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Tuesday, 10/16/2018 2:22:20 PM

Tuesday, October 16, 2018 2:22:20 PM

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CannaRoyalty Announces Record Financial Results for the Second Quarter of 2018: Revenue of $3.5 million, +446% Sequentially; Earnings per Share of $0.18


Q2-2018 Revenue of $3.5 million compared to $643,437 in Q1-2018 – marks the successful initiation of California distribution and manufacturing strategy.

Net income of $9.3 million (EPS of $0.18) and EBITDA of $10.4 million generated through execution of stated strategy to rationalize non-core assets and an increase in gross margin related to growing product sales.
FloraCal (closed July 2nd) and RVR Distribution ("RVR") (closing in Q3-2018) are performing above plan and are expected to drive sequential revenue growth through the second half of 2018 and beyond.

Premier cannabis brand development platform powered by five licensed distribution and manufacturing facilities across California, delivering several of the state's top independent branded products to the majority of licensed dispensaries in the state.

OTTAWA, Aug. 23, 2018 /CNW/ - CannaRoyalty Corp. (CSE: CRZ) (OTCQX: CNNRF) ("CannaRoyalty" or the "Company") today announced the Company's financial results for the three and six-month periods ended June 30, 2018. All figures are reported in Canadian dollars ($), unless otherwise indicated. CannaRoyalty's financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS").

"Q2 marked a turning point for CannaRoyalty and its shareholders as the team translated strategy and execution into record financial performance. The Company generated earnings per share of $0.18 primarily by delivering on its stated objective of rationalizing early passive investments.

The Company also generated a record adjusted EBITDA result for a Canadian-listed cannabis company2," said Marc Lustig, CEO of CannaRoyalty. "Q2 is the beginning of a multi-quarter parabolic step change in revenue, powered by sequential acquisitions and organic growth.

CannaRoyalty generated a record $3.5 million in revenue this quarter, a 446% increase from Q1 and more than the Company generated in all of 2017. These results reflect the successful initiation of the Company's strategic focus on building its Californian distribution and brands platform. This growth is expected to continue in Q3 and Q4 as FloraCal and RVR are added to the Company's financials and as our team continues to grow market share and expand the Company's supporting manufacturing and value-add services footprint.

Both RVR and FloraCal are performing above expectations, and we are actively executing our plans to increase the revenue generating capacity of both companies. I thank all of our long term shareholders for their faith in this team and our plan. I am proud to say that this is truly just the beginning of the CannaRoyalty story."

"Our goal is to be the home of origin for the global cannabis brands of the future. It's a model built on trust. Trust from our brand partners that we will drive their success in California and beyond. Trust from our retail partners that we will deliver exactly what they need. Without that trust, it is not possible to build the trust we are seeking from consumers – which is what we believe a brand to be.

We've been hard at work building the infrastructure and services needed to support brands in building that consumer trust," said Afzal Hasan, President and General Counsel of CannaRoyalty. "This is a highly scalable platform. We touch the majority1 of licensed dispensaries in the state. We're doing this not just because we believe it will result in the formation of tomorrow's global cannabis brands, but also because we believe it will drive industry leading revenue growth in the next 12 months.

We're actively pursuing distribution relationships with a number of California's leading brands, and each successful relationship that we enter into is immediately accretive to our revenue run rate. With $15.7 million in cash at the end of Q2, the proceeds from our recent convertible debenture issue and the combined $26 million sale of certain non-core assets, we have the financial strength to continue to take advantage of the accretive growth opportunities we see in the California market."

Recent Developments

For a more comprehensive overview of these recent developments, please refer to CannaRoyalty's Management's Discussion and Analysis of the Financial Condition and Results of Operations for the Three Months Ended June 30, 2018.

On July 3, 2018, CannaRoyalty announced the close of the FloraCal Farms acquisition for a total consideration of US$1 million in cash and 35,088 CannaRoyalty Class A Compressed Shares, as well as up to an additional US$3 million in cash and 35,088 Compressed Shares to be paid over 3 years, based on completion of certain milestones and other considerations.

On July 6, 2018, executing on its stated strategy to focus on expanding its California footprint, CannaRoyalty announced that it purchased a licensed distribution and manufacturing facility in the city of Cotati in Sonoma County, California for US$2.4 million. The Cotati facility will serve as an additional hub for distribution, as well as supporting manufacturing infrastructure, to meet the strong demand of CannaRoyalty's distributed brand portfolio.

On July 12, 2018, CannaRoyalty announced that it had acquired the exclusive rights to distribute and manufacture Pacific Remedy LLC's industry-leading infused pre-rolls in California.

On July 12, 2018, the Company announced that it had closed a fully marketed private placement of unsecured convertible debentures raising aggregate gross proceeds of $32,980,000.

On August 9, 2018, CannaRoyalty announced the close of Aurora's acquisition of Anandia Inc. for initial consideration valued at approximately $115 million in common shares and warrants of Aurora. CannaRoyalty's equity stake in Anandia was reported at approximately $26.4 million as of June 30, 2018.

On August 9, 2018, CannaRoyalty announced its intention to commence normal course issuer bid. Under the proposed normal course issuer bid, CannaRoyalty may purchase up to 5% of CannaRoyalty's issued and outstanding common shares over a 12-month period using proceeds from asset divestitures.

On August 14, 2018, the Company's previously announced (July 11th) sale of its Canadian pre-roll technology license to Aurora for aggregate consideration of $7 million in Aurora common shares, had closed.

CannaRoyalty's proceeds in Aurora equity generated through the sale of the Company's Anandia position is valued at $19.9 million based on the closing price of Aurora common shares on August 22, 2018.

The value of these shares based on the closing price of Aurora common shares on August 22, 2018, was approximately C$6.1 million.

Financial Highlights – Q2 – 2018

Operating Results

All comparisons below are to June 30, 2017, unless otherwise noted

Revenues were $3.5 million as compared to $960,157, an increase of 266%;

Gross margin was $820,935 as compared $421,681, an increase of 95%;

Operating expenses were $6.3 million as compared to $2.7 million, an increase of 129%;

Net income of $9.3 million as compared to a net loss of $2.0 million;

Net income per basic share of $0.18 as compared to a net loss per basic share of $0.05;

Net income per diluted share of $0.17 as compared to a net loss per diluted share of $0.05;

Adjusted EBITDA income of $11.1 million as compared to a loss of $1.0 million, an increase of $12.1 million; and

Adjusted EBITDA per basic share of $0.21 as compare to a loss of $0.02, an increase of $0.23 per basic share;

Adjusted EBITDA income per diluted share of $0.20 as compared to a loss of $0.02, an increase of $0.22 per basic share.

Balance Sheet

All comparisons below are to December 31, 2017, unless otherwise noted

Cash was $15.7 million as compared to $4.5 million, an increase of 248%;

Total assets of $94.8 million as compared to $46.1 million, an increase of 105%;

Current assets of $23.5 million as compared to $7.9 million, an increase of 196%;

Current liabilities of $5.9 million as compared to $2.1 million, an increase of 178%; and

Long-term debt of $290,457 as compared to $2.3 million, a decrease of 87%.