Q1 2025 MediPharm Labs Corp Earnings Call
Thank you for standing by and welcome to the meta farm Lab's conference call to discuss its first quarter 2025 results.
Greg Hunt: Our speakers on today's call are David <unk>, President and Chief Executive Officer, and Greg Hunt, our Chief Financial Officer.
As a reminder, all participants are in listen only mode and the conference is being recorded.
After management's presentation, we will take questions from the analyst community on the telephone and then take written questions through the Q&A feature on the webcast.
Greg Hunt: The information contained in this presentation should be considered together with the more detailed information disclosure financial data and statements available on the company's website and on Cedar plus profile.
Greg Hunt: As seen on slide two and three I would like to note that this earnings call contains forward looking information that is based on the company's current expectations estimates and beliefs as of today's date.
And we'll also use terms that are non I O R. S financial measures. Please review the company's most recent disclosure materials for the risks associated with the use of forward looking information and the use of non I S. R. S financial measures in this presentation.
Greg Hunt: Please note that all dollar amounts mentioned on today's call are in Canadian dollars, unless otherwise noted and now I would like to turn the call over to Mr. David Pitts.
Greg Hunt: Good morning, everyone and thank you for joining US today, we will focus on the strategic progress and momentum in our business that has driven our improved results later in the call I will discuss the evolving situation involving a dissident shareholder.
Greg Hunt: Since becoming CEO in 2022, the <unk> team and I have worked tirelessly to implement a strategic plan focused on growing and diversifying revenues improving margins and lowering operating costs strengthening our balance sheet and building out our international medical business, where we believe we have a clear competitive advantage.
As part of this strategy, we acquired vivo in 2023 with the objective of combining two leaders in the medical wellness cannabis industry with complementary strengths and the ability to deliver a diversified revenue stream in multiple markets, most notably vivo provided us with an expanded international platform via the established Australia.
Greg Hunt: Ian and German medical cannabis brand Beacon medical.
Greg Hunt: Today, the vivo business has been fully integrated and met a farm and I can say it has been a transformational transaction and a genuine success story in the cannabis industry.
Greg Hunt: Positive Q1 results, we'll discuss today and the broader improvements across our business is evidence of the success of this acquisition and the overall strategy endorsed by our board.
Greg Hunt: For shareholders. We believe we have the platform and a strong financial base to deliver further growth both organic and inorganic that in turn will position the company to deliver long term shareholder value.
Greg Hunt: We had a successful first quarter of 2025, continuing the steady improvement since I joined the company in 2022 across all our key financial metrics.
Greg Hunt: Two key indicators that we believe measure our performance and demonstrate improvement across our business, our gross profit and adjusted EBITDA.
Greg Hunt: As seen on slide five.
Greg Hunt: Gross profit in Q1, 2025, or $4 2 million or 38, 7% of sales with our highest gross margin we achieved in many years.
Greg Hunt: And as seen on slide six this chart demonstrates the consistent progress we've made when I joined the company three years ago, we had a negative gross margin, meaning we were losing money on every sale we were making.
Greg Hunt: Adjusted EBITDA was negative $6 million per quarter, when I joined in 2022.
Greg Hunt: Nearly this was not sustainable and if we did not change course, we would have ended up bankrupt like many other cannabis companies have over the past few years instead, we generated a new plan that would get us to profitability.
Greg Hunt: Through hard work and commitment by the team we undertook many initiatives over the past several years to grow revenues increased gross profit and reduce operating expenses.
Greg Hunt: Positive trends in gross margin and adjusted EBITDA are proof that our plan is working.
Greg Hunt: As I mentioned, a moment ago several peers in the cannabis sector had excessive debt insufficient cash negative working capital and are generally in a very weak financial position.
Greg Hunt: Many cell products below cost.
Greg Hunt: We don't pay excise taxes, and many have stretched accounts payables and lose money.
You'll have entered seafood ablate protection and were gone bankrupt and have wiped out shareholders' investments.
As a result of our improved financial performance in recent quarters <unk> now enjoys a strong balance sheet, a favorable cash position positive working capital.
Greg Hunt: To invest in working capital and virtually no debt. We also own all our facilities have right and we are very proud to be up to date on excise taxes and accounts payable. Unlike many others in the sector.
Greg Hunt: All of this is testament to our focus on strategic execution, and creating long term sustainable value.
Greg Hunt: Given our financial strength <unk> stands out as an attractive international distribution partner and we are able to invest quickly in emerging growth opportunities globally. As an example, you will see that we have now begun to deploy some of our cash to support our international growth to investments in working capital, specifically inventory and accounts receivable.
Greg Hunt: These investments are driving our strong international revenues.
Greg Hunt: The well run financially stable and have proven reliable partner.
Greg Hunt: Has enabled us to secure many BBB partnership opportunities in both Canada and abroad, you actually pay our bills, which is not always a given by others in our industry.
Greg Hunt: Our strong cash position also gives us flexibility to consider various M&A opportunities and are quickly consolidating market, which cannot be understated.
Greg Hunt: Let's take a more detailed look at our international business, which has quickly become the oldest exciting segment for us.
Greg Hunt: On slide eight you can see the evidence of our international success with the upward trend in our international revenues since 2022.
Greg Hunt: International sales now represent more than 50% of our total revenues in each of the past two quarters and it's the fastest growing segment of our business.
Speaker Change: Many Canadian license producers, our Lp's had been approached by international customers regarding possible supply their chemicals box, including flower in some cases for premium prices for most of these producers who are new to the international market.
Speaker Change: <unk> and unique challenges at the international candidate supply chain are significant. These complexities include regulatory issues export and import permit management logistics changing quality testing requirements and cash flow and other commercial and operational challenges. Many Lps have found that the allure of premium prices are offset.
Speaker Change: By difficulties in navigating the complexities in the international markets.
Speaker Change: Meta farm have solve these challenges, while developing and earning the trust of our partners. We have several years of experience in selling into markets in the U K, Germany, Australia, Brazil, and other European countries.
Speaker Change: We also have a competitive advantage by conducting a robust suite of licenses, including good manufacturing process GMP and our drive establishment license with Dell that are required in the pharmaceutical industry.
Speaker Change: We benefit from long standing global relationships and partnerships established regulatory and supply chain pathways and commercial agreements and operational processes to smoothly facilitate international sales.
Speaker Change: As a result, we have a growing reputation as a reliable supplier.
Speaker Change: This position of strength enables matter a farm to work with several existing and new International partners.
Speaker Change: Significantly increased revenues, we have already begun to serve as a partner and bring together a high quality candidates products from Canadian LP, including flower and then facilitating a smooth and efficient supply of these products to international markets.
Speaker Change: The vivo acquisition accelerate our international growth led by the <unk> brand, which is very strong in Australia.
Roads in Germany and elsewhere a.
Greg Hunt: A couple of other quick highlights before I turn it over to Greg more information on some of these can be found in our investor deck and Brazil. <unk> has now received their controlled substance import authorization quota a key step to the coming 2025 product launch we have signed five new international distribution partners, our clinical trial investments continue to progress.
Rest of the respective milestone our inhaler technology from Emma dose is being launched in various countries and our hope facility sale to Rubicon for $4 5 million is on track to close in Q2, that's allowing us to monetize a dormant noncore assets.
Greg Hunt: Clearly as you can see there is momentum across our business.
Greg Hunt: Driven by the implementation of our strategy, which is focused on leveraging our key operational and product advantages to drive growth both internationally and domestically. We're excited about the future at this point I'll ask Greg to review, our Q1 financial results in greater detail.
Speaker Change: Thanks, Dave and good morning, everyone. Merry Farm management has been focused on growing our revenue base through both organic and inorganic initiatives, while reducing expenses and cash burn with the goal of becoming a profitable and cash flow positive organization.
Speaker Change: The results of these efforts can be seen in our Q1 results highlighted by the major milestone of becoming EBIT positive.
Speaker Change: Revenue for the first quarter of $10 8 million increased $1 million or 10, 6% versus the same quarter a year ago, driven by the expansion of our international business.
Speaker Change: International Medical cannabis revenue increased $2 8 million or 87% versus prior year to $5 9 million.
Speaker Change: The growth was broad based across our German, Australia, and United Kingdom customers and across our flower oil and Dronabinol product portfolio.
Speaker Change: The international medical business represented approximately 55% of total revenue in the quarter versus 33% in the prior year.
Speaker Change: ADT medical cannabis revenue for the quarter was $3 2 million and increased three 7% sequentially from Q4 2024.
Speaker Change: Canadian adult use and wellness revenue of $1 3 million in the quarter declined versus prior year and sequentially as we have chosen to prioritize profitability over volume in this highly competitive market.
Speaker Change: It is common knowledge that many cannabis companies felt products at a loss or at very low margins to achieve market share goals medifast.
Speaker Change: <unk> pharma is not willing to sacrifice profitability for the sake of market share.
Speaker Change: That has been a major factor in our margin expansion.
Speaker Change: Gross profit for the quarter was $4 2 million or 38, 7% of revenue and improved significantly versus Q1, 2024 gross profit of $2 7 million or 27, 4%.
Speaker Change: This was many farms highest gross profit and gross profit margin in many years as.
Speaker Change: As you can see on the slide gross profit margin has steadily improved over the past three years, driven by product mix production efficiencies and cost reductions.
Speaker Change: Management continues to focus on efficiencies to drive gross profit.
Speaker Change: General and administrative expenses for the quarter of $3 million decreased $1 2 million or 29% versus prior year.
Speaker Change: In addition, G&A decreased <unk> 7 million or 19% sequentially from Q4 2024.
Speaker Change: Marketing and selling expense of $1 2 million for the quarter was consistent with prior year and prior quarter.
Speaker Change: Total operating expenses, which includes G&A marketing and selling and R&D expense was $4 4 million for the quarter and decreased $1 3 million or 23% versus prior year and decreased zero point $8 million or 15% sequentially versus Q4 2024.
Speaker Change: Management continues to focus on further expense reduction opportunities.
Speaker Change: Adjusted EBITDA for the quarter was positive 141000, and improved $1 1 million from prior years 949000 loss. This improvement in adjusted EBITDA was driven by continued revenue growth margin expansion and the reduction of expenses.
Speaker Change: While we don't provide guidance, we are very encouraged by the EBIT trend and expect it to continue to move in a positive direction.
Speaker Change: Although there may be variability from quarter to quarter as international markets develop.
Speaker Change: Moving to a few notable items on the balance sheet, our cash balance at the end of Q1 was $8 4 million and declined versus the prior quarter as we invested in inventory to support our international expansion and growth.
Speaker Change: We plan to maintain this level of working capital to be able to remain nimble. So we can quickly respond to growth opportunities as they arise.
Speaker Change: Trade and other receivable balance at Q1 is $7 8 million and 89% of trade accounts receivable is aged 60 days or less.
Speaker Change: Trade and other payable balance at Q1 is $8 5 million and unlike many other cannabis company. We are up to date on cannabis excise duty sales taxes and trade payable obligations.
Speaker Change: The company has virtually no debt and full ownership of three production facilities with an appraised value of greater than $20 million.
Speaker Change: As Dave mentioned, we expect to see a further strengthening of our balance sheet when the $4 5 million sale of the whole facility closes during the current quarter.
Speaker Change: Although we still have work ahead of us to enhance our profitability profile and become cash flow positive Q1 was a significant step in the right direction.
Speaker Change: International Medical cannabis revenue increased 87% versus prior year and represented 55% of total revenues in the quarter.
Speaker Change: Gross profit margin for the quarter was 38, 7% and was the highest in over five years adjusted.
Speaker Change: Adjusted EBITDA was positive for the first time in over five years and finally as previously discussed we have a strong balance sheet relative to our peers.
Speaker Change: As a result of our strong balance sheet and significantly improved financial performance, we are well positioned to continue to invest in organic and inorganic growth opportunities as the industry continues to mature.
Speaker Change: With that I'll turn it back to Dave to discuss our upcoming AGM.
Dave: Thanks, Craig I now want to address the activist shareholder Apollo Technology Capital Corp, led by Mr. Regan Magee as.
Speaker Change: As many of you already know Apollo filed a dissident proxy circular nominating six alternative candidates for the <unk> board of directors at our upcoming AGM on June 16th some of you may have even been contacted directly by representatives of Apollo.
Speaker Change: The board has serious concerns about Apollo and its nominees most notably with Mr. Mcgee let.
Speaker Change: Let me take a few moments to provide you with some of our reasons for concern.
Speaker Change: Mr. Magee believes he is qualified to run met a farm despite having limited public company director experience and no candidates nor pharmaceutical experience.
Speaker Change: He has many challenges involving his own company Novo technologies, which I'll outline in greater detail shortly.
Speaker Change: Mr. Magee has also so far failed to presented an alternative vision for the company for us to consider.
Speaker Change: But first let me be clear myself and the board tried to engage Mr. Mickey in a constructive manner. When you first approach.
Speaker Change: We're always willing to engage with our shareholders and we extended the same courtesy to Mr. Mcgee. However, our efforts were quickly to rail when he attempted to pressure myself and another director into selling him our shares at a premium to market, but disturbingly on terms not being offered to other shareholders.
Speaker Change: And that tactic failed.
Speaker Change: Then insisted that the company provide for him a dilutive private placement for more than $3 million tailwind.
Speaker Change: <unk> gained control of the board.
Speaker Change: The board did in good faith carefully consider the unsolicited offer but given that Mr. Mcgee threatened that met a farm should take pablo's money versus selling the dormant hope facility, where else you would accuse the board of neglect of its fiduciary duties.
Speaker Change: The board concluded that such transaction with Apollo would not be in the best interest of shareholders and flatly refused the offer.
Speaker Change: From there the discussions quickly devolved into threats made by Mr. Mcgee against several directors, including myself and our chair, Chris taste and Mr. Mcgee went even further than that by also threatening our family members. He also spread untrue and defamatory information to associates of ours with no relationship to modify them at.
Speaker Change: At one point, Mr. Mcgee showed up at our manufacturing facility demanding entry and harassed and threatened and employee Mitch.
Speaker Change: Mr Magee as chairman and CEO of Novo Technologies, Inc. A private company involved for the past two years and $100 million lawsuit against several of its former directors, who resigned on mass over and allegedly toxic atmosphere and alleged misrepresentation.
Speaker Change: About how the business generated revenue.
Speaker Change: And its filings related to that same case, a wellness Toronto based institutional Investor <unk> Associates accused Mr. Magee of siphoning money from noble to exorbitant compensation and non arm's length transactions for his own personal use that case is still progressing through the courts.
Speaker Change: More recently noble announced the merger in March 2024, with check Caf limited a NASDAQ listed company. Despite this merger not closing it appears that noble has still managed to somehow have millions of dollars of cash transfer to its accounts from check cap.
Speaker Change: Interestingly, the chairman of check cap, who played a part in authorizing the cash transfer to noble is David lung kidney who is now being included on the Apollo list of nominees for meta farms Board.
Speaker Change: Prior to check cap, we do not believe Mr. <unk> had any experience as a board member for a public company.
Speaker Change: Last week, Chris <unk>, Our board chair and myself, along with the company's legal counsel were sued for a total of $100 million.
Speaker Change: By none other than Mr. Magee.
Speaker Change: We have the latest names added to a growing list of more than 10 active litigation filed involving the highly litigious and dispute prone Regan Mcgee.
Speaker Change: This disturbing history suggests that Mr. Mcgee puts his own interests above those of shareholders and should be excluded from your consideration at the director we.
Speaker Change: We are also concerned that only two of the six nominees. Mr. Mcgee has put forward have any cannabis experience and all such candidates experience has been primarily in the recreational space, which is very different from the medical space where met of farms focus lies.
Speaker Change: The nominees are also interlocked and multiple ways, meaning they have business relationships outside of met a farm that could impair their ability to make independent decisions.
Speaker Change: Let's move on now to take a look at our policy alleged holdings and metaphor, which they claim represents about 3% of meta farm shares. This is a small stake in our company acquired only in the last few months yet Apollo is now taking full control of your company without offering a single penny of premium to the rest of our shareholders. This.
Speaker Change: The brazen attempt to seize power through the backdoor bypassing any fair value transaction.
Speaker Change: Make no mistake anyone demanding control of a public company's board with such a small newly acquired position must meet an exceptionally high bar. They all shareholders a detailed credible plan for value creation.
Speaker Change: Paulo has presented nothing of the sort of strategy no vision, no roadmap, leaving shareholders with only Vegas assertion and no concrete alternatives to consider and we have no assurances and alternative strategy is forthcoming.
Speaker Change: Lastly, it's interesting to consider whether Apollo genuinely has concerns regarding <unk> performance in the competence of its management and board.
Speaker Change: So one may ask why it aggressively purchased its entire 3% block of <unk> shares in the open market in the last two and a half months forcefully engaged management to participate in a dilutive private placement and implemented a pressure field campaign to purchase met a farm shares from insiders directly.
Speaker Change: Next let me address our policy comments about our share price performance against the S&P <unk> composite index, which reflects apollo's inexperienced in cannabis industry. It also misses entirely how <unk> performed against disappear since I became CEO as outlined in the chart on slide 13.
As you can see for the time period from the end of 2022, when our plant started to reap rewards to now our share price has outperformed the largest cannabis companies in Canada, and the leading global marijuana life Sciences Index.
Speaker Change: Let me conclude with a summary of our company.
Speaker Change: Which supports why you should vote to protect your investment using the green proxy.
Speaker Change: Our business is more diversified than ever we are seeing meaningful growth in the international markets. We have distinct competitive advantages that will drive our continued success.
Speaker Change: Our financial strength is improving every quarter and we have a proven ability to complete successful acquisitions.
Speaker Change: Future has never looked brighter assuming we have a chance to continue to execute our strategy. This is not the time to change course, I truly believe that the foundations have been laid for a re rating opportunity based on our improved financial metrics strong balance sheet.
Speaker Change: And growth prospects.
Speaker Change: We believe the strategy and team currently in place is the best way to create sustainable value. We need you know to stand up for your company.
Speaker Change: Our annual meeting is on June 16th and our shareholders will be receiving our proxy materials. Shortly we urge you to review the materials and devote with the green proxy.
Speaker Change: Now I will turn it over to the operator for questions.
Speaker Change: At this time I would like to remind the analysts in order to ask a question press star one on your telephone keypad. All others. You may ask a question online using the Q&A button and typing your question in.
Speaker Change: We will pause for a moment to compile the roster.
Speaker Change: Okay.
Speaker Change: Our first online question.
Speaker Change: Do you expect the international business to keep growing.
Speaker Change: Thank you operator.
Dave: This is Dave.
Dave: Our international business is doing very well actually many candidates companies are seeking to grow their international business now and you see many making announcements about their intent.
Dave: To get into market. So we expect to see growth probably like on three fronts selling more products through existing channels and we've been in many of these markets for a long time selling into new markets, New Zealand, France, other European countries selling to new customers in our existing markets.
Dave: I think we expect our international business, yes to continue to grow and we recently signed five new International distribution partners have launched the new inhaler product.
Dave: And we expect to see more positive developments as we said in the call International now represents a large portion of our revenues and is seeing significant growth.
Dave: It's important our international business as a medical market. So it's really complex in terms of regulations and other challenges.
Dave: And we're experienced in navigating those complexities and I think we're well positioned based on our licenses our relationships our reputation and our history, there's lots of learnings over years.
Speaker Change: We're now investing in working capital is as Greg mentioned, we are deploying some of our cash to invest in working capital specifically to support our international growth. So.
Speaker Change: Short answer is yes, we expect international business to keep growing in a meaningful way.
Speaker Change: Your next question you've been promising better returns for years, yeah, the share price stays flat.
Speaker Change: Okay.
Speaker Change: Yes, I think as we mentioned so thanks for the question Yeah as I mentioned.
Speaker Change: I joined the company in 2022, I, often say that's accurate.
Speaker Change: The significant crash.
Speaker Change: In the market. So the graph that we show and I think we can put the graph maybe backup on the on the slide here if we could.
Speaker Change: Shows from essentially when I started to our performance now.
Speaker Change: I would say the cannabis industry as everyone knows has been challenging for most companies in the space of share prices have suffered capitals exited the market the market's overcrowded and requires consolidation and we think we have a role to play in that process, but it takes time.
Speaker Change: In the long run we believe with your returns in due course, because we're financially stable, we're diversified where experience we have an international presence we have pharmaceutical.
Speaker Change: Investments.
Speaker Change: Some companies they ended up in Cc dunaway, they saw their share price go to zero.
Speaker Change: And investors like that so we're proud to be part of a team that's on a different trajectory.
Speaker Change: Yeah.
Speaker Change: Many companies are.
Speaker Change: One concern in their financial reports I think the share price graph we showed.
Speaker Change: Shows that we've actually outperformed all of the major <unk>.
Speaker Change: Cannabis company since December 2022.
Speaker Change: As well as the global X marijuana life Sciences Index.
Speaker Change: In the long term, we believe expect companies with stable financials, and a growing business will be rewarded with share price appreciation, we intend to be in that group.
Speaker Change: We obviously are going to be one of the survivors but.
Speaker Change: Today, we're very proud to ship shared a positive EBITDA results.
Speaker Change: Well as a number.
Strategies and areas of focus that we believe are going to continue.
Speaker Change: To make the company stronger, which will in turn get reflected in stronger share price.
Speaker Change: Okay.
Speaker Change: Your next question what is the status of the sale of <unk>.
Speaker Change: I think that Nappanee is that is that our facility that we've announced is.
Speaker Change: Oh, sorry, the Napa need facility, we have announced that a deal that we prior had.
Speaker Change: Felt through the facility was actually never for sale, we were approached unsolicited to sell and they had offered a reasonable price.
Speaker Change: A potential acquirer actually was unable to come through with the funds that they had and in the time between signing and close our international business. As we mentioned some of which is supported from our Napa <unk> business exploded. So the interesting thing is it's probably a bit of a blessing that we didnt, helping happening facility, even though we hadn't.
Speaker Change: <unk>.
Speaker Change: That they were going to continue to supply us to help and support our international business. So with an average facility is no longer for sale, we're actually investing in the naphthalene facility, we're actually putting more business through the Nappanee facility, we're actually growing more product at the <unk> facility.
Speaker Change: And related facility question, just if someone else asked the question how are we doing with the sale process for our hope facility that is on track to be sold to Rubicon and that should close in Q2, and everything looks positive for that to come together, so that debt facilities update for votes.
Speaker Change: Okay.
Speaker Change: Your next question why should investors be worried about Apollo what are your biggest concerns with them.
Speaker Change: This is a question we get from from many shareholders as we speak to them I think you need to look at the litigious history of this dividend you have a history of lawsuits against his own directors and investors.
Speaker Change: He has been accused of siphoning off cash from other companies. The controls we believe he's intends to do the same thing with your cash for purposes, not align with shareholder interests and we intend to stop them from doing that.
Speaker Change: Yeah.
Speaker Change: I would direct your attention to our AGM website at Www <unk> labs.
Speaker Change: M Dot com and we will be communicating more detail and background.
Speaker Change: I've personally.
Speaker Change: Had dealings with Mr. Magee.
Speaker Change: And.
Speaker Change: It's hard to imagine his approach.
Speaker Change: And it's a very aggressive approach, it's hard to imagine us approach working with our international partners with our pharmaceutical partners, who value stable leadership and cooperative relationships.
Speaker Change: As a shareholder I would be very worried about the comprehensive and intentions of any team. He has put forward and what that would do to your business.
Speaker Change: We have a strong cash position, we have a strong asset base that the goal of many actavis.
Speaker Change: To try and get control of those assets and cash to deploy as they see fit so looking at the history of this dissident it doesn't inspire confidence.
Speaker Change: Okay.
Speaker Change: Again, if you would like to ask a question you can type it in on the webcast and at the Q&A button.
Speaker Change: Yeah.
Speaker Change: And that concludes our Q&A session.
David Pitts: I'll now turn the call back over to David <unk> for closing remarks.
Okay.
David Pitts: Thank you operator, and thanks to everyone who participated if you have any additional questions. Please contact us through the details shown on this slide.
David Pitts: For all of the latest development of materials related to the annual and special meeting of shareholders visit met a farm labs AGM dotcom regularly remember vote with the green proxy.
David Pitts: Just one comment theres going to be a lot of misinformation and even some statements that are patently false coming from the dissident group.
David Pitts: We're always open to discuss any issues with shareholders, we're going to try and keep shareholders posted on the <unk> labs, AGM Dot com website and.
David Pitts: And as we see as.
David Pitts: As we see things come up and in press releases, we will we will address them to provide the best information for shareholders to make their decisions. So thank you everyone for taking the time today, everyone have a great day.
David Pitts: Thank you for joining you may now disconnect.
Please wait the conference will begin shortly.
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