WeedMD Released Q1, 2020 Earnings Beating Revenue Estimates

WeedMD Inc. (TSX.V:WMD) released their first quarter financials for the 2020 fiscal year, beating net revenue estimates by $5.48M, and up 265% year-over-year.

This substantial revenue increase was driven by a significant boost in patient sales, which saw a 1000% increase year-over-year. Wholesale revenue also saw a modest 160% growth year-over-year too.

The management attributed this performance to its renewed focus on its adult use brand, Color Cannabis, and its expanded distribution and partner network thanks to its acquisition of Starseed Holdings.

In turn due to its increased sales volume, the company realized an EBITDA loss of $5.1M below street estimate by 6.25%.

Performance Breakdown

The company sold nearly 5 million grams of cannabis at a weighted average cost of $2.54 per gram. Direct to Patient cannabis which saw the most revenue increase were sold at an average price of $7.43 per gram, while Provincial cannabis were sold at $4.21 per gram. However cannabis was sold to wholesalers at an average price of $1.25 per gram, which is quite below its weighted average cost per gram.

Fortunately the latter issue is on path to be resolved since the company has already lowered its cost per gram by 12.4% year-over-year. The company would further be able to lower this as it continues to expand its outdoor cultivation operations. On its release, the management announced that the company had completed planting 18 thousand clones across its 27-acre outdoor field in June, which makes WeedMD one of the few licensed-producers entering its second year of outdoor operations.

In terms of liquidity, the company has enough to operate for another quarter. When considering the fact that the company has nearly $36M of debt with interest payments totalling half a million, investors should expect new financing activities in near term because the company does not generate a positive cash flow at the moment.

Share Price Performance

WeedMD’s share price action is lesser to the marijuana ETF, MJ. However, its shares could catch a bid if the company continues to execute on outdoor growing strategy, increasing brand recognition, and achieving its necessary client acquisition targets.

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