By Meg Flippin, Benzinga
With the demand for high-quality, affordably priced cannabis growing in Canada, Cannara Biotech Inc.'s (OTCMKTS: LOVFF) investments seem to be paying off. The vertically integrated producer of premium-grade cannabis and derivative product offerings has used investment dollars to produce quality cannabis products and increase the number of growing zones. That has resulted in Montreal-based Cannara Biotech reporting record-setting revenue for its first quarter and forecast even more growth to come in 2024.
For the first quarter ending November 30, 2023, Cannara posted net revenue of $19.5 million, an 89% year-over-year increase and net income of $2.1 million, up significantly from $2,954 in the year-ago first quarter. Meanwhile, gross profit before fair value adjustments of $7.9 million was up 98% from the year-ago first quarter and earnings before interest, taxes, depreciation and amortization (EBITDA) of $5.2 million marked a 206% increase. Our first quarter results are continued solid proof of Cannara's strong financial health and strategic approach to business operations, Nicholas Sosiak, CFO of Cannara said when reporting quarterly results. We have seen impressive sales increases and a steady rise in adjusted EBITDA, net income and cash flow from operations, which sets a strong base for the rest of the year.
Quality Cannabis At An Affordable Price
Since launching in 2017, Cannara Biotech has been focused on growing quality cannabis products and bringing them to the masses at an affordable price. The company operates two huge facilities spanning over 1,650,000 square feet in Quebec, where it churns out quality cannabis products en masse using its access to low-priced utilities in the province and lean operational structure to keep costs down. It then passes on those savings to its legions of customers.
During the first quarter, the company produced from nine growing zones out of its Valleyfield Facility with a 10th growing zone added in January. All told, the company has increased its total production to about 33,500 kg of cannabis per year. That should be welcome news to its investors given sales of cannabis products in Canada are projected to grow at a CAGR of 13.4% between 2021 and 2030. Underscoring that demand, Cannara said it sold 1.34 million units across its three flagship brands during the first quarter, up 99% from the 675,000 units sold in the same period a year ago. Quarter-over-quarter units sold were up 11%.
The variety of its product line is also increasing, which could drive sales further in 2024. During the quarter it increased its total national product portfolio of cannabis products by 60% to 155 SKUs from 97. It is innovating in new categories including infused pre-rolls, milled flower and budget-friendly vapes.
Market Share Gains
Along with an increase in sales during the quarter were market share gains, a key metric given its difficult to stand out in the market thanks to climates that make it hard to grow the product, regulatory hurdles and high start-up costs.
In Quebec, Canadas largest market for cannabis, Cannara is the fourth-largest licensed producer, controlling about 8.7% of the market as of the first quarter. In Ontario, it ranks as the ninth top producer and in Alberta, its market share has increased to 2.3% from 1.2% share in the year-earlier first quarter. In British Columbia, it's making inroads, with market share of just under 1%.
The company is still at the beginning of its growth, with only 35% of its production capacity activated, and operates in only five main markets in Canada, resulting in many strategies in Cannaras toolkit to potentially increase its revenues and market share quarter over quarter. Another milestone for Cannara during the first quarter: it completed its first intentional export sale of cannabis product to Israel. Not only does that showcase its ability to be an exporter, it highlights an additional potential revenue stream for the company.
A Bright Future Ahead?
Looking out to the remainder of 2024, the company plans to increase production capabilities and sales incentives, roll out new products including new formats, release new strains, increase market penetration and continue to post positive Adjusted EBITDA. Its confident all of that should position it for solid results this year and beyond.
"The first quarter of 2024 has been another significant period for Cannara, with record breaking net revenues of $19.5 million, an 89% increase from the comparative quarter in 2023, and an incredible net income surge, Zohar Krivorot, President and Chief Executive Officer, said of the first quarter results. As we build on this momentum in 2024, our roadmap is clear, continued execution with excellence, cost efficiencies and product innovation. This strategic expansion is not just about quantity, it is about deepening our market penetration by enriching our customers experience with high-quality products that stand out in the market. With a keen eye on evolving market trends and consumer preferences, we are committed to growing our market presence and product portfolio in a purposeful manner."
Featured photo courtesy of Cannara Biotech.
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