Q2 2024 MediPharm Labs Corp Earnings Call
Operator: [inaudible] Ladies and gentlemen, thank you for standing by, and welcome to the MediPharm Labs 2024 second quarter financial results conference call. Please be advised that today's conference is being recorded. Before we begin, please note that the remarks today may contain forward-looking information and forward-looking statements within the meaning of applicable securities laws. This includes, without limitation, statements about MediPharm Labs and its current and future plans, expectations, intentions, financial results, levels of activity, performance, goals, or achievements, and other future events, trends, profitability, business growth, or development.
Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to the MediPharm Labs 2024 second quarter financial results conference call. Please be advised that today's conference is being recorded.
Operator: Forward-looking statements are made as of the date hereof based on information currently available to management of MediPharm and on estimates and assumptions made based on factors that MediPharm believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct.
Speaker Change: Before we begin, please note that remarks today may contain forward-looking information and forward-looking statements within the meaning of applicable securities laws.
Speaker Change: This includes, without limitation, statements about MetaPharm Labs and its current and future plans, expectations, intentions, financial results, levels of activity, performance, goals or achievements, and other future events, trends, profitability, business growth, or developments.
Operator: Many factors could cause actual results to differ materially from those expressed or implied by forward-looking statements. Additional information is contained in MediPharm Labs' filings with the Canadian and provincial security regulators, which are available on CDAR at CDAR.com. The company's remarks may also contain references to certain non-IFRS financial measures, including EBITDA, adjusted EBITDA, gross profit, and adjusted gross profit. These measures do not have any standardized meaning according to International Financial Reporting Standards or IFRS and therefore may not be comparable to similar measures presented by other companies.
metafarm: Forward-looking statements are made as of the date hereof based on information currently available to management of MediPharm and on estimates and assumptions made based on factors that MediPharm believes are appropriate and reasonable in the circumstances.
metafarm: There can be no assurance that such estimates and assumptions will prove to be correct.
metafarm: Many factors could cause actual results to differ materially from those expressed or implied by forward-looking statements.
metafarm: Additional information is contained in MediPharm Labs filings with the Canadian and Provincial security regulators which are available on CDAR at CDAR.com.
metafarm: The company's remarks may also contain references to certain non-IFRS financial measures, including EBITDA, Adjusted EBITDA, Gross Profit, and Adjusted Gross Profit.
metafarm: These measures do not have any standardized meaning according to International Financial Reporting Standards, or IFRS, and therefore may not be comparable to similar measures presented by other companies.
Operator: MediPharm believes that the non-IFRS measures referenced provide information useful to shareholders and investors in understanding performance and may assist in the evaluation of the combined company's business relative to that of its peers. For more information, please see the section titled Reconciliation of Non-IFRS Measures in the most recent MD&A of MediPharm, which is available on CDAR. I will now pass the call to David Pidduck, CEO of MediPharm.
metafarm: Metafarm believes that the non-IFRS measures referenced provide information useful to shareholders and investors in understanding the performance and may assist in the evaluation of the combined company's business relative to that of its peers.
metafarm: For more information, see the section titled Reconciliation of Non-IFRS Measures, the most recent MD&A of Medifarm, which is available on CDAR.
metafarm: I will now pass the call to David Pidduck, CEO of Metafarm. Please go ahead, sir.
David Pidduck: Thank you, operator, and welcome, everyone, to our Q2 2024 earnings call. We are very happy to report today that we're close to profitability being essentially a break-even adjustment in the top of the quarter. The Q2 adjusted EBITDA is $124,000 negative for the quarter.
Speaker Change: Thank you operator and welcome everyone to our Q2 2024 earnings call. We are very happy to report today that we're close to profitability being essentially a break-even adjustment even after the quarter.
Speaker Change: Q2 adjusted EBITDA is $124,000 negative for the quarter. The company and all of our hardworking employees have been strictly focused on getting to this moment.
David Pidduck: The company and all of our hardworking employees have been strictly focused on getting to this moment. Over the last two years, we've gone through several significant restructurings, sold our MediPharm Australia facility, acquired and integrated Vivo, resolved outstanding litigation, and significantly diversified our business. Recently, we completed the integration of our CannaPharm's medical business into the Bay Area operations, resulting in lower costs and better service for our medical patients. We are now in the process of selling our Hope facility, which will further improve our financials and generate additional cash. The MediPharm team has transformed the business from losing over 6 million per quarter in the Justice League at die in Q2 2022 to being essentially broken in this court.
Speaker Change: Over the last two years, we've gone through several significant restructurings, sold our MediPharm Australia facility, acquired and integrated Vivo, resolved outstanding litigation, and significantly diversified our business.
Speaker Change: Recently, we completed the integration of our CannaPharm's medical business into the Berry operations, resulting in lower costs and better service for our medical patients.
Speaker Change: We are now in the process of selling our HOPE facility, which will further improve our financials and generate additional cash.
Speaker Change: The Metafarm team has transformed the business from losing over $6 million per quarter in adjusted EBITDA in Q2 2022 to being essentially break-even this quarter.
David Pidduck: International sales for the quarter are over 40% of our revenue. We've grown sales quarter over quarter for the last three quarters. We have $16 million in cash at the end of the quarter and plans in place to sell underused assets that could generate significant additional revenue. But obviously, we're not satisfied to just break even. We have active plans in place to generate additional revenue and to further reduce costs. On the revenue front, the international field continues to drive growth and profitability.
Speaker Change: International sales for the quarter are over 40% of our revenues. We've grown sales quarter over quarter for the last three quarters. We have 16 million dollars in cash at the end of the quarter and plans in place to sell underused assets that could generate significant additional cash.
Speaker Change: but obviously we're not satisfied to just break even. We have active plans in place to generate additional revenue and to further reduce costs.
Speaker Change: On the revenue front, international sales continue to drive growth and profitability. We will continue to focus on growing our business in Europe, Australia, and Brazil.
Speaker Change: We're hopeful that our pharmaceutical partners file in Brazil will be approved in the next quarter and start to generate revenue in Q4. In Europe , we've made progress on initial contracts in the UK, France, and Poland.
David Pidduck: The last quarter has also seen progress with our B2B and Pharma channel. We have initiated several contracts, both domestically and for international markets. We see continued future growth, developing and manufacturing brands for other LPs and global farmers. On the cost side, the consolidation of the HOPE facility and certain further restructuring efforts already in progress will generate over a million dollars in additional profits on an annualized basis. We believe that further efficiency and cost reduction opportunities still exist that will improve on the already implemented savings target that I just referenced.
Speaker Change: The last quarter has also seen progress with our B2B and pharma channel. We have initiated several contracts both domestically and for international markets. We see continued future growth developing and manufacturing brands for other LPs and global pharma companies.
Speaker Change: On the cost side, the consolidation of the HOPE facility and certain further restructuring efforts already in progress will generate over a million dollars in additional profits on an annualized basis.
Speaker Change: We believe that further efficiency and cost reduction opportunities still exist that will improve on the already implemented savings targets I just referenced. These include finding further efficiencies in our German supply chain and in our medical and clinical businesses.
David Pidduck: These include finding further efficiencies in our German supply chain and in our medical and clinical business. Now, the task moves to driving consistent profitable revenue growth and generating positive cash flows for 2025 in our Corp. Our strengths in international markets will be a key revenue driver. As mentioned, over 40% of our revenues last quarter came from international markets. Key drivers included newly launched vape and oil scoops in Australia and a good response to our. In addition, several companies have sought us out to supply new GMP SKUs. For international markets as regulatory standards tighten in Australia and other markets.
Speaker Change: So now the task moves to driving consistent profitable revenue growth and generating positive cash flows for 2025 in our core businesses.
Speaker Change: Our strengths in international markets will be a key revenue driver. As mentioned, over 40% of our revenues last quarter came from international markets. Key drivers included newly launched vape and oil SKUs in Australia, and good response to our Dronabinol launch in Germany.
Speaker Change: In addition, several companies have sought us out to supply new GMP SKUs for international markets as regulatory standards tighten in Australia and other markets.
David Pidduck: Our medical pharmaceutical approach has laid the foundation for growth in international markets with established regulatory and supply chain pathways and reputable pharmaceutical and distribution partners. We've been leveraging these established paths to drive additional products through existing channels. We have also been leveraging all our quality regulatory and pharmaceutical expertise to assist partners. Several recent examples of this expertise in action include developing and manufacturing products like our agreement with Adi Kona for their said capsule formulation. [inaudible] Assisting our Brazilian pharma partner with their file submission, and the recent signing of a Remedos inhaler deal. Ongoing pharmaceutical product submissions with our partners, and continued support of various pharmaceutical and academic clinical trials.
Speaker Change: Our medical pharmaceutical approach has laid the foundation for growth in international markets with established regulatory and supply chain pathways and reputable pharma and distribution partnerships.
Speaker Change: We've been leveraging these established paths to drive additional products through existing channels.
Speaker Change: We have also been leveraging all our quality regulatory and pharmaceutical expertise to assist partners.
Speaker Change: Several recent examples of this expertise in action include developing and manufacturing products like our agreement with Avicona for their SEDS capsule formulation.
Speaker Change: assisting our Brazilian pharma partner with their file submission, the recent signing of a Remedos inhaler deal, ongoing pharmaceutical product submissions with pharma partners, and continued support of various pharma and academic clinical trials.
David Pidduck: Being the only natural cannabis site in Canada that is registered and inspected by the U.S. FDA allows us to further expand our pharmaceutical-related business into the U.S. in the future. The rescheduling of cannabis has continued to make good progress in the United States, which will ultimately lead to more medical research. Expanding the total addressable market for MediPharm in this specialized, high-margin niche area. We have a solid balance sheet and strong cash position and should soon generate even further cash in the sale of underutilized facilities. We removed our going concern qualification last quarter, and we intend to pay off $2.1 million, our only significant outstanding debt, next quarter.
Speaker Change: Being the only natural cannabis site in Canada that is registered and inspected by the U.S. FDA allows us to further expand our pharmaceutical-related business into the U.S. in the future.
Speaker Change: The rescheduling of cannabis has continued to make good progress in the U.S., which will ultimately lead to more medical research, expanding the total addressable market for metapharm in this specialized high-margin niche area.
Speaker Change: We have a solid balance sheet and strong cash position and should soon generate even further cash through the sale of underutilized facilities.
Speaker Change: We removed our going concern qualification last quarter, and we intend to pay off $2.1 million, our only significant outstanding debt, next quarter.
David Pidduck: As mentioned before, unlike many of our peers, we do not have any CRA or tax exposure, and unlike our peers, we hold very minimal debt. Our balance sheet and cash position now stand out as one of the strongest positions of LPs in our peer group. But industry challenges and ongoing consolidation are continuing. In the last few quarters, we've continued to see multiple LPs file for CCAA protection. Industry Profitability remains a challenge, and there are still far too many operating companies at the end of this. In short, there are far too many publicly traded companies in the industry, and the industry as a whole needs to take collective costs out of the system. As a result, industry consolidation will remain a reality.
Speaker Change: As mentioned before, unlike many of our peers, we do not have any CRA excise tax exposure. And unlike our peers, we hold very minimal debt. Our balance sheet and cash position now stand out as one of the strongest positions of LPs in our peer group.
Speaker Change: But industry challenges and ongoing consolidations are continuing. In the last few quarters we've continued to see multiple LPs filing for CCAA protection. Industry profitability remains a challenge and there are still far too many operating companies in the industry.
Speaker Change: In short, there are far too many publicly traded companies in the industry and the industry as a whole needs to take collective costs out of the system.
Speaker Change: As a result, industry consolidation will remain a reality, and fortunately, we are in an excellent position to benefit from a thoughtful and prudent M&A approach.
David Pidduck: Unfortunately, we are in an excellent position to benefit from a thoughtful and prudent M&A approach. We continue to evaluate opportunities that could represent significant upside for shareholders and strengthen the company long term. Our unique positioning and approach in the medical pharma space and our strong base of growing profitable international sales make us a unique partner of choice. Whether as a contract manufacturer, distribution partner, product development partner, or pharmaceutical supplier, MediPharm is well-positioned to grow both organically and through M&A in the near future. I will now turn it over to our President, Keith Strachan, to share some further commercial insights. Thanks, Dave.
Speaker Change: We continue to evaluate opportunities that could represent significant upside for shareholders and strengthen the company long term.
Speaker Change: Our unique positioning and approach in the medical pharma space and our strong base of growing profitable international sales makes us a unique partner of choice.
Metaphymer: Whether as a contract manufacturer, distribution partner, product development partner, or pharmaceutical supplier, MediPharm is well-positioned to grow both organically and through M&A in the near term.
Metaphymer: I will now turn it over to our President, Keith Strachan, to share some further commercial insights.
Keith Strachan: Thank you, everyone, for joining us this morning. As we build on our achievements from the first quarter, the second quarter of 2024 continued to showcase our commitment to operational excellence and strategic growth in the global cannabis market. The whole company is motivated and excited as we are closing the gap to get back to profitability. This quarter, we fortified our innovative product portfolio through a new licensing agreement with Remedios Eris. Granting us exclusive rights to their advanced cannabis product technology
Keith Strachan: Thanks, Dave.
Keith Strachan: Thank you everyone for joining us this morning. As we build on our achievements from the first quarter, the second quarter of 2024 continues to showcase our commitment to operational excellence and strategic growth in the global cannabis market.
Keith Strachan: The whole company is motivated and excited as we are closing the gap to get back to profitability.
Keith Strachan: This quarter, we fortified our innovative product portfolio through a new licensing agreement with Remidos Aerosol, granting us exclusive rights to their advanced cannabis product technology.
Keith Strachan: This expansion enhances our offerings across domestic and international medical cannabis markets. We will assume their existing adult use sales in Q3 and start GMP shipments of these products internationally in Q4. Also, in partnership with Avikana, a leader in cannabis research and formulation, we have been developing the scale-up and commercialization of a new self-emulsifying drug delivery system in capsule format. We are pleased to announce that we have now completed the scale-up, validation, and manufacturing of the first batch.
Keith Strachan: This expansion enhances our offerings across domestic and international medical cannabis markets.
Keith Strachan: We will assume their existing adult use sales in Q3 and start GMP shipments of these products internationally in Q4.
Keith Strachan: Also, in partnership with Avikana, a leader in cannabis research and formulation, we have been developing the scale-up and commercialization of a new self-emulsifying drug delivery system in capsule format.
Keith Strachan: We are pleased to announce that we have now completed the scale-up, validation, and manufacturing of the first batches.
Keith Strachan: Distribution of these new products is now available to Canadian cannabis patients. Our international portfolio continues to expand. In July, we began delivery of high-potency medical cannabis flour under our Beacon Medical brand in Germany.
Keith Strachan: Distribution of these new products are now available to Canadian cannabis patients.
Keith Strachan: Our international portfolio continues to expand. In July , we began delivery of high-potency medical cannabis flour under our Beacon Medical brand in Germany.
Keith Strachan: This is in response to favorable regulatory changes and is expected to complement our growing sales in that market. Additionally, our market share for GMP vapes in Australia is now third based on unit sold and patient revenue, just nine months after their launch. Our international sales continue to grow and reach $4.5 million in the quarter. Trinavinol sales have continued their strong performance from Q1, doubling to a total of $1.9 million year-to-date.
Keith Strachan: This is in response to favorable regulatory changes and is expected to complement our growing sales in that market.
Keith Strachan: Additionally, our market share for GMP Bates in Australia is now third based on unit sold and patient revenue, just nine months after their launch.
Speaker Change: Our international sales continue to grow and reach 4.5 million in the quarter.
Speaker Change: Trinavinol sales have continued their strong performance from Q1, doubling to a total of $1.9 million year-to-date.
Keith Strachan: This revenue stream enjoys higher margins and is helping our drive towards profitability. Our sales to our German pharma partner Stata also had a strong quarter, as oil and flour units sold to Stata patients in Germany increased 35 percent in the first six months of 2024 compared to the same period in 2023. In compliance and quality, April was significant for us with the successful completion of two EU GMP inspections. Both our Napanee and Berry facilities were inspected by Germany's LADG Health Department.
Speaker Change: This revenue stream enjoys higher margins and is helping our drive towards profitability.
Speaker Change: Our sale to our German pharma partner Stata also had a strong quarter as oil and flour units to Stata patients in Germany have increased 35% in the first six months of 2024 compared to the same period in 2023.
Speaker Change: In compliance and quality, April was significant for us with the successful completion of two EU GMP inspections.
Speaker Change: Both our Napanee and Berry facilities were inspected by Germany's LADG Health Department. I am pleased to report that our renewed EU GMP certifications were issued by the LADG on July 1, 2024.
Keith Strachan: I am pleased to report that a renewed EU GMP certification was issued by the LABG on July 1st, 2024. Another milestone was reached in April with our submission of a drug master file for CBD API to help Kim. This submission allows for our current and future pharmaceutical partners to reference MediPharm's high-quality CBD API in their drug applications.
Speaker Change: Another milestone was reached in April with our submission of a drug master file for CBD-API to Help Canada.
Speaker Change: This submission allows for our current and future pharmaceutical partners to reference MediPharm's high-quality CBD API in their drug applications, echoing the DMF we filed with the U.S. FDA back in 2021.
Keith Strachan: Echoing the DMF we filed with the U.S. FDA back in 2021, as we continue to advance on these fronts, our focus remains on innovation, strategic global market expansion, and enhancing operational efficiencies. These pillars not only drive our financial performance but strengthen our position as a leader in the global cannabis market. I'll now pass the call to Greg to go over Financial D- Thanks, Keith, and good morning, everyone.
Speaker Change: As we continue to advance on these fronts, our focus remains on innovation, strategic global market expansion, and enhancing operational efficiencies. These pillars not only drive our financial performance, but strengthen our position as a leader in the global cannabis market.
Speaker Change: I'll now pass the call to Greg to go over financial details.
Greg Hunter: As discussed in prior calls, MediPharm management has been focused on growing our revenue base through organic and inorganic initiatives, reducing cash fervor, and driving towards profitability as key priorities. I am pleased to report that Q2 was another step in the right direction. Before reviewing the results, let me add some additional commentary on the progress we made on these priorities in the quarter. Q2 was a pivotal quarter as adjusted EBITDA loss of $0.1 million was very close to break even and was the best in over three years.
Greg: Thanks Keith and good morning everyone. As discussed in prior calls, MediFarm management has been focused on growing our revenue base through organic and inorganic initiatives, reducing cash burn and driving towards profitability as key priorities.
Greg: I am pleased to report that Q2 was another step in the right direction.
Greg: Before reviewing the results, let me add some additional commentary on the progress we made on these priorities in the quarter.
Speaker Change: Q2 was a pivotal quarter as adjusted EBITDA loss of $0.1 million was very close to break-even and was the best in over three years.
Greg Hunter: Revenue of $10.3 million was the highest in over three years and increased $0.8 million or 8% versus the prior year and improved $0.6 million or 6% sequentially. We had our largest commercial shipments of Dronabinol to Germany in Q2, representing 1.3 million in revenue, which was double the Q1 revenue. Our growth margin of $3.4 million was the highest in over four years and over 33% of revenue. In addition, we completed the relocation of the Hope Medical Channel operations to the Berry facility, which will save approximately one million on an annualized basis.
Speaker Change: Revenue of $10.3 million was the highest in over three years and increased to $0.8 million or 8% versus prior years and improved $0.6 million or 6% sequentially.
Speaker Change: We had our largest commercial shipments of Dronabinol to Germany in Q2, representing $1.3 million in revenue, which was double the Q1 revenue.
Speaker Change: Our growth margins of 3.4 million was the highest in over four years and was over 33% of revenue.
Speaker Change: In addition, we completed the relocation of the Hope Medical Channel operations to the Berry facility, which will save approximately $1 million on an annualized basis.
Greg Hunter: The HOPE facility is being listed for sale and could generate $4 to $5 million of additional cash in the near term, adding to our balance sheet strength. Now, turning to the P&L performance for the second quarter. Revenue for the second quarter of $10.3 million increased $0.8 million or 8% versus the prior year and increased to $0.6 million or 6% sequentially from Q1 2024. Canadian Adult Youth and Wellness revenue of $1.5 million in Q2-24, a decline versus Q2-23. Revenue also declined sequentially from $2.1 million in Q1-24, driven by increased competitive pressure.
Speaker Change: The HOPE facility is being listed for sale and could generate 4 to 5 million of additional cash in the near term, adding to our balance sheet strength.
Speaker Change: Turning to the P&L performance for the second quarter.
Speaker Change: Revenue for the second quarter of $10.3 million increased $0.8 million, or 8% versus prior year, and increased to $0.6 million, or 6% sequentially from Q1 2024.
Speaker Change: Canadian, I don't use an wellness revenue of $1.5 million in Q224 decline versus Q223. Revenue also declines sequentially from $2.1 million in Q124, driven by increased competitive pressures.
Greg Hunter: The management team will be focused on improving this revenue stream in the coming quarter. Canadian medical cannabis revenue for Q2'24 of $3.5 million was consistent with Q1'24 and decreased from $3.8 million in prior years. International medical revenue increased from $3 million in Q2'23 to $4.5 million in Q2'24, driven by Granavonol sales in Germany and new Australian base and oil business. Revenue increased sequentially from $3.2 million in Q1 2024, driven by increased granabinol and oil sales.
Speaker Change: The management team will be focused on improving this revenue stream in the coming quarters.
Speaker Change: Canadian medical cannabis revenue for Q2'24 of $3.5 million was consistent with Q1'24 and decreased from $3.8 million in prior years.
Speaker Change: International medical revenue increased from 3 million in Q2-23 to 4.5 million in Q2-24. Driven by Dr. Navin Hall Fails in Germany and new Australian faith and well business.
Speaker Change: Revenue increased sequentially from $3.2 million in Q1-24, driven by increased granavenol and oil sales. The international business represented approximately 44% of total revenue in Q2 versus 33% in Q1.
Greg Hunter: The international business represented approximately 44% of total revenue in Q2 versus 33% in Q1. Pharmaceutical and B2B revenue in Q2'24 of $0.8 million increased from $0.3 million in Q2'2023, largely due to a new contract manufacturing cutoff. However, revenues decreased $0.2 million sequentially from Q1-24 driven by customer order timing.
Speaker Change: Pharmaceutical and B2B revenue in Q2'24 of $0.8 million increased from $0.3 million in Q2 2023, largely due to a new contract manufacturing customer.
Speaker Change: Revenues decreased 0.2 million sequentially from Q1 2024 driven by customer order timing.
Greg Hunter: As Keith and Dave discussed previously, pharmaceutical revenue is a longer-term strategy and will take time to pay off as clinical trials for threats and applications make their way through the long-term process of approval. Growth profit for Q2 was $3.4 million, or 33%, and improved significantly versus Q2'23 of 8.2%. Q2-24 growth profit also increased versus Q1-24 driven by increased international medical cannabis revenue that typically enjoys higher margins. Q2-24 gross profit was 37% when adjusting for several discrete items such as biological asset fair value adjustments, inventory write-downs, and severance for restructuring.
Speaker Change: As Keith and Dave discussed previously, pharmaceutical revenue is a longer-term strategy and will take time to pay off as clinical trials progress and applications make their way through the long-term process of approvals.
Speaker Change: Growth profit for Q2 was $3.4 million or 33% and improved significantly versus Q2-23 of 8.2%.
Speaker Change: Q2'24 growth profit also increased versus Q1'24 driven by increased international medical cannabis revenue that typically enjoys higher margins.
Speaker Change: Q2-24 gross profit was 37% when adjusting for several discrete items such as biological asset fair value adjustments, inventory write-downs, and severance for restructuring.
Greg Hunter: This was the highest growth profit in over four years. Growth profit continues to improve, driven by product mix, production efficiencies, and cost reductions. Management continues to focus on driving growth. This was the highest growth profit in over four years. General and administrative expenses in the second quarter of $3.9 million decreased versus $5.8 million in the prior year, largely driven by the achievement of synergies from the integration of VIVO and a continued focus on cost reduction.
Speaker Change: This was the highest gross profit in over four years. Gross profit continues to improve driven by product mix, production efficiencies, and cost reductions. Management continues to focus on driving growth profit.
Speaker Change: General and administrative expenses in the second quarter of $3.9 million decreased versus $5.8 million in prior year, largely driven by achievement of synergies from the integration of EVO and a continued focus on cost reductions.
Greg Hunter: G&AD creeps sequentially from $4.3 million in Q1 2024. Marketing and selling expenses of $1.5 million were consistent with the prior year and prior quarter. Total Offex, which includes G&A, marketing, and selling, and R&D expense, was $5.4 million for Q2-24 and decreased $2.1 million versus the prior year due to the achievement of synergies from the integration of Vivo and a continued focus on cost reduction. In addition, Q224 operating expense decreased 0.3 million or 5% versus Q124. When adjusting for severance and other discrete items, Q2-24 operating expense was $4.9 million.
Speaker Change: DNA decreased sequentially from 4.3 million in Q1 2024.
Speaker Change: Marketing and selling expenses of $1.5 million was consistent with prior year and prior quarter.
Speaker Change: Total Offex, which includes G&A, marketing and selling, and R&D expense was $5.4 million for Q2'24 and decreased $2.1 million versus prior year due to the achievement of synergies from the integration of VIVO and a continued focus on cost reductions.
Speaker Change: In addition, Q224 operating expense decreased 0.3 million or 5% versus Q124.
Speaker Change: When adjusting for severance and other discrete items, Q2-24 operating expense was $4.9 million. Management continues to focus on further expense reduction opportunities as Dave discussed.
Greg Hunter: Management continues to focus on further expense reduction opportunities, as Dave discussed. Adjusted EBITDA loss for Q2 was $0.1 million and improved $3.1 million, or 96% versus Q2-23. This improvement in adjusted EBITDA is driven by revenue growth, an improvement in gross profit, and a reduction of expenses. In Q224, Adjusted EBITDA improved 0.8 million, or 87% versus Q124. Driven by revenue, growth profit, and continued expense reduction. Management continues to pursue profitable revenue growth through organic and inorganic initiatives and further expense reductions to move from our essential break-even adjusted EBITDA to positive adjusted EBITDA and positive cash flow.
Speaker Change: Adjusted EBITDA loss for Q2 was $0.1 million and improved $3.1 million or 96% versus Q2-23. This improvement in adjusted EBITDA is driven by revenue growth, the improvement in gross profit, and the reduction of expenses.
Speaker Change: Q2-24 adjusted EBITDA improved 0.8 million or 87% versus Q1-24, driven by revenue, gross profit, and continued expense reduction.
Speaker Change: Management continues to pursue profitable revenue growth through organic and inorganic initiatives and further expense reductions to move from our essential break-even adjusted EBITDA to positive adjusted EBITDA and positive cash flow.
Greg Hunter: Moving to a few notable items on the balance sheet. The trade and other receivable balance at Q2 is $6.2 million, and 93% of trade accounts receivable are aged 60 days or less. Our cash burn in Q2 was approximately $1 million, resulting in an ending cash balance of $16 million at June 30.
Speaker Change: Moving to a few notable items on the balance sheet.
Speaker Change: Trade and other receivable balance at Q2 is $6.2 million and 93% of trade accounts receivable is aged 60 days or less.
Speaker Change: Our cash burned in Q2 was approximately $1 million, resulting in an ending cash balance of $16 million at June 30.
Greg Hunter: The company has less than $3 million in debt, and unlike many other cannabis companies, MediPharm is also up-to-date on cannabis excise duty and trade payables. Although we still have work to achieve profitability and become cash flow positive, Q2 was another step in the right direction. Revenue was the highest in over three years and increased 6% sequentially to $10.3 million and 8% year over year. Adjusted gross profit was 37%, which was the highest in over four years. Adjusted EBITDA loss was close to breakeven and improved sequentially and versus the prior year to $0.1 million, and it was the best in over four years.
Speaker Change: The company has less than $3 million of debt, and unlike many other cannabis companies, Medifarm is also up-to-date on cannabis excise duty and trade payables.
Speaker Change: Although we still have work to achieve profitability and become cash flow positive, Q2 was another step in the right direction.
Speaker Change: Revenue was the highest in over three years and increased 6% sequentially to $10.3 million and 8% year-over-year.
Justin: Adjusted gross profit was 37%, was the highest in over four years.
Justin: Adjusted EBITDA loss was close to breakeven and improved sequentially and versus prior year to 0.1 million and was the best in over four years.
Greg Hunter: And finally, we have a strong balance sheet relative to our peers, with $16 million of cash and less than $3 million of debt, and assets held for sale that could generate more. And finally, we have a strong balance sheet relative to our peers with 16 million in cash and less than 3 million in debt, an asset shelter sale that could generate another 4 to 5 million in cash. As a result of our strong balance sheet and significantly improved financial performance, we are well positioned to invest in organic and inorganic growth opportunities as the industry continues to mature.
Justin: And finally, we have a strong balance sheet relative to our peers with $16 million of cash and less than $3 million of debt and assets held for sale that could generate more stocks.
Justin: And finally, we have a strong balance sheet relative to our peers with $16 million of cash and less than $3 million of debt and assets held for sale that could generate another $4 to $5 million of cash.
Speaker Change: As a result of our strong balance sheet and significantly improved financial performance, we are well positioned to invest in organic and inorganic growth opportunities as the industry continues to mature. With that, I'll turn it over to the operator to open the line for questions.
Greg Hunter: With that, I'll turn it over to the operator to open the line for questions. Thank you. We will now open the line for your questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. To withdraw your question, press star 1 again. If you are dialed in and listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: Thank you. We will now open the line for your questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. To withdraw your question, press star 1 again.
Speaker Change: If you are dialed in and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
Operator: Our first question comes from the line of Aaron Grey with Alliance Global Partners. Please go ahead. Hi, good morning.
Speaker Change: Our first question comes from the line of Erin Gray with Alliance Global Partners. Please go ahead.
Aaron Grey: Thank you for the questions here. So, first one for me, I just want to talk a bit more about some of the M&A opportunities you spoke about, particularly in Canada. I know there are a lot of players there, still a lot of fractionalized players with small market shares, 1% or even lower in some cases, so I wanted to see where you see the potential operations, you know, just adding revenue and stripping, you know, corporate synergy costs, making it appealing from an acquisition standpoint, or do you see opportunities out there that would help you accelerate and drive top-line growth, and this one's geared Thanks, Aaron. It's Dave.
Speaker Change: i
Erin Gray: Hi, good morning, thank you for the questions here. So first one for me, I just want to talk a bit more about some of the M&A opportunities you spoke to, particularly in Canada.
Speaker Change: I know there's a lot of players there, still a lot of fractionalized.
Speaker Change: players with small market share 1% or even lower in some cases. So I want to see where you see the potential ops, you know, is just adding revenue and stripping, you know, corporate synergy costs, making it appealing from an acquisition standpoint, or do you see opportunities out there to that would help you accelerate?
Speaker Change: and drive top-line growth, and this one's geared more specifically to Canada. And if you don't see things in Canada, then that's fine, and then maybe talk more about outside opportunities. Thank you.
David Pidduck: I'll touch on this and then maybe Keith or Greg can add. For M&A opportunities, we have to be really careful. As you know, with our cash position, we are an interesting partner for many, many folks out there. We're being very selective and thoughtful about what we do. I think it's a good combination.
Speaker Change: [inaudible]
Speaker Change: can add.
Speaker Change: So, for M&A opportunities, we have to be really careful, as you know, with our cash position. We are an interesting partner for many, many folks out there, and so we're being very selective and thoughtful about what we do.
David Pidduck: We're looking for partners where there is significant synergy. It has to be revenue synergy because we're leveraging what they have, or vice versa. You said you focused on the Canadian market. There are a lot of Canadian players that don't have an international presence, so that could be significant synergy where we have channels and partners internationally. And maybe they have some areas where they're strong domestically, and that would be good synergy. You know, most of the various opportunities all come with, I'll say, general synergy opportunities in terms of people and management and facilities, potentially. So that kind of applies to a lot of players.
Speaker Change: And I think it's a combination of, we're looking for...
Speaker Change: Any partners where there is significant synergy and it has to be both sort of revenue synergy Because they're leveraging either we're leveraging what they have or vice versa. You said you focused on the Canadian market There's a lot of Canadian players that don't have an international presence
Speaker Change: where that could be significant synergy where we have sort of channels and partners internationally.
Speaker Change: and maybe they have some areas where they're strong domestically and that would be good synergy.
Speaker Change: Most of the various opportunities all come with, I'll say, general synergy opportunities in terms of people and management and facilities, potentially. So that kind of applies to a lot of players. So anything we would do, we would look at something that had...
Keith Strachan: So anything we would do, we would look at something that had significant, significant revenue synergies in addition to just, I'll say, normal cost synergies of companies coming together. So that's kind of my reflections on that. I don't know, Keith or Greg, if you want to add anything to that.
Speaker Change: significant revenue synergies in addition to just, I'll say, normal cost synergies of companies coming together.
Speaker Change: That's kind of my reflections on that. I don't know, Keith or Greg, if you want to add anything to that.
Keith Strachan: Thanks, Aaron. I think just to cover Dave's point, from a Canadian perspective, now that we are essentially breakeven from an adjusted EBITDA perspective, obviously, anything would need to be accretive. We're not looking to go backwards in that sense.
Speaker Change: Thanks Aaron. I think just to cover Dave's point from a perspective in Canada,
Speaker Change: Now that we are essentially breakeven from an adjusted EBITDA perspective, obviously anything would need to be accretive. We're not looking to go backwards in that sense. And I think where we have capacity is...
Keith Strachan: And I think where we have capacity is probably where the best opportunity lies as far as consolidation goes. So, as you've mentioned, there are some folks that even have 1%, 2% market share, even we do in some adult recreation categories, as we are very strong in international and medical. So, as we look at other Canadian opportunities, things like other medical platforms, so we do direct-to-patient distribution and ordering, all of that infrastructure could take on more, and we are growing that organically. But if there's an opportunity to grow something like that segment inorganically through M&A, that's where our focus would be in Canada. Okay, great. Thanks for the color there.
Speaker Change: is probably where the best opportunity lies as far as consolidation goes. So, as you've mentioned, there's some folks that even have 1%, 2% market share, even we do in some adult rec categories, as we are very strong in international and medical.
Speaker Change: So, as we look at other Canadian opportunities, things like other medical platforms, so we do direct-to-patient distribution and ordering, all of that infrastructure could take on more. And we are growing that organically, but if there's an opportunity to grow something like that segment inorganically through M&A, that's where our focus would be in Canada.
Aaron Grey: I appreciate it. Second question for me, just on Germany, could you discuss maybe how you're seeing the market evolve, you know, post the April 1 change in medical reform, any potential bottlenecks, what you're seeing in growth, you know, as you speak with your partners out there? So that'd be helpful color there. Yeah, maybe, Keith, maybe you take that.
Speaker Change: Okay, great. Thanks for the call there. I appreciate it. Second question for me, just on Germany. Could you discuss maybe how you're seeing the market evolve post the April 1 change in medical reform, any potential bottlenecks, what you're seeing in growth as you speak with your partners out there? So that'd be helpful. Call her there.
Keith Strachan: Yeah, Germany has been, you know, exciting this year as we saw the changes come into effect, uh, in April with the removal of the narcotics. Um, there are some, uh, logistical changes that need to happen with that. So everyone who had a narcotics license for cannabis now gets a new license for cannabis. They call it the Can-G.
Speaker Change: Yeah, maybe Keith, maybe you take that.
Keith Strachan: Yeah, Germany has been, you know, exciting this year as we saw the changes come into effect.
Keith Strachan: in April with the removal of the narcotics.
Keith Strachan: There is some...
Keith Strachan: logistical changes that need to happen with that. So everyone who had a narcotics license for cannabis now gets a new license for cannabis.
Keith Strachan: So you would register all your products, but it's just registered in a different way. So I think everyone in the industry is working through that, and Bpharm, the regulator in Germany, has been, uh, very good at letting people get through that by the end of the year. We have seen a lot more physicians that are willing to write, um, prescriptions, and we're seeing more pharmacies who are carrying the product, and that will continue to result in more sales. Last year in Germany, MediPharm sold about three and a half million dollars in net sales.
Keith Strachan: They call it the CAN-G, so you would register all your products, but it's just registered in a different way.
Keith Strachan: So I think everyone in the industry is working through that and Bfarm, the regulator in Germany, has been very good on letting people get through that to the end of the year.
Keith Strachan: We have seen a lot more physicians that are willing to do, to write prescriptions, and we're seeing more pharmacies who are carrying the product, and that will.
Keith Strachan: continue to result in more sales.
Keith Strachan: Last year in Germany
Keith Strachan: MediPharm sold about three and a half, $3.6 million net sales. We've already surpassed that in Q in 2024, so in the first six months of 2024.
Keith Strachan: We've already surpassed that in 2024. So, in the first six months of 2024, we are just cresting over our total sales for 2023. So that is a big growth for us. Theta remains our number one partner there, especially on the oil side. They're not as impacted by what I would say, like the patient pay model. The patient pay model is those patients who are more curious about cannabis as a therapeutic benefit and go into a pharmacy and pay out of pocket.
Keith Strachan: We are just cresting over our total sales of 2023.
Speaker Change: You know, it is big growth for us.
Speaker Change: Data remains our number one partner there, especially on the oil side.
Speaker Change: They're not as impacted by what I would say like the patient pay model. The patient pay model is those patients who are more cannabis curious as a therapeutic benefit.
Keith Strachan: Those are mostly flower consumers, a bit more promiscuous and trying different things that have taken a pharma approach where they're getting folks for therapeutic benefits on prescriptions and keeping them on those prescriptions. Their business year to date is already up 35 percent, and their businesses call it 80 percent, 85 percent oil, which is, you know, higher margin. So in some cases, a little bit lower on the top line as far as blasting out a ton of flour, but obviously great for us from a margin perspective.
Speaker Change: and going into a pharmacy and paying out-of-pocket. Those are mostly flower consumers, a bit more promiscuous and trying different things.
Speaker Change: That has taken a pharma approach where they're getting folks for therapeutic benefits on prescriptions and keeping them on those prescriptions. Their business year-to-date is already up 35%.
Speaker Change: And their businesses call it 80%, 85% oil, which is, you know, higher margin. So, in some cases, a little bit lower on the top line as far as blasting out.
Speaker Change: a ton of flour, but obviously great for us from a margin perspective.
Keith Strachan: We do see that there is a need and demand for flour, so we continue to increase our flour sales. I think our big bolus of more deliveries actually started in July and August. So we'll see that translate more into Q3 and then we'll be able to, you know, see how that's trending into Q4 post the load in of some of those new Beacon Medical streams. Beacon Medical, which is a Medifarm owned brand internationally in Germany, was always small when we bought it from Vivo in 2023, but it was really big and a market leader in Australia and continues to be.
Speaker Change: We do see that that need and demand for the flowers so we continue to increase our flower sales
Speaker Change: I think our big bolus of more deliveries actually started in July and into August .
Speaker Change: So we'll see that translate more into Q3, and then we'll be able to, you know, see how that's trending into Q4, post the load-in of some of those new Beacon Medical strains.
Speaker Change: Beacon Medical, which is a MediPharm owned brand internationally.
Speaker Change: In Germany was always small when we bought that from Vivo in 2023, but was really big and a market leader in Australia and continues to be.
Keith Strachan: And so we want to replicate our success in Australia with that brand in Germany, and we've started to do that by signing on with the changes in April. We've signed on new distributors and new partners, and we're focused on more high-potency THC, as we mentioned in the earlier remarks. And so those deliveries have started, and then we'll see how those trend, and we are excited to give an update on that, you know, in the back half of the year. Okay, great. I really appreciate that comment there. I'll jump back in the queue. Again, if you would like to ask a question, please press star 1.
Speaker Change: We want to replicate our success in Australia with that brand in Germany, and we've started to do that by signing on with the changes in April . We've signed on new distributors.
Speaker Change: And we're focused on more high-potency THC, as we mentioned in the earlier remarks. And so those deliveries started, and then we'll see how those trend, and are excited to give an update on that, you know, in the back half of the year here.
Speaker Change: Okay, great. Really appreciate that color there. I'll jump back into the queue.
Speaker Change: Again, if you would like to ask a question, please press star 1.
Operator: Seeing no further questions, I will now turn the call back to David Pidduck for any closing remarks. Thanks, operator, and thank you everyone for joining us. We look forward to seeing everybody or speaking with everybody in the next quarter. And everybody. Hope you're having a great summer.
Speaker Change: Thank you for watching, and I'll see you in the next video.
Speaker Change: Seeing no further questions, I will now turn the call back to David Pidduck for any closing remarks.
David Pidduck: Thanks, Operator, and thank you, everyone, for joining us. We look forward to seeing everybody or speaking with everybody in next quarter. And, everybody, hope you're having a great summer. Take care.
David Pidduck: Take care. This will conclude today's conference call. Thank you all for your participation. You may not disconnect. Thank you very much. Please wait. The conference will begin shortly.
Speaker Change: This will conclude today's conference call. Thank you all for your participation. You may now disconnect.
David Pidduck: We will continue to focus on growing our business in Europe, Australia, and Brazil. We are hopeful that our pharmaceutical partners' file in Brazil will be approved in the next quarter and start to generate revenue in Q4. In Europe, we've made progress on initial contracts in the UK, France, and Poland.