Open up the financials and MDA to follow along. TRST recorded sales of $7.0 million for a 14% QoQ increase.
Grams of flower sales increased 5% but were offset by a decline in price per gram to $8.14 from $8.81 sequentially, resulting in a 2.6% decrease in dollar sales. Oil sales increased 24% in dollar sales with sales by ML growing at a like rate. Average revenue per ML decreased slightly from $2.04 to $1.97 but revenue per gram equivalent of Oil went up to $9.34/gram equiv from $9.27/gram equiv. So while bottle price notionally fell, price per gram of input improved. [No one else I have reviewed provides this very interesting data point]. Oil sales as per MDA are 64% of overall sales [my math shows it a little higher at 67%. I have looked for an error but cannot find one. Reverse engineering their MDA numbers on page 6 I get Oil at 62% and Bud at 34%, gap of 4%. So my error is likely in attributable to accessories sales.]
Interesting to note that TRST equates 4.73 ml oil = 1 gram equivalent in 4Q 2017 versus 3.78 ml = 1 gram equivalent in Q4 F2016. Q3F17 it was 4.55 ml= 1 gram. This is the lowest I believe I have seen disclosed.
Average patient consumption went down from 26.2 to 22.8 grams/per patient per Q on a 6,000 lift in patients during the Q.
Most of this Q’s story is in the Gross Margin before IFRS Voodoo line, with a pretty significant drop QoQ from 69% to 23% in Q4. Part of the decrease was bringing on harvests of Niagara GH in Dec/17 [Oct/17 Cultivation License] and accompanying amortization, as amortization expense increased $400K to $669. However, $1.8 million [as per news release disclosure] was from bringing in 3rd party product such that they could grow mothers for Niagara planting in Vaughan instead of product for sale. They state this is “one-off”.
Sales license for Niagara was in hand in Feb/18, so look for distortion in GM to be evident next Q, as they do not have a full Q of sales but have a full Q of overhead. Full Gross Margin yield without distortion should be evident in Q2 F18 [April-June 2018].
Production Exp + FVI of $1.5 Million = $6.8 million versus sales of $7.0. But keep in mind, a chunk of sales was third party, so this would be in a deficit if it was all in-house sales.
This is reflected if you look at COGS [pre voodoo] per Gram sold which went from $2.42 to $6.18/gram QoQ. That is $3.36/gram swing. So that is where the Gross Margin was eaten up. GoB was large at $11 million vs $6 million last Q, as they built up inventory that was not saleable until Sales license receipt in Feb/18, but the larger factor was bio assets increasing $6.4 million as they filled up the Phase 1 at Niagara with plants. TRST continues to be a leader in Opex control with total Opex expenses increasing by 3% in absolute terms but falling as a percentage of Sales to 69% from 76% last Q. Looking at peer group [includes ACB, APH, CGC, LEAF, OGI] TRST is tied for tops with Aphria on SGA Aggregate at 56% of Sales versus LEAF at 79%, OGI at 86%, CGC at 94% and ACB at 109%. On SBC basis over the Trailing Twelve Months [so as to iron out the semi-annual swings] TRST is tops at 11%, OGI at 27%, Leaf at 29%, Aph at 30%, ACB at 47% and CGC at 49%. While reporting a Positive Net Income of $6.2 million… when adjusted for IFRS Voodoo that swings $9.4 million to the negative and ends up at negative $3.2 million versus negative $0.4 million last Q.
Adjusted EBITDA also took a hit due to the $1.8 million erosion from third party goods sold: swinging to negative $1.7 from positive $1.2 million last Q. Year-end adjusted EBITDA was positive at $41k. Not going to look at too many B/S items… Cash is up $10 million to $18 million and should get a further boost from drawing Green House Term Debt of $10 million [$5 million more will be drawn at completion of P2]. Inventory increased by $2.4 million to $11 million. They had $3.4 million in Finished Goods while $7.3 million was WIP, increases of $0.9 and $1.5 million QoQ, respectively. [Not sure if WIP is a function of cultivated at GH but not sold due to harvest in late Dec or just a timing issue with the Vaughan. The good news is FG increased QoQ indicating they are processing more than selling [caveat: although the FG could be third party goods, as no breakdown is provided]. Fixed asset spend was $6.8 million for the Q. And look at that… no goodwill or intangibles on the balance sheet!!! Plus no Convertible debentures on debt side. That is CLEAN!! Probably the cleanest I have seen in the industry. It will be interesting to see if their sales were inventory constrained last Q based on getting GH P1 sales license half way through Q1 F18. Full benefit of GH won’t be seen until Q2 but partial benefit should materialize in Q1 F18.
With the sales license in hand look for them to remove throttle on patient acquisition in Q2 18 [up 6,000 last Q but seems to be up only 3,000 in Q1F18] and open up export opportunities.