Cannara Biotech (LOVE) Q3 2024 earnings summary

Executive summary

• Vertically integrated cannabis producer with 1.6 million sq ft of cultivation in Quebec, producing 33,500 kg annually and scalable to 100,000 kg.

• Net revenues reached $19.5 million in Q3 2024, up 22.6% year-over-year, marking the thirteenth consecutive quarter of positive Adjusted EBITDA at $2.8 million.

• Three flagship brands—Tribal, Nugz, and Orchid—anchor the product portfolio, with strong organic growth and minimal marketing in Quebec.

• Ranked 9th nationally and 3rd in Quebec by sales, with a national market share of 3.2% and 11.8% in Quebec as of July 2024.

• Growth driven by expansion into new provinces, new SKUs, and wholesale market sales; strategic investments in sales and marketing underway to support further national expansion.

Financial highlights

• Q3 2024 revenue: CAD 19.5 million; gross profit: CAD 5.8 million; gross margin: 29.4%.

• Gross cannabis revenues before excise taxes rose to $26.2 million, a 27.6% increase year-over-year.

• Year-to-date gross margin: 35%; trailing 12-month net revenue: CAD 77 million; EBITDA: CAD 16.4 million; net income: CAD 5 million.

• Q3 net income: CAD 2 million; free cash flow: CAD 1.2 million; 13 consecutive quarters of positive EBITDA.

• Operating cash flow increased 72% to $4.3 million; working capital at $35.2 million as of May 31, 2024.

Outlook and guidance

• Targeting number one market share in Quebec by fiscal 2025, with less than 2% gap to the leader.

• Strategic investments in sales force and infrastructure are expected to drive future returns and market share gains.

• Production capacity to increase to 75,000 kg by 2028, with phased activation of additional grow rooms.

• Management anticipates a return to stronger pricing and demand as less competitive peers exit the market.

• Focus remains on Canadian market before considering international or U.S. expansion.