MJardin Group, Inc. Reports Third Quarter 2018 Financial Results
DENVER–(BUSINESS WIRE)–MJardin Group, Inc. (“MJardin” or the “Company”) (CSE: MJAR), a leader in cannabis management, today reported financial results for its third quarter ended September 30, 2018. All amounts are expressed in United States dollars. Certain metrics, including those expressed on an adjusted basis, are non-IFRS measures. See “Non-IFRS Financial Measures” below.
Highlights of the Third Quarter 2018 Results Versus Third Quarter 2017 Results
- Revenue increased 65.1% to $7.0 million compared to the prior year of $4.3 million;
- Gross margin1 increased to 56.3% from 38.7% in the prior year;
- Adjusted EBITDA increased 48.4% to $1.0 million compared to the prior year of $0.6 million;
- Net loss was $0.4 million compared to net income of $0.6 million in the prior year, largely reflecting higher interest expense, compensation and benefits, and higher legal and consulting fees related to recent acquisitions, equity and RTO transactions;
- Completed Cheyenne acquisition (license transfers pending), establishing MJardin as a principal operator in Nevada;
- Completed an investment into DNA Genetics, providing an entry into the California market and expansion in the European region, with a leading Cannabis brand;
- In addition, subsequent to the end of the third quarter, in November 2018 the Company announced the pending acquisition of GrowForce Holdings (“GrowForce”).
1 Gross margin is defined as net revenue divided by gross revenue
We are pleased to report our first quarterly results as a publicly traded company, continuing our strong growth trends and positive EBITDA. This is a very exciting time for MJardin with this month’s public listing of Mjardin shares and the announcement of the proposed acquisition of GrowForce. We believe we are well positioned as one of the largest and most experienced cannabis operators in North America and as the largest multi-national operator.
Rishi Gautam, Chairman of MJardin
We intend to continue to grow our footprint of managed and owned facilities, both across the U.S. and Canada as well as globally, and are pleased with the progress we have and are continuing to make towards becoming a preeminent global operator of legal cannabis assets.
“Based on current operations, MJardin has one of the largest international footprints of any cannabis provider. MJardin now operates with direct ownership, or has investment, in three provinces and three states. MJardin will continue to expand either organically or through acquisitions both in these locations and into new markets that are consistent with our operating principles,” continued Gautam.
Third Quarter 2018 Results
Revenue increased 65.1% to $7.0 million in the third quarter of 2018 from $4.2 million in the third quarter of 2017. The growth was driven primarily by facility design and build-out fees earned from GrowForce for cultivation centers, interest on notes receivable and rent income earned from Buddy Boy Brands. At the end of the third quarter of 2018, the Company was managing 37 total facilities / operations.
Net revenue, defined as gross revenue less direct expenses incurred for compensation and benefits and other operating costs borne by the Company in performing its consulting, and cultivation and operations management services, increased 140.1% to $4.0 million in the third quarter of 2018 from $1.7 million in the third quarter of 2017 and gross margin increased to 56.3% from 38.7% in the same period a year ago. The increase in gross margin primarily reflects revenue earned for facility design and build-out fees from GrowForce-owned cultivation centers in Canada, the increase in revenue from interest income and rent earned from affiliated operator Buddy Boy Brands.
Total operating expenses increased 58.9% to $5.8 million from $3.6 million in the prior year period. The increase reflects increased compensation and benefits to support growth, including increased grow facility personnel at affiliated and non-affiliated operator facilities and the continued expansion of the Company’s executive team and corporate office personnel. The operating expense increase also includes a $0.7 million increase in professional fees to support recent equity, public listing and strategic transactions.
Operating income increased 101.1% to $1.3 million in the third quarter of 2018 from $0.6 million in the third quarter of 2017 and operating margin increased to 17.9% from 14.7% in the same respective periods.
Net loss for the third quarter of 2018 was $0.4 million, or $0.01 per common share, compared to a net income of $0.6 million in the third quarter of 20171.
Adjusted EBITDA increased 48.4% to $1.0 million in the third quarter of 2018 from $0.6 million in the third quarter of 2017. Adjusted EBITDA, which is not an IFRS measure, is defined by us to mean EBITDA adjusted for acquisition-related costs, share-based compensation, corporate restructuring charges, compensation-related derivative gains or losses (e.g. stock options and warrants) and gains or losses on property and equipment. There is no directly comparable IFRS measure for Adjusted EBITDA; the most directly comparable measure is net (loss) income.
See the reconciliation of Net (Loss) Income to Adjusted EBITDA below.
Balance Sheet and Cash Flow
As of September 30, 2018, the Company had $2.5 million in cash and cash equivalents, total assets of $78.3 million and $31.8 million of total debt. After the end of the third quarter, on October 19, 2018, MJardin completed an equity capital raise in the form of a subscription receipt offering in the approximate amount of CAD$26 million. On November 13, 2018, MJardin completed the reverse take-over of Sumtra Holdings. On November 15, 2018 the Company commenced trading on the Canadian Securities Exchange and the $26 million of subscription receipt proceeds were released from escrow and available to the Company.
During the first nine months of fiscal 2018, the Company used $3.4 million of cash in operations and invested $3.6 million in capital expenditures, including $2.6 million of payments made for equipment on behalf of GrowForce Holdings. The operating cash use primarily reflects a $5.4 million increase in payments due from affiliates.
Management will host a conference call to discuss the Company’s third quarter 2018 results today at 6:00 a.m. Mountain Time (8:00 a.m. Eastern Time). Investors interested in participating in the live call can dial (888) 254-3590 from the U.S. and Canada or international callers can dial (323) 994-2093. A telephone replay will be available approximately two hours after the call concludes and will be available through Wednesday, December 5, 2018, by dialing (844) 512-2921 from the U.S. and Canada or (412) 317-6671 from international locations and entering confirmation code 7162341.
There also will be a simultaneous, live webcast available on the Investors – Events and Presentations section of the Company’s web site at http://investors.mjardin.com/ or directly at http://public.viavid.com/index.php?id=132426. The webcast will be archived for approximately 90 days on the Company’s website.
MJardin is a global cannabis management platform with extensive experience in cultivation, processing, distribution and retail. For over 10 years, MJardin has refined cultivation methodologies, developed state of the art facilities and implemented vertical integration for and on behalf of license owners. As a well-capitalized organization, MJardin continues to pursue strategic expansion and M&A opportunities across global legal cannabis markets. MJardin is based in Denver Colorado, with offices in Toronto, Canada and Barcelona, Spain.
1 The third quarter of 2018 is the first full quarter of operations during which the entity was structured as a corporation. Previously, the entity was structured primarily as a group of pass-through entities with ownership interests represented by member interests instead of common shares.
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