~Company reports record quarter with 73% increase
in year over year net revenue~
TORONTO, July 24, 2020 /CNW/ - Namaste
Technologies Inc. ("Namaste" or the "Company") (TSXV: N)
(FRANKFURT: M5BQ) (OTCMKTS: NXTTF), an online platform for cannabis
products, accessories, and responsible education, today reported
its financial results for the second quarter ended May 31, 2020. All financial figures are in
Canadian dollars unless otherwise indicated.
Namaste's second quarter results continue to build on the
revenue growth success posted in the first quarter as the Company
solidifies its position within the cannabis value chain. On a year
over year basis for the second quarter ended May 31, 2020, revenue increased and net loss
decreased significantly. On a sequential basis, second quarter
revenue, gross margin and the net loss improved over the first
quarter of 2020.
CannMart Inc. ("CannMart"), a wholly owned subsidiary of Namaste
Technologies, has demonstrated its ability to attract premium
brands, value added suppliers, and provincial agencies thanks to
its expertise in e-commerce, production, packaging, and
distribution in this highly competitive and regulated industry. As
reflected in the Q2 2020 results, CannMart's expanded product
catalogue grew in both its business to business ("B2B") and
business to consumer ("B2C") channels. CannMart continues to
strengthen its competitive position in the Cannabis industry as the
space matures and shifts into consumer packaged goods.
Second quarter highlights:
- Record net revenues for the Company of $6.9 million for the second quarter ended
May 31, 2020, a 73% increase over the
same period last year, and a 31% sequential increase over the first
quarter of 2020.
- The net segment revenue for CannMart, Namaste's core growth
engine, increased approximately 1500% to over $2.4 million compared to the comparable period in
2019, excluding excise tax.
- CannMart's revenue increased 82% on a sequential basis from Q1
to Q2 2020.
- Over 33% of second quarter 2020 revenue was derived from
cannabis and cannabis products compared to under 5% for the same
period in 2019.
- 48% of second quarter 2020 net revenues were derived from
Canadian clients compared to 19% from the same period in 2019, a
338% increase in quarter over quarter revenue, reflecting efforts
made to focus on growing the Company's market share within the
Canadian market.
- Reported Q2 2020 net loss of $4.8
million compared to $8.6
million in the same quarter last year. The improvement
reflects CannMart's introduction of new distribution channels,
restructuring efforts in 2019, and resulting business improvements
in 2020.
"The introduction of B2B distribution channels by CannMart has
made a significant contribution to Namaste's revenue stream and
bottom line," said Meni Morim, CEO
of Namaste. "For the second consecutive quarter, we have seen
considerable revenue growth and have just recorded the highest
quarterly revenue for the Company to date. As stated in the first
quarter, the strategic decisions we made in 2019 and early 2020 are
beginning to be reflected in our results. Our efforts have resulted
in significant growth for cannabis and cannabis products sales in
Canada but there is more work for
us to do. We have shown that we can grow our revenue and as we
expand our product lines, improve operational efficiencies, and
increase our gross margins in coming quarters to coincide with
revenue growth."
"As Canada is leading the way
with respect to the rollout of regulations around a legal cannabis
market, and with other countries paying close attention to this
rollout, we set out to refine and perfect the scalability of our
business model within this legal framework. The work and investment
that we have made and will continue to make in Canada will provide a playbook for eventual
expansion into other markets and verticals as regulations allow,"
added Morim.
"We continue to sign agreements with well-known international
cannabis brands. These are endorsements of our value proposition as
a leader in development, manufacturing and distribution of consumer
packaged goods in the cannabis sector. As brand loyalty becomes
more important in a maturing industry, we place great value in
working with well-known brands looking to leverage our expertise
and distribution channels and, at the same time, have invested in
creating products under our own brand. It will be brands that will
drive customer loyalty, product development and ultimately sales.
We have experienced early success with major brands through both
CannMart's B2B and B2C sales channels."
"We also received approval from Alberta Gaming, Liquor &
Cannabis ("AGLC") and the Ontario Cannabis Retail Corporation
operating as the Ontario Cannabis Store ("OCS") to begin offering
Cannabis 2.0 products, another significant milestone for Namaste.
The Cannabis 2.0 market is gaining momentum as new and innovative
products are being introduced. Alberta and Ontario are important markets for CannMart and
we will work to gain market share in these and other
provinces."
Summary of Consolidated Financial Results
Net revenue for the second quarter ended May 31, 2020 was $6.9
million, an improvement of 73% compared to $4.0 million for the second quarter of 2019.
Gross margin as a percentage of net revenue (before inventory
adjustment) for the second quarter ended May
31, 2020 was 9% compared to 18% for the previous period. As
illustrated on the chart below, cannabis revenue is demonstrating
strong growth and becoming a major component of total revenues.
https://mma.prnewswire.com/media/1219076/1.jpg
Overall expenses decreased by $241,913 or 4% for the second quarter ended
May 31, 2020 in comparison to the
same period last year. The change reflects a decrease in
share-based compensation and selling and marketing expenses offset
by an increase in office and general costs.
Adjusted EBITDA for the second quarter ended May 31, 2020 was a loss of $4.7 million, compared to a loss of $3.9 million for the second quarter ended
May 31, 2019. Net loss for the second
quarter ended May 31, 2020 was
$4.8 million compared to $8.6 million in the same period last year. The
improvement in the net loss is primarily attributed to a decrease
in restructuring and other related costs.
For further details, the complete Financial Statements for the
second quarter ended May 31, 2020 and
the related Management's Discussion & Analysis can be accessed
on the Company's SEDAR profile at www.sedar.com.
Annual General Meeting of Shareholders
The Company intends to hold its annual general meeting of
shareholders ("AGM") virtually on September
29, 2020. The Company requested and has received a
four-day extension to the date on which it is required to hold its
AGM from the British Columbia Registrar of Companies in accordance
with section 182(4) of the Business Corporations Act (BC). The
Company will provide further details regarding the AGM, including
how shareholders can attend and vote at the virtual AGM, in due
course.
COVID-19 UPDATE
COVID-19 continues to be an unprecedented challenge for the
global community. In response to this very serious health risk,
management employed procedures to mitigate its effects on the
business and ensure the continued health and safety of its
employees, vendors, partners and customers as the first quarter was
coming to a close. Although these challenges still persist,
management believes that appropriate actions have been taken and
the business is well positioned to operate with limited
disruption.
NON IFRS FINANCIAL MEASURES
Management evaluates the Company's performance using a variety
of measures, including "EBITDA" and "Adjusted EBITDA". The non-IFRS
measures discussed below should not be construed as an alternative
to other financial measures determined in accordance with IFRS.
These measures do not have a standardized meaning prescribed by
IFRS and therefore they may not be comparable to similarly titled
measures presented by other publicly traded companies.
The Company believes these non-IFRS financial measures provide
useful information to both management and investors in measuring
the financial performance and financial condition of the
Company.
Management uses these and other non-IFRS financial measures to
exclude the impact of certain expenses recognized under IFRS when
analyzing underlying operating performance and cash impact. From
time to time, the Company may exclude additional items if it
believes doing so would result in a more effective analysis. The
exclusion of certain items does not imply they are
non-recurring.
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|
|
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Three months
ended
|
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Six months
ended
|
|
|
31-May-20
|
|
31-May-19
|
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31-May-20
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31-May-19
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Net
loss
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$
|
(4,842,373)
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$
|
(8,632,771)
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$
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(12,234,038)
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$
|
(18,910,807)
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Income tax
|
|
8,180
|
|
(72,479)
|
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32,748
|
|
(165,772)
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Depreciation and
amortization
|
|
506,188
|
|
508,342
|
|
1,232,469
|
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1,174,554
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EBITDA
|
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(4,328,005)
|
|
(8,196,908)
|
|
(10,968,821)
|
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(17,902,025)
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Other
income
|
|
118,052
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331,458
|
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278,125
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|
755,745
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Restructuring and
other costs
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1,300,000
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(3,346,603)
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1,300,000
|
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(6,926,103)
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Impairment of
goodwill and intangibles
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|
-
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-
|
|
-
|
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-
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Impairment loss on
loans receivable
|
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(322,887)
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-
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(322,887)
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-
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Impairment of
investment in associate
|
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(437,860)
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-
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(1,016,127)
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-
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Share of associates'
loss, net of tax
|
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(140,408)
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(97,102)
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(329,652)
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(97,102)
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Share-based
compensation
|
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(142,870)
|
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(1,178,673)
|
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(178,681)
|
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(2,582,209)
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Adjusted
EBITDA
|
$
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(4,702,032)
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$
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(3,905,988)
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$
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(10,699,599)
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$
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(9,052,356)
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(i) Current and
deferred income taxes, depreciation and amortization, and
share-based compensation were excluded from the Adjusted EBITDA
calculation as they do not represent cash expenditures.
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(ii) Other income
consisting of gain on disposal of subsidiary, interest income,
realized gain on disposition of AFS investments, unrealized gain on
derivatives and other miscellaneous non-recurring income were
excluded from Adjusted EBITDA calculation.
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(iii)
Non-recurring costs related to restructuring and legacy issues were
excluded from Adjusted EBITDA calculation.
|
|
(iv)
Share of associates loss, net of tax, is excluded due to lack of
control.
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About Namaste Technologies Inc.
With headquarters in
Toronto, ON, and offices in both
B.C. and around the globe, Namaste Technologies is a leading online
platform for cannabis products, accessories, and responsible
education. The company's 'everything cannabis store', CannMart.com,
provides customers with a diverse selection of hand-picked products
from a multitude of federally-licensed cultivators, all on one
convenient site. Namaste's global technology and continuous
innovation address local needs in a burgeoning cannabis industry
requiring smart solutions.
Information on the Company and its many products can be accessed
through the links below:
NamasteTechnologies.com
NamasteMD.com
Cannmart.com
NamasteVapes.ca
FORWARD-LOOKING INFORMATION – This news release contains
"forward-looking information" within the meaning of applicable
securities laws. All statements contained herein that are not
historical in nature contain forward-looking information.
Forward-looking information can be identified by words or phrases
such as "may", "expect", "likely", "should", "would", "plan",
"anticipate", "intend", "potential", "proposed", "estimate",
"believe" or the negative of these terms, or other similar words,
expressions and grammatical variations thereof, or statements that
certain events or conditions "may" or "will" happen. The
forward-looking information contained herein, (including statements
relating to the expected continued increases in revenue and gross
margins in coming quarters, expansion into other regulated markets,
and the gains in market share expected to be achieved with the
introduction of Cannabis 2.0 products for sale in Alberta, Ontario and other provinces) is made as of the
date of this press release and is based on assumptions management
believed to be reasonable at the time such statements were made,
including management's perceptions of Namaste's standing in the
online marketplace for cannabis products, the Company's transition
into a growth phase with a focus on increasing revenues and gross
margins while reducing costs, the Company's goal of becoming a
leading procurement, processing and distribution company focusing
on the Canadian cannabis market, Namaste's beliefs regarding the
quality of its management, the strides the Company has taken in its
operations and the quality of the brands offered by CannMart, the
Company's focus on growing the business profitably, reducing
operational burn and continuing to master the mechanism of moving
cannabis into the market, safely and reliably, the expected demand
for Cannabis 2.0 products and the growth of that market and the
results of operations, operational matters, historical trends,
current conditions and expected future developments, as well as
other considerations that are believed to be appropriate in the
circumstances. While we consider these assumptions to be reasonable
based on information currently available to management, there is no
assurance that such expectations will prove to be correct. By their
nature, forward-looking information is subject to inherent risks
and uncertainties that may be general or specific and which give
rise to the possibility that expectations, forecasts, predictions,
projections or conclusions will not prove to be accurate, that
assumptions may not be correct and that objectives, strategic goals
and priorities will not be achieved. A variety of factors,
including known and unknown risks, many of which are beyond our
control, could cause actual results to differ materially from the
forward-looking information in this press release. Such factors
include, without limitation: risks relating to the Company's
ability to execute its business strategy and the benefits
realizable therefrom, risks specifically related to the Company's
international operations, and risks relating to the market price of
Namaste's common shares. Additional risk factors can also be found
in the Company's current MD&A which has been filed under the
Company's SEDAR profile at www.sedar.com. Readers are cautioned not
to put undue reliance on forward-looking information. The Company
undertakes no obligation to update or revise any forward-looking
information, whether as a result of new information, future events
or otherwise, except as required by applicable law. Forward-looking
statements contained in this news release are expressly qualified
by this cautionary statement.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release or has in any way approved or disapproved
of the contents of this press release.
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SOURCE Namaste Technologies Inc.