Debra Borchardt
The Supreme Cannabis Company, Inc. (FIRE.TO) (SPRWF) reported net revenue of $19 million for the fourth quarter ending June 30, 2019, a 90% increase sequentially. The net loss for the quarter was $421,000. Supreme Cannabis’ core recreational flower brand, 7ACRES, accounted for the company’s marked increase in revenue, growing 443% year-over-year from $3.5 million in Q4 2018 to $19 million in Q4 2019.
In the fourth quarter, 7ACRES continued to transition sales from its legacy wholesale contracts to recreational sales channels, increasing revenue from recreational markets by 51% between Q3 2019 and Q4 2019.
“We end fiscal 2019 as one of the few Canadian cannabis businesses building sustainable operations and valuable brands, reporting $3.2 million in Adjusted EBITDA for the fourth quarter,” said Navdeep Dhaliwal, CEO of Supreme Cannabis. “Our positive Adjusted EBITDA and significant revenue growth in the fourth quarter reflects the rapid scale of our 7ACRES business and continued strong sales pricing for our brands from the provinces as we transition our premium supply to recreational sales channels.”
The company said in its statement, that with its partnership with Khalifa Kush Canada ULC,it expanded its product offerings beyond whole flower with the launch of premium KKE Oil. The company’s KKE Sensi Star Oil was the first oil launched under the KKE brand. It will create other ultra-premium products for recreational consumers under the KKE brand, including pre-rolls, derivative products, and flower.
Anticipating the next phase of cannabis regulations and the legalization of derivatives products, the company prepared to enter the cannabis extracts category through its partnership with Pax Labs, Inc. (“PAX”). Pursuant to this partnership, 7ACRES became one of only four license holders to supply cannabis pods for the Pax Era vaporizer in Canada. Supreme said it will benefit from PAX’s strong brand recognition, reputation, and market-leading vaporizer technology, selling more than 500,000 Era devices and over one million devices in the flower vaporizer category.
Looking Ahead
Supreme Cannabis said it is projecting net revenue of between $150 million and $180 million in fiscal 2020. The company also said it expected to be positive Adjusted EBITDA1 on aggregate over the course of the year. 7ACRES’ is to complete its transition from a wholesale business to premium consumer brand by third-quarter fiscal 2020, with complete in-house packaging capabilities for all flower products under the 7ACRES’ brand.
“With strong confidence in our core business, we began fiscal 2020 with two accretive acquisitions that expanded our addressable markets, provided valuable licensed operating assets and focused expertise,” Mr. Dhaliwal added. “As we integrate these businesses and realize further efficiencies from our scaled 7ACRES operations, we expect all of our brands to meaningfully contribute to the revenue we have forecasted for fiscal 2020. Amidst the noise of this new marketplace, Supreme Cannabis has taken a strategic and disciplined approach to develop a focused business with clear pillars: best-in-class infrastructure, top consumer brands, advanced intellectual property, and high-impact and capital-light exposure to developing international markets.”
