~Company reports record quarter with 73% increase in year over year net revenue~
TORONTO, July 24, 2020 /PRNewswire/ - Namaste Technologies Inc. ("Namaste" or the "Company") (TSXV: N) (FRANKFURT: M5BQ) (OTCMKTS: NXTTF), an online platform for cannabis products, accessories, and responsible education, today reported its financial results for the second quarter ended May 31, 2020. All financial figures are in Canadian dollars unless otherwise indicated.
Namaste's second quarter results continue to build on the revenue growth success posted in the first quarter as the Company solidifies its position within the cannabis value chain. On a year over year basis for the second quarter ended May 31, 2020, revenue increased and net loss decreased significantly. On a sequential basis, second quarter revenue, gross margin and the net loss improved over the first quarter of 2020.
CannMart Inc. ("CannMart"), a wholly owned subsidiary of Namaste Technologies, has demonstrated its ability to attract premium brands, value added suppliers, and provincial agencies thanks to its expertise in e-commerce, production, packaging, and distribution in this highly competitive and regulated industry. As reflected in the Q2 2020 results, CannMart's expanded product catalogue grew in both its business to business ("B2B") and business to consumer ("B2C") channels. CannMart continues to strengthen its competitive position in the Cannabis industry as the space matures and shifts into consumer packaged goods.
Second quarter highlights:
Record net revenues for the Company of $6.9 million for the second quarter ended May 31, 2020, a 73% increase over the same period last year, and a 31% sequential increase over the first quarter of 2020.
The net segment revenue for CannMart, Namaste's core growth engine, increased approximately 1500% to over $2.4 million compared to the comparable period in 2019, excluding excise tax.
CannMart's revenue increased 82% on a sequential basis from Q1 to Q2 2020.
Over 33% of second quarter 2020 revenue was derived from cannabis and cannabis products compared to under 5% for the same period in 2019.
48% of second quarter 2020 net revenues were derived from Canadian clients compared to 19% from the same period in 2019, a 338% increase in quarter over quarter revenue, reflecting efforts made to focus on growing the Company's market share within the Canadian market.
Reported Q2 2020 net loss of $4.8 million compared to $8.6 million in the same quarter last year. The improvement reflects CannMart's introduction of new distribution channels, restructuring efforts in 2019, and resulting business improvements in 2020.
"The introduction of B2B distribution channels by CannMart has made a significant contribution to Namaste's revenue stream and bottom line," said Meni Morim, CEO of Namaste. "For the second consecutive quarter, we have seen considerable revenue growth and have just recorded the highest quarterly revenue for the Company to date. As stated in the first quarter, the strategic decisions we made in 2019 and early 2020 are beginning to be reflected in our results. Our efforts have resulted in significant growth for cannabis and cannabis products sales in Canada but there is more work for us to do. We have shown that we can grow our revenue and as we expand our product lines, improve operational efficiencies, and increase our gross margins in coming quarters to coincide with revenue growth."
"As Canada is leading the way with respect to the rollout of regulations around a legal cannabis market, and with other countries paying close attention to this rollout, we set out to refine and perfect the scalability of our business model within this legal framework. The work and investment that we have made and will continue to make in Canada will provide a playbook for eventual expansion into other markets and verticals as regulations allow," added Morim.
"We continue to sign agreements with well-known international cannabis brands. These are endorsements of our value proposition as a leader in development, manufacturing and distribution of consumer packaged goods in the cannabis sector. As brand loyalty becomes more important in a maturing industry, we place great value in working with well-known brands looking to leverage our expertise and distribution channels and, at the same time, have invested in creating products under our own brand. It will be brands that will drive customer loyalty, product development and ultimately sales. We have experienced early success with major brands through both CannMart's B2B and B2C sales channels."
"We also received approval from Alberta Gaming, Liquor & Cannabis ("AGLC") and the Ontario Cannabis Retail Corporation operating as the Ontario Cannabis Store ("OCS") to begin offering Cannabis 2.0 products, another significant milestone for Namaste. The Cannabis 2.0 market is gaining momentum as new and innovative products are being introduced. Alberta and Ontario are important markets for CannMart and we will work to gain market share in these and other provinces."
Summary of Consolidated Financial Results
Net revenue for the second quarter ended May 31, 2020 was $6.9 million, an improvement of 73% compared to $4.0 million for the second quarter of 2019. Gross margin as a percentage of net revenue (before inventory adjustment) for the second quarter ended May 31, 2020 was 9% compared to 18% for the previous period. As illustrated on the chart below, cannabis revenue is demonstrating strong growth and becoming a major component of total revenues.
Overall expenses decreased by $241,913 or 4% for the second quarter ended May 31, 2020 in comparison to the same period last year. The change reflects a decrease in share-based compensation and selling and marketing expenses offset by an increase in office and general costs.
Adjusted EBITDA for the second quarter ended May 31, 2020 was a loss of $4.7 million, compared to a loss of $3.9 million for the second quarter ended May 31, 2019. Net loss for the second quarter ended May 31, 2020 was $4.8 million compared to $8.6 million in the same period last year. The improvement in the net loss is primarily attributed to a decrease in restructuring and other related costs.
For further details, the complete Financial Statements for the second quarter ended May 31, 2020 and the related Management's Discussion & Analysis can be accessed on the Company's SEDAR profile at www.sedar.com.
Annual General Meeting of Shareholders
The Company intends to hold its annual general meeting of shareholders ("AGM") virtually on September 29, 2020. The Company requested and has received a four-day extension to the date on which it is required to hold its AGM from the British Columbia Registrar of Companies in accordance with section 182(4) of the Business Corporations Act (BC). The Company will provide further details regarding the AGM, including how shareholders can attend and vote at the virtual AGM, in due course.
COVID-19 continues to be an unprecedented challenge for the global community. In response to this very serious health risk, management employed procedures to mitigate its effects on the business and ensure the continued health and safety of its employees, vendors, partners and customers as the first quarter was coming to a close. Although these challenges still persist, management believes that appropriate actions have been taken and the business is well positioned to operate with limited disruption.
NON IFRS FINANCIAL MEASURES
Management evaluates the Company's performance using a variety of measures, including "EBITDA" and "Adjusted EBITDA". The non-IFRS measures discussed below should not be construed as an alternative to other financial measures determined in accordance with IFRS. These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies.
The Company believes these non-IFRS financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Company.
Management uses these and other non-IFRS financial measures to exclude the impact of certain expenses recognized under IFRS when analyzing underlying operating performance and cash impact. From time to time, the Company may exclude additional items if it believes doing so would result in a more effective analysis. The exclusion of certain items does not imply they are non-recurring.
Three months ended
Six months ended
Depreciation and amortization
Restructuring and other costs
Impairment of goodwill and intangibles
Impairment loss on loans receivable
Impairment of investment in associate
Share of associates' loss, net of tax
(i) Current and deferred income taxes, depreciation and amortization, and share-based compensation were excluded from the Adjusted EBITDA calculation as they do not represent cash expenditures.
(ii) Other income consisting of gain on disposal of subsidiary, interest income, realized gain on disposition of AFS investments, unrealized gain on derivatives and other miscellaneous non-recurring income were excluded from Adjusted EBITDA calculation.
(iii) Non-recurring costs related to restructuring and legacy issues were excluded from Adjusted EBITDA calculation.
(iv) Share of associates loss, net of tax, is excluded due to lack of control.
About Namaste Technologies Inc. With headquarters in Toronto, ON, and offices in both B.C. and around the globe, Namaste Technologies is a leading online platform for cannabis products, accessories, and responsible education. The company's 'everything cannabis store', CannMart.com, provides customers with a diverse selection of hand-picked products from a multitude of federally-licensed cultivators, all on one convenient site. Namaste's global technology and continuous innovation address local needs in a burgeoning cannabis industry requiring smart solutions.
Information on the Company and its many products can be accessed through the links below:
FORWARD-LOOKING INFORMATION – This news release contains "forward-looking information" within the meaning of applicable securities laws. All statements contained herein that are not historical in nature contain forward-looking information. Forward-looking information can be identified by words or phrases such as "may", "expect", "likely", "should", "would", "plan", "anticipate", "intend", "potential", "proposed", "estimate", "believe" or the negative of these terms, or other similar words, expressions and grammatical variations thereof, or statements that certain events or conditions "may" or "will" happen. The forward-looking information contained herein, (including statements relating to the expected continued increases in revenue and gross margins in coming quarters, expansion into other regulated markets, and the gains in market share expected to be achieved with the introduction of Cannabis 2.0 products for sale in Alberta, Ontario and other provinces) is made as of the date of this press release and is based on assumptions management believed to be reasonable at the time such statements were made, including management's perceptions of Namaste's standing in the online marketplace for cannabis products, the Company's transition into a growth phase with a focus on increasing revenues and gross margins while reducing costs, the Company's goal of becoming a leading procurement, processing and distribution company focusing on the Canadian cannabis market, Namaste's beliefs regarding the quality of its management, the strides the Company has taken in its operations and the quality of the brands offered by CannMart, the Company's focus on growing the business profitably, reducing operational burn and continuing to master the mechanism of moving cannabis into the market, safely and reliably, the expected demand for Cannabis 2.0 products and the growth of that market and the results of operations, operational matters, historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances. While we consider these assumptions to be reasonable based on information currently available to management, there is no assurance that such expectations will prove to be correct. By their nature, forward-looking information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, including known and unknown risks, many of which are beyond our control, could cause actual results to differ materially from the forward-looking information in this press release. Such factors include, without limitation: risks relating to the Company's ability to execute its business strategy and the benefits realizable therefrom, risks specifically related to the Company's international operations, and risks relating to the market price of Namaste's common shares. Additional risk factors can also be found in the Company's current MD&A which has been filed under the Company's SEDAR profile at www.sedar.com. Readers are cautioned not to put undue reliance on forward-looking information. The Company undertakes no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable law. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
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