Plus Products Reports Second Quarter 2020 Financial Results
SAN MATEO, Calif., Aug. 20, 2020 (GLOBE NEWSWIRE) — Plus Products Inc. (CSE: PLUS) (OTCQX: PLPRF) (the “Company” or “PLUS”), a cannabis branded products company in the U.S., today released its unaudited financial and operational results for the three and six months ended June 30, 2020, expressed in U.S. dollars. These filings are available for review on the Company’s SEDAR profile at www.sedar.com and on the Canadian Securities Exchange (the “CSE”) website at www.thecse.com.
Q2 2020 Financial Highlights
- Revenues: Net revenues reached $4.3M in Q2 2020, representing 21% year-over-year growth as compared to Q2 2019 net revenues of $3.6M. The Company continues to see revenue growth driven by its core operations in the California adult-use market, with contributions from new brand launches, the Nevada adult-use market, and its national hemp CBD product line. Sales in Nevada were negatively impacted by COVID-19 during the quarter due to a market-wide reduction in demand and temporary disruption in supply caused in part by the pandemic.
- Gross Profits: Gross profits climbed to $1.6M in Q2 2020 compared to $0.7M in Q2 2019. Gross profit margin in Q2 2020 was 36%, up from 20% in Q2 2019. Reduced costs per unit derived from operating at increased scale, along with a higher average selling price per unit, drove the improvement in profitability.
- Operating Profits (Losses): Operating losses were $(1.4)M in Q2 2020, representing a 71% improvement year-over-year from $(4.6)M in Q2 2019.
- Cash Balance: The Company reported $13.0M in cash and cash equivalents at June 30, 2020. Cash and cash equivalents fell by $1.1M during the second quarter. With a $0.7M semi-annual interest payment occurring at the end of the period, the Company consumed just $0.4M in cash from normal operating, investing, and financing activities.
Q2 2020 Business Highlights
- In June 2020, the Company expanded the product offering of its PLUS CBDRelief brand. Following significant demand for the new wellness-based product line,1 the Company introduced a 1:1 Pomegranate CBD:THC ratio product. The new offering contains 5mg of THC and 5mg of CBD per serving along with ellagitannins, which are unique antioxidants found in pomegranates that are associated with anti-inflammatory pathways.2 The new product joins the initial CBDRelief lineup, which includes a 9:1 Tropical Mango gummy with 9mg of CBD and 1mg of THC per serving, and an 18:1 Tart Cherry gummy with 18mg of CBD and 1mg of THC per serving.
- In June 2020, the Company announced the retirement of its Chief Financial Officer, Jon Paul. The role has been filled by then-current VP of Finance, Nate Pearson. Mr. Pearson has significant experience operating within the finance departments of companies in emerging and heavily regulated industries. Following his time at Ernst & Young, Mr. Pearson worked at Tesla as a Senior Financial Analyst and at Lagunitas as the Director of Financial Planning and Analysis, before ultimately joining PLUS in his role as Vice President of Finance.
- In July 2020, just after the reporting period, the Company announced the launch of its new HI-CUBES brand. With 10mg of THC packed into each 5 calorie serving, HI-CUBES are the most concentrated gummy products available by volume within the California market.3 Manufactured with 100% whole-plant full-spectrum oil, the product delivers an array of cannabinoids, flavonoids and aromatic terpenes to create a powerful effect for consumers looking for an intense cannabis experience.
The first half of 2020 has been about creating a sustainable economic foundation for the business and continuing to lay the groundwork for current and future growth. We are very happy with the progress we have made on both of these fronts.
Jake Heimark, Co-founder and CEO
Compared to the second half of 2019, in the first half of this year PLUS grew net revenues 29% from $7.0M to $9.0M, improved gross margin from 19% to 36%, and reduced cash burn 89% from $18.9M to $2.1M.
Heimark added, “While shipments from PLUS to its 3rd-party distributor in California dropped from Q1 to Q2, contributing to the quarter-over-quarter reduction in net revenues from $4.7M to $4.3M, market demand remained strong as sales of the Company’s products from its 3rd-party distributor to licensed retailers in California (the ‘Wholesale Depletions’) grew by 13% quarter-over-quarter.4
“Despite the difficulties we experienced in Nevada during the quarter, we have successfully restarted production with our manufacturing partner and look forward to revitalizing our presence in the market.
“Beyond the improvements we’ve seen in our fundamentals, we made an important strategic transition from a single brand to a portfolio of brands in the first half of this year with the launch of PLUS CBDRelief and HI-CUBES into the California adult-use market.
“PLUS continues to believe that California is the most strategically valuable market to build a cannabis brand. California is the largest legal Cannabis market in the world today, but more importantly still retains the most growth potential of any market in the U.S. The adult-use market in California is expected to grow by more than $4.0 billion dollars over the next four years. With a projected market size of 7.2 billion dollars in 2024, California is expected to be larger than the next four largest projected U.S markets (Colorado, Florida, New York, and Michigan) combined.5
“Moving forward we will continue to drive our 2020 strategy with a focus on: 1) ensuring the safety and health of our employees, customers, and partners during this pandemic; 2) establishing ourselves as the clear, long-term leader in California edibles; and 3) becoming a cash-flow positive business.”
In March 2020, there was a global outbreak of COVID-19, which continues to evolve. The extent to which the virus may impact the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence. The ultimate geographic spread of the disease; the duration of the outbreak; travel restrictions; social distancing; business closures or business disruptions; and the effectiveness of actions taken in the United States and other countries to contain and treat the disease all remain unknown.
While cannabis has been deemed an essential business throughout most of California, it is still too early to understand how COVID-19 will impact PLUS or the market as a whole. To date, the Company has not seen a sustained downside impact on consumer demand in its core California market. Please visit plusproductsinc.com/coronavirus to see the actions PLUS has taken to respond to this unique challenge.
(1) According to PLUS internal sales data, the PLUS CBDRelief brand sold into licensed retailers representing more than 80% of the Company’s California wholesale business within 3 months of its launch
(2)  Li Z, Henning SM, Lee RP, et al. Pomegranate extract induces ellagitannin metabolite formation and changes stool microbiota in healthy volunteers. Food Funct. 2015;6(8):2487-2495. doi:10.1039/c5fo00669d.  Heber D. Pomegranate Ellagitannins. In: Benzie IFF, Wachtel-Galor S, eds. Herbal Medicine: Biomolecular and Clinical Aspects. 2nd ed. Boca Raton (FL): CRC Press/Taylor & Francis; 2011.  Zhao R , Long X , Yang J , et al. Pomegranate peel polyphenols reduce chronic low-grade inflammatory responses by modulating gut microbiota and decreasing colonic tissue damage in rats fed a high-fat diet. Food Funct. 2019;10(12):8273-8285. doi:10.1039/c9fo02077b.  Kang B, Kim CY, Hwang J, et al. Punicalagin, a Pomegranate-Derived Ellagitannin, Suppresses Obesity and Obesity-Induced Inflammatory Responses Via the Nrf2/Keap1 Signaling Pathway. Mol Nutr Food Res. 2019;63(22):e1900574. doi:10.1002/mnfr.201900574
(3) According to internal market research
(4) According to sales data received from the Company’s 3rd party distributor, HERBL distribution solutions. Wholesale Depletions do not represent income for the Company but are an indicator of market demand for products sold by PLUS
(5) Arcview Market Research State of the Legal Cannabis Markets 7th Edition Report
Conference Call Details
At 5:00 pm Eastern Time / 2:00 pm Pacific Time today (Thursday, August 20, 2020) the Company will host a conference call and webcast to discuss the financial results and its recent corporate highlights.
Participant Dial-In Numbers:
Toll-Free: (866) 220-4156
Toll / International: (864) 663-5231
*Participants should request the Plus Products Earnings Call or provide conference ID: 9094390
Please dial-in or log-on to the webcast at least 15 minutes before the start of the call
The call will also be webcast at https://edge.media-server.com/mmc/p/96527bg3. Please visit the website at least 15 minutes prior to the call to register, download, and install any necessary audio software. Following the conclusion of the call, there will be an archived audio webcast of the conference call available for replay on the Company’s website at PlusProductsInc.com.
Jake Heimark, Co-founder and Chief Executive Officer, and Nate Pearson, Chief Financial Officer, will be conducting a question and answer session following the prepared remarks.
PLUS is a cannabis food company focused on using nature to bring balance to consumers’ lives. PLUS’s mission is to make cannabis safe and approachable – that begins with high-quality products that deliver consistent consumer experiences. PLUS is headquartered in San Mateo, CA.
Adjusted uncompressed weighted average shares outstanding and loss per share.
The Company has additionally determined the adjusted uncompressed weighted average shares outstanding and loss per share, basic and diluted. The Company believes these measures to be representative of loss and comprehensive loss on a per share basis; however, these performance measures have no standardized meaning. As such, there are likely to be differences in the method of computation when compared to similar measures presented by other issuers. Management believes that, in addition to conventional measures prepared in accordance with GAAP, some investors use this information to evaluate the Company’s performance. Accordingly, they are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.