Key Highlights

  • For Q3-2019, Biome Grow Inc. (“Biome”, “company”) reported revenue of $1.44 million, a QoQ increase of 7%. The company shipped approximately 192 kg of dried cannabis flower at an average selling price per gram of $7.49 versus 170 kg of dried cannabis flower at an average selling price per gram of $7.86 in Q2-2019. We are revising our 2019 and 2020 revenue forecasts to $5.13 million (previously $11.27 million) and $15.57 million (previously $40.20 million), respectively. This is due to the company’s shift in business direction to be an asset-light cannabis wholesaler rather than a cannabis cultivator.
  • Stabilization in Gross Margin: Q3-2019 gross margin was 43% (Q2-2019: 44%). Due to revenue revisions, we are revising our 2019 and 2020 gross margin forecasts to 43.64% (previously 36.56%) and 31.68% (previously 64.32%), respectively.
  • Increase in SG&A Expense: Q3-2019 SG&A expenses were $1.78 million, a QoQ increase of 32%. The large increase in SG&A expenses QoQ were primarily attributed to greater professional fees and salaries and wages. We are revising our 2019 SG&A expense forecast higher to $6.16 million (previously $5.70 million). Due to changes made to revenue for 2020, we are revising our 2020 SG&A expense forecast to $6.75 million (previously $12.06 million).
  • Q3-2019 EBITDA was -$1.15 million (Q2-2019 EBITDA was -$0.75 million). Earnings for Q3-2019 and Q2-2019 were -$1.48 million (EPS: -$0.01) and -$0.77 million (EPS: -$0.01), respectively. Our revised 2019 and 2020 earnings forecasts are -$4.18 million (EPS: -$0.04) and -$3.35 million (EPS: -$0.02), respectively. Our previous 2019 and 2020 earnings forecasts were -$1.89 million (EPS: -$0.01) and $10.34 million (EPS: $0.05), respectively.
  • The company now has a distribution channel to the provinces of (1) Newfoundland and Labrador, (2) Nova Scotia, (3) Saskatchewan, (4) New Brunswick, (5) Manitoba and (6) Prince Edward Island.

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