts (grams)
|
|
1,639,025
|
461,469
|
|
3,984,132
|
1,206,349
|
Average Revenue per
gram of cannabis
equivalent from extract sales
|
|
$4.29
|
$9.34
|
|
$5.76
|
$9.39
|
Wholesale(2)
|
|
|
|
|
|
|
Dried cannabis sold
(grams)
|
|
1,286,093
|
-
|
|
1,724,324
|
-
|
Average Revenue per
gram
|
|
$4.24
|
-
|
|
$4.67
|
-
|
Total dried cannabis
equivalent sold from
extracts (grams)
|
|
103,899
|
-
|
|
154,659
|
-
|
Average Revenue per
gram of cannabis
equivalent from extract sales
|
|
$3.86
|
-
|
|
$5.02
|
-
|
Cost of Sales per
gram sold
|
|
$3.08
|
$6.04
|
|
$2.72
|
$3.44
|
Cash Cost per gram
sold(1)
|
|
$2.94
|
$5.16
|
|
$2.45
|
$2.88
|
Notes:
|
(1) The terms
Adjusted EBITDA, and Cash Cost per gram do not have any
standardized meanings under IFRS and therefore it may not be
comparable to similar measures presented by other companies. A
discussion of Adjusted EBITDA and Cash Cost per gram and a
reconciliation to IFRS measures is contained in CannTrust's
MD&A for the year and fourth quarter ended December 31, 2018
under the section "Non-IFRS Measure and
Reconciliation".
|
(2) Wholesale
revenue includes goods and services sold to international markets,
the Canadian recreational market and to third party Licensed
Producers.
|
Net revenue for the fourth quarter of 2018 increased to
$16.2 million from $7.0 million in the fourth quarter of 2017. The
increase in revenue was attributable to increased sales volumes
primarily due to the continued growth in the Company's medical
patient base and sales derived from the recreational market in
Canada. The growth in sales volume
was partially offset by the absorption of excise taxes on our
medical products beginning in the fourth quarter of 2018, which
impacted revenue by $0.9 million.
Gross profit before changes in fair value of biological assets
increased to $5.7 million in the
fourth quarter of 2018 from $2.4
million in the prior year, reflecting growth in medical and
recreational revenue. Gross margin before fair value changes to
biological assets declined from 69% in the third quarter of 2018 to
35% in the fourth quarter, as a result of absorption of the excise
tax on medical sales, lower pricing on wholesale sales and the
impact of not yet operating at full production capacity during the
quarter.
Adjusted EBITDA declined to a loss of $8.5 million in the fourth quarter of 2018,
compared to a loss in the comparable period of the prior year of
$0.9 million. During the quarter, the
Company made deliberate investments in operating expenses in
support of its growth efforts. Specifically, these investments
included marketing costs to support the launch of four recreational
brands, personnel to advance product innovation and our
international strategy, and costs in preparation of the Company's
listing on the New York Stock Exchange.
As at December 31, 2018, CannTrust
remained in a strong financial position with $72.0 million in cash and short term investments,
and a working capital position of $111.6
million.
Events Subsequent to Year End 2018
- The Company obtained all necessary permits from the
Town of Pelham for the
construction of its 390,000 square foot Phase 3 expansion.
- Greg Guyatt was appointed Chief
Financial Officer.
- The Company's common shares began trading on the New York Stock
Exchange under the ticker symbol "CTST".
- CannTrust was included in the TSX Composite Index.
- Entered into Letters of Intent to secure approximately 200
acres of land through purchase and lease. The Company plans to use
this land for outdoor harvest of cannabis using its proprietary
genetics. These transactions are expected to close in the second
quarter of 2019, subject to customary closing conditions.
- Made capital investments to enhance the Company's extraction
equipment, which the Company believes will triple its annual
capacity.
Outlook
CannTrust expects to continue to make investments in a
disciplined and deliberate manner to position the Company to take
advantage of future opportunities, both domestically and
internationally. The Company continues to invest in people,
process, technology and marketing, and is developing innovative
products for the expected legalization of the edibles market in
Canada later in 2019. These
products include vape pens, beverages and confectionaries.
CannTrust is also making strategic investments into its capacity to
prepare for expected increases in demand for its products. The
Company believes it will be a leader in outdoor growing capability,
which will leverage its proprietary genetics and has the potential
to accelerate the Company's low-cost production advantage.
The completed Phase 2 expansion of the Perpetual Harvest
Facility is expected to increase production capacity to 50,000kg on
an annualized basis. With this increased production capability, the
Company believes revenue will increase significantly in 2019
compared to the 2018 full year results, with revenue growth
accelerating throughout the year starting in the second quarter of
2019. The Company is positioned to receive all necessary regulatory
approvals to support this planned growth. In addition, having
obtained all necessary permits from the Town of Pelham for the construction of its
Phase 3 expansion, the Company continues to expect its Perpetual
Harvest Facility capacity to reach 100,000kg on an annuallized
basis in the second half of 2020.
Driving further capacity enhancement for primarily
extraction-based products, CannTrust's outdoor growing initiatives
are targeted to deliver material future revenue contributions as
early as 2020. The Company estimates the production from this
initiative to result in an additional 100,000kg to 200,000kg of
cannabis in 2020 subject to regulatory approvals.
CannTrust's investments into people, process, technology and
marketing are expected to impact near-term profitability as the
Company continues to scale. These are calculated investments that
the Company expects will result in increasing yields, lower cost
per gram and the advance of the Company's brand and strategic
initiatives. In the first quarter of 2019, adjusted EBITDA is
expected to remain consistent with the fourth quarter of 2018.
Profitability is expected to improve following the full realization
of the increased operational capacity of the Phase 2 expansion. As
the Phase 2 expansion contributes to positive operating leverage,
the Company is targeting a return to profitability. CannTrust
expects that its gross margin before fair value changes to
biological assets should increase throughout 2019 as the Company
increases its production levels and gains production
efficiencies.
Conference Call Details
The Company will hold a conference this morning at 8:00AM ET to discuss the financial results and
provide investors with key business highlights. The call will be
hosted by Peter Aceto, Chief
Executive Officer, and Greg Guyatt,
Chief Financial Officer.
Date: March 28, 2019 │ Time:
8:00AM ET
Participant dial-in: (+1) 416 764 8609 or (+1) 888 390 0605
Conference ID: 41347163
Listen to the webcast:
https://event.on24.com/wcc/r/1959823/EE67F27D426445C606A84C145664F6BD
About CannTrust
CannTrust is a federally regulated licensed producer of medical
and recreational cannabis in Canada, and the 2018 Canadian Cannabis Awards
"Top Licensed Producer of the Year". Founded by pharmacists,
CannTrust brings more than 40 years of pharmaceutical and
healthcare experience to the medical cannabis industry and serves
more than 67,000 medical patients with its dried, extract and
capsule products. The Company operates its 450,000 sq. ft. Niagara
Perpetual Harvest Facility in Pelham,
Ontario, has been permitted to construct another 390,000 sq.
ft. facility in Pelham, and
prepares and packages its product portfolio at its 60,000 sq. ft.
manufacturing centre of excellence in Vaughan, Ontario.
CannTrust is developing nanotechnology to develop new products
in the medical, recreational, beauty, wellness and pet markets. The
Company has established its international footprint through a
strategic partnership with Cannatrek Ltd. in Australia and a joint venture with STENOCARE
in Denmark. The Company has also
partnered with Breakthru Beverage Group through Kindred Canada, for
recreational distribution in Canada. CannTrust is committed to research and
innovation through partnerships with McMaster
University in Ontario and
Gold Coast University in
Australia, which were designed to
contribute to the growing body of evidence-based research regarding
the use and efficacy of cannabis.
For more information, please visit www.canntrust.ca.
Forward Looking Statements
This press release contains "forward-looking information" within
the meaning of Canadian Securities laws and "forward-looking
statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995 and other applicable
United States safe harbor laws and
such statements are based upon CannTrust's current internal
expectations, estimates, projections, assumptions and beliefs and
views of future events. Forward-looking information and
forward-looking statements can be identified by the use of
forward-looking terminology such as "believes", "expect", "likely",
"may", "will", "should", "intend", "anticipate", "potential",
"proposed", "estimate" and other similar words, including negative
and grammatical variations thereof, or statements that certain
events or conditions "may", "would" or "will" happen, or by
discussions of strategy.
The forward-looking information and statements in this news
release are based upon the expectations, estimates, projections,
assumptions and views of future events which management believes to
be reasonable in the circumstances. Forward-looking information and
statements includes estimates, plans, expectations, opinions,
forecasts, projections, targets, guidance or other statements that
are not statements of fact. Forward-looking information and
statements necessarily involve known and unknown risks, including,
without limitation: risks associated with general economic
conditions; adverse industry events; loss of markets; future
legislative and regulatory developments in Canada, the United
States and elsewhere; the cannabis industry
in Canada generally; and, the ability of CannTrust to
implement its business strategies.
Any forward-looking information and statements speak only as of
the date on which they are made, and, except as required by law,
CannTrust does not undertake any obligation to update or revise any
forward-looking information or statements, whether as a result of
new information, future events or otherwise. New factors emerge
from time to time, and it is not possible for CannTrust to predict
all such factors. When considering these forward-looking
information and statements, readers should keep in mind the risk
factors and other cautionary statements in CannTrust's Annual
Information Form dated March 29, 2018 (the "AIF") and
filed with the applicable Canadian securities regulatory
authorities on SEDAR at www.sedar.com and filed as an
exhibit CannTrust's Form 40-F annual report under the United States
Securities Exchange Act of 1934, as amended, with the United States
Securities and Exchange Commission on EDGAR at www.sec.gov. The
risk factors and other factors noted in the AIF could cause actual
events or results to differ materially from those described in any
forward-looking information or statements.
The TSX and NYSE do not accept responsibility for the adequacy
or accuracy of this release.
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SOURCE CannTrust Holdings Inc.