Key Highlights

  • Eve & Co Inc. (“Eve & Co”, “company”) reported Q3-2019 financials, with revenue growing 102% quarter-over-quarter (“QoQ”). The company shipped 242 kg of dried cannabis flower and trim at an average revenue per kg of $3,797 (a QoQ increase of 53%). Given the current state of the Canadian cannabis market, and a delay in the commencement of its German supply contracts, we are revising our 2019, and 2020, revenue forecasts to $4.31 million (previously $7.25 million) and $47.88 million (previously $73.38 million), respectively.
  • The company’s normalized gross margin for Q3-2019 was 20.84% compared to 38.61% in the preceding quarter. The deterioration in gross margin, indicated by management, was due to lower high margin bulk sales. We are revising our gross margin forecasts for 2019, and 2020, to 35.65% (previously 44.42%) and 42.59% (previously 58.73%), respectively.
  • SG&A expenses for Q3-2019 were $0.83 million, a QoQ decrease of 23%. The decline was primarily due to lower professional fees and consulting and contract work. Our 2019, and 2020, SG&A expense forecasts seem to be too high and we are revising these to $3.37 million (previously $6.54 million) and $9.58 million (previously $14.68 million), respectively.
  • The company reported a net loss of -$1.96 million (EPS: -$0.01) for Q3-2019, compared to net income of $0.36 million (EPS: $0.00) for Q2-2019. The deterioration in bottom line QoQ was primarily due to changes in the fair value of company biological assets. Our revised earnings forecast for 2019, and 2020, are -$4.36 million (EPS: -$0.02) and $6.88 million (EPS: $0.02), respectively. This compares to our previous earnings forecast for 2019, and 2020, of -$6.58 million (EPS: -$0.02) and $19.75 million (EPS: $0.07), respectively.
  • The company’s 0.78 million sq. ft. facility expansion was approved by Health Canada in December 2019. In addition, the company now has a distribution footprint to the provinces of Ontario, Saskatchewan, Manitoba and Newfoundland and Labrador.

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