Earnings Release

As TheCannalysts were engaged by WeedMD to consult on preparation, format and content of Management Discussion and Analysis (although not for the previous five Q’s) we will not be providing much in the way of narrative to the Quarter in Pictures, and we will stand down from preparing “Structure & Current State” until such time as they are no longer a client OR until we believe we have put enough distance between engagement and analysis so as not to impact analysis.  The peer comparisons and tables kind of speak for themselves.

The following is data pulled from Weed MD financials and those of their peers.  (Math not analysis.)

WeedMD delayed their yearend reporting, which was due April 30, 2021 to “on or about May 28, 2021”, and reported May 31, 2021. “About” … I guess.

Income Statement Drivers & Breakeven: Trend

Last Q: Ohhh, that 1% GM really makes breakeven skyrocket.

This Q: Hold my beer… -444% GM… and I cannot do breakeven calculations with that.

Table 1: Revenue by Segment

NOTE: As Adult Use and Wholesale Revenue was not broken out, I imputed the Wholesale revenue by multiplying Average Selling Price by Grams sold.  Adult Use was the remaining non-Direct to Customer Revenue less imputed Wholesale.

Sales retreated $0.8 million -10% QoQ to $7.0 million before netting excise.  After excise $5.1 million a -$0.7 million decrease.

I do note they provided Q1F21 guidance of revenue of $12 million, +$5 million +72% QoQ, split between Medical $5.5 million (new record) +$2.9 million +114%, and $6.5 million adult use +$2.3 million +56%.

Income Statement Drivers & Breakeven: Peer

Gross Margin: Peer & Trend

Gross Margin was negative $22.5 million and includes an inventory impairment of $26 million.  If that was backed out GM would have been $3.5 million or 68%.

Tough to tell, given Q4 they harvested outdoor, if the impairment is indoor or outdoor related. On CC they indicate Outdoor will be a test pilot of strains this year.

On the CC they indicate Q1F21 GM will be a record (trusting that is a positive record).

Gross Margin: Larger Peer Base

New record at -444%.

SGA & SBC as % of Sales: Trend

Note: I move interest expense to Other income to maintain peer comparability.

Selling expense $0.9 million versus $0.5 million last Q.

G&A expenses $8.7 million versus $4.8 million last Q. Consulting and Professional Fees +$3.5 million QoQ.

SBC $0.7 million versus $0.8 million last Q.

Depreciation $0.7 million versus $0.8 million last Q.

Total Opex $11 million versus $7.4 million last Q.

SGA & SBC as % of Sales: Peer

+Net Operating Profit Sales Breakeven divided by Current Quarterly Sales: Peer

With a negative Gross Margin, I cannot calculate breakeven sales levels.

NOP without IFRS voodoo was -$34 million versus -$7.4 million last Q. Largely impairment driven.

Other Income (Expense): This Q -$1.3 million versus last Q -$31 million

• Covid grants last Q $2.4 million versus Q $0.3 million
• Other Income last Q $2.3 million from recovery of previously written off A/R, versus this Q $1.0 million
• Finance expense last Q -$0.8 million versus this Q -$2.6 million.  Full Q if Liuna loan.

Net income this Q -$44 million versus -$26 million last Q.

+EBITDA Sales Breakeven divided by Current Quarterly Sales: Peer

With a negative Gross Margin, I cannot calculate breakeven sales levels.

EBITDA Trend and Peer

Note: They did not adjust for impairment to inventory of $20 million this Q and $1.2 million in the previous Q.  I did.

“Gas in the Tank”- Trend

Inventory is $31 million -$12 million QoQ despite the outdoor harvest. Finished Goods inventory exceeds sales at $18 million versus $5.1 million in sales. 

Bio Assets are down considerably, likely due to outdoor harvest and writedowns, by $7 million to $2 million.

“Waterfall”: Trend

Outdoor harvest spikes total harvest to 16,963 KGs. They average a cost per gram in inventory of $2.65/gram.  Last Q this data was not available.

Cash vs Debt

Cash decreased by $8 million to the $22 million. Interest expense ramped as Liuna term debt was on books for entire Q.  They raised $17 million in equity post Q.

Accounts receivable decreased $5.8 million to $2.2 million.  This will likely ramp next Q with increase sales to provinces who have 60 day trade terms.

Accounts Payable are $16 million an increase of $7 million.

Balance sheet items, other than above, were not notably different QoQ.

The preceding is the opinion of the author and is in no way intended to be a recommendation to buy or sell any security or derivative. The author does not have a position in WMD and will not start one in the next five days.