InterCure Ltd. (TSX: INCR.U) (TASE: INCR) (dba Canndoc) (the “Company”) is pleased to announce its financial results for the second quarter of 2021 and provide a business update. All amounts are expressed in New Israeli Shekels (NIS) or Canadian dollars ($), unless otherwise noted.
Second Quarter 2021 Key Financial & Operating Highlights
- Achieved record revenue of NIS 45 million ($17 million), four times greater than the second quarter of 2020 and up over 35% compared to the first quarter of 2021.
- EBITDA2 for the second quarter of the Company’s cannabis business was NIS 12 million ($5 million), and NIS 11 million ($4 million) on a consolidated basis. This represents an annual run rate of close to NIS 50 million ($20 million), a significant increase year-over-year, driven by revenue growth, improvement in gross profit and operating profit.
- Positive cash flow from operations for the fourth consecutive quarter.
- Strong balance sheet with NIS 201 million ($78 million) of cash as of June 30, 2021.
- Generated Pro forma1 second quarter revenues of NIS 55 million (over $21 million), representing a run rate of NIS 220 million ($86 million).
- Recorded a continued increase in operating profit, EBITDA and net profit.
- Continued to grow market share due to solid demand for Canndoc’s branded products, expansion of its medical cannabis dispensing operation and continued improvement across all facets of the business, including same store sales (SSS) increase.
- Added three additional medical cannabis license pharmacies during the quarter, bringing the total retail locations to eight. Expansion of the Company’s medical cannabis dispensing operation is expected to continue and accelerate in the third quarter and throughout the remainder of 2021.
- Successful launch of the first ever Cookies™ GMP premium products exclusively cultivated and manufactured in the Company’s advanced southern facility.
- Solid international demand for InterCure’s GMP branded products expected to boost global expansion as Ministry of Economy announced easing regulation for medical cannabis exportation.
- Legislation of adult use cannabis and CBD products in Israel progresses as a new government sworn into office in June 2021.
- Revenue growth is expected to continue in the third quarter and throughout 2021.
“We continue to execute our profitable growth strategy while strengthening InterCure’s brands, manufacturing and distribution leadership,” said InterCure CEO Alexander Rabinovich, adding, “we achieved during this quarter unmatched results with some of the strongest revenue growth rates and EBIDTA margin in the sector. Our leadership position in Israel, the leading GMP market, alongside our global expansion creates visible momentum for continued near and long-term profitable growth, generating value for shareholders and relief for patient communities.”
“The second quarter of 2021 is InterCure’s sixth consecutive quarter with quarter-to-quarter high double-digit growth and fourth consecutive quarter with positive cash flow from operations,” said InterCure CFO Amos Cohen, adding, “maintaining sound financial discipline and a strong balance sheet are key in strengthening our position leading the consolidation process outside North America.”
[1] Includes estimated revenues of all InterCure’s consolidated operations for the entire quarterly period.
[2] This is a non-IFRS financial measure and does not have a standardized meaning prescribed by IFRS, please see “Non-IFRS Measures” below.
(1) Gross profit before effect of fair value.
(2) EBITDA adjusted for changes in the fair value of inventory, share-based payment expense, impairment losses (and gains) on financial assets, non-controlling interest and other expenses (or income). This is a non-IFRS financial measure and does not have a standardized meaning prescribed by IFRS, please see “Non-IFRS Measures” below.
Second Quarter 2021 Results
The Company reported second quarter 2021 revenue of NIS 45 million ($17 million), an increase of four times compared to revenue of NIS 11 million in the prior year period and up more than 37% sequentially compared to the first quarter of 2021. Estimated revenue represents an annual run rate of NIS 180 million (over $70 million). Pro Forma second quarter revenues on a full quarterly operating basis of NIS 55 million (over $21 million), representing a run rate of NIS 220 million ($86 million).
InterCure continued to grow its market share with strong demand for Canndoc’s branded products, expansion of its medical cannabis dispensing operation and continued improvement across all facets of the business, including same store sales (SSS) increase.
During the time of this report, InterCure launched its Lemonade™ medical cannabis approved pharmacy in Jerusalem, the first Lemonade™ retail location outside of the US. In addition, it added two more medical cannabis licensed pharmacies to its leading pharmacy chain – Givol™, bringing the total number of medical cannabis approved retail locations to eight. The expansion is expected to continue and accelerate during the third quarter and throughout the remainder of 2021.
The Company continued to generate increases in operating profit, EBITDA and net profit during the second quarter of 2021, reflecting InterCure’s market leadership, scale and operational excellence.
During the second quarter the southern facility, largest and most advanced in Israel, successfully ramped up its cultivation capacity to meet the growing demand for InterCure’s GMP products. To continue supplying the solid demand, the Company is considering accelerating production and development plans of its southern cultivation site.
During the quarter, the Company successfully launched new branded products, including the first ever Cookies™ GMP premium products, setting new standards of quality. These were exclusively cultivated and manufactured in the Company’s advanced southern facility as part of the strategic partnership with Cookies™.
In late June 2021, the Company was one of the first and only Israeli licensed producers to meet the new standards set by the IMCA (Act 109) and successfully resumed importation of medical cannabis from its exclusive strategic partner Tilray. Importation is expected to continue and accelerate throughout the third quarter and the rest of 2021.
Legalization of adult cannabis use progresses, for the first time in Israel’s history cannabis reform was part of the new government’s coalition agreements. Since the new parliament was assembled in June, both coalition and opposition parties put forward bills for adult cannabis use with minor differences. InterCure remains committed to lead this upcoming new market once the legislations pass.
Another expected reform is the completion of de-listing CBD from the Dangerous Drugs Act. With the formation of a new government, this process is expected to continue and come to completion. During the quarter, InterCure has laid infrastructure with our strategic partner Charlotte’s Web™, a global leader, and is prepared for the launching of this new segment.
The new Minister of Economy also enacted an ease on exporting GMP grade medical cannabis and CBD products from Israel. Combined with solid international demand for InterCure’s GMP branded products, the new regulations are expected to boost the Company’s global expansion. InterCure’s leadership and brand equity in international target markets, including Europe, position the Company for long term growth in these emerging markets.
The Company is in advanced stages of completing an acquisition and merger of Israeli medical cannabis licensed producer ‘Better’. The integration with Better is expected to increase InterCure’s market share and further strengthen its leadership position within the pharmaceutical cannabis market.
On April 20, 2021, InterCure applied to list its shares on The Nasdaq Capital Market (“Nasdaq”) and has filed a registration statement with the SEC to register its shares under the Exchange Act of 1934, a prerequisite to listing on Nasdaq. The Company expects to satisfy all of the requirements for listing and will issue a statement once a trading date has been confirmed by Nasdaq.
Consolidated Financial Statements and Management’s Discussion and Analysis
InterCure’s unaudited financial statements and accompanying notes for the three and six month periods ended June 30, 2021 and related management’s discussion and analysis of financial condition and results of operations (“MD&A”) are available under the Company’s profile on SEDAR.
