Vibe Bioscience Ltd. (CSE:VIBE)(OTC:VBSCF) (the “Company” or
“Vibe”), a vertically integrated cannabis retailer and cultivator,
is pleased to announce the financial and operating results for the
three months and full year ended December 31, 2019 and provide an
operational update. All financial information is provided in U.S.
dollars unless otherwise indicated. The Financial Statements and
Management’s Discussion and Analysis (“MD&A”) for the three and
12 months ended December 31, 2019 are available on the Company’s
SEDAR profile at www.sedar.com and on Vibe’s website at
www.vibebycalifornia.com.
2019 Operational
Highlights(a)
For the full year ended December 31, 2019 Vibe generated
positive Adjusted EBITDA of $293,224. Management anticipates
positive EBITDA during the first quarter of 2020 and for
fiscal year 2020 as a result of expanded operations, prudent
fiscal management initiatives implemented in 2019 and continuing
process improvements:
- Redding Acquisition
Completion. In December 2019, Vibe secured a license
for an adult-use cannabis retail operation located in Redding,
California by completing the acquisition of membership interests in
the securities of EVR Managers LLC. In February 2020, Vibe opened
its Redding retail outlet that is currently exceeding Management’s
forecasted customer count and revenue expectations. The Redding
dispensary was the first newly constructed location to be fully
branded under the “Vibe by California” store name. The Redding
location’s vernacular design is intended to maximize customer foot
traffic and streamline the purchasing process.
- Increased Store
Traffic. During 2019 and Q1
2020, average daily customer counts in the Sacramento and
Stockton stores increased significantly when compared to the
prior year’s periods.
- Expanded Payment
Methods. During the second quarter of 2019,
Vibe expanded acceptable payment methods in its dispensaries,
resulting in higher in-store sales for the second half of
2019.
- Commenced Delivery
Service. In June 2019, Vibe was granted a
delivery license for the City of Sacramento, allowing for
door-to-door delivery of cannabis products throughout Sacramento.
Customer adoption of Vibe’s delivery services in its Sacramento and
Redding markets has continued to increase as clients adjust to the
restrictions resulting from the COVID-19 pandemic.
- Completed Development of
its “Hype” Brand Extracts Products (“Hype
Extracts”). In October 2019, Vibe entered into
a strategic extraction agreement with a local manufacturer to
further expand and produce Hype branded products.
- Improvements and Buildout
of the Company’s Cultivation Facilities. In the
fourth quarter of 2019, the Company completed improvements to
increase its nursery capacity, which it expects will increase its
potential harvest schedule from 4 to 5 cycles per year and
production yield by 20-25%; facilitate the wholesale production of
clones available for sale; and provide research and development
space for the Company’s cultivation team.
- Undertook Significant
Actions to Reduce G&A. During 2019, the Company
incurred various one-time restructuring charges at its Canadian
head office resulting in anticipated monthly savings of
approximately $30,000 per month.
Financial Update:
The Company’s core cannabis business did not
commence until the acquisition of the U.S. Targets on February 18,
2019. Consequently, revenue, gross margin, G&A, selling
and marketing expense and adjusted EBITDA amounts include results
of; (i) the U.S. Targets from February 18, 2019 to December 31,
2019; and (ii) the Company’s head office for the entire twelve
months ended December 31, 2019. In 2018, the Company’s
activities consisted of identifying and evaluating cannabis
cultivation, retail dispensary and other ancillary business
opportunities with a view to negotiate and enter into letters of
intent and definitive agreements with respect to acquiring or
developing such assets. The Company’s key financial results for the
three and twelve months ended December 31, 2019 are as follows:
U.S. dollars |
Three Month EndedDecember 31, 2019 |
The Year Ended December 31, 2019 |
Total revenue(a) |
$4,012,850 |
$12,600,159 |
Gross margin |
$1,178,152 |
$4,617,645 |
Gross margin %(a) |
29.4 |
36.6 |
Adjusted EBITDA(a) |
$(158,313) |
$293,224 |
Adjusted
EBITDA %(a) |
(3.9) |
2.3 |
(a) This is a non-IFRS measure. Readers are
cautioned that the amounts presented do not have standardized
meanings prescribed by IFRS
Catalysts for 2020:
Vibe anticipates further growth over the next 12
months and positive EBITDA in the first quarter of 2020 and fiscal
2020 as a result of the 2019 operations highlights outlined above
in addition to the following catalysts:
- Cultivation and nursery assets in Sacramento came online at the
end of the fourth quarter of 2019 for optimization in Q1 2020;
- 13,500 square feet of new cultivation capacity in Crescent
City, California to be acquired and operational in May 2020;
- Launch of current and planned marketing campaigns in key
markets;
- Enhanced training of employees, focusing on total customer
satisfaction;
- Establishment of a centralized effective product procurement
strategy allowing negotiation of favorable terms and pricing, and
ensuring supplier quality and efficiency;
- Use of technology to enhance the customer experience for rapid
check in and purchasing, offering expedited service resulting in
increased average daily customer counts in the Sacramento and
Stockton locations compared to Q1 2019;
- Launched online platform with real-time inventory availability,
delivery and express pickup options;
- Expanded inventory and product selection, offering the largest
selection of product in each of Vibe’s markets;
- Initiated the Vibe Reward program, offering valuable rewards to
retain existing customers and increase lifetime customer value, and
expanding Vibe’s price match guarantee establishing Vibe as a value
leader in each of our markets;
- Expansion of Hype Cannabis Co. product availability to stores
in San Francisco and Los Angeles; and
- Engaging social media and online presence, featuring Vibe
branding in the community.
Outlook:
In the fourth quarter of 2019, the Company continued to build on
the positive results realized in the first five and a half months
of operating two dispensaries and a cultivation facility. The
U.S. Targets also benefited from positive seasonal effects in both
the second and third quarters of 2019, whereas the fourth and first
quarters are slower months for the Company. Vibe’s Sacramento
location launched its door-to-door delivery service in June 2019
and improvements to the store layout continue in connection with
the first phase of the upgrades and improvements being made to the
Sacramento Cannabis Campus. Vibe’s delivery service and online
ordering system have been critical in meeting growing customer
demand brought on by the COVID-19 pandemic.
Management expects the profitability of the U.S. Targets will
continue in 2020 with the introduction of the new Hype Cannabis Co.
Extracts line of products launched in August 2019, opening the
Redding dispensary, additional cultivation capacity, continued
roll-out of the door-to-door delivery service and ongoing
improvements being made to existing dispensaries. Management
expects the gross margin(a) realized by the dispensaries to be in
the 35 to 40 percent range in 2020. Management also
anticipates Sacramento Cultivation will operate at a slight loss on
a gross margin(a)basis for the remainder of the first quarter of
2020 and then to be a net contributor to the gross margin in
2020.
In addition, management expects the improvements and expansions
completed at Sacramento Cultivation will increase wholesale revenue
in addition to increasing sales of the Company’s proprietary “Hype
Cannabis Co.” brand, while lowering product costs at its three
dispensaries as a result of increased vertical
integration(b). However, the full benefit of the investment
in Sacramento Cultivation is not expected to be realized until 2020
or 2021, given the expected timeline to complete the upgrades.
The Company was partially negatively affected by increased
general and administrative expenses incurred by the head office in
the three months ended September 30, 2019 and December 31, 2019,
largely due to a one-time charge of approximately $200,000 in the
restructuring of the Canadian head office, investor relations
service, insurance costs and other expenses associated with public
company requirements subsequent to the Company’s public listing in
April 2019. Management expects head office general and
administrative expenses to be lower in 2020(b).
About Vibe Bioscience Ltd.
Vibe is a vertically integrated cannabis company delivering
exceptional retail experiences with its Vibe by California brand
and ethos, premier cultivation product and high-efficiency delivery
and on-line sales. The Company’s management team brings expertise
in retail, cannabis cultivation and mergers and acquisitions to
support its U.S. expansion through accretive acquisitions and
organic growth. For more information, please visit
www.vibebycalifornia.com.
(a) This is a non-GAAP measure. Readers are cautioned that the
amounts presented do not have standardized meanings prescribed by
IFRS. See discussion of non-IFRS Measures in the MD&A for
reconciliation to measures reported in the Company’s financial
statements.
(b) This is a forward-looking statement. See “Forward-Looking
Information”.
Forward-Looking Information
Certain statements contained in this press
release constitute forward-looking information. These statements
relate to future events or future performance. The use of any of
the words “anticipate”, “could”, “intend”, “expect”, “believe”,
“will”, “projected”, “estimated” and similar expressions and
statements relating to matters that are not historical facts are
intended to identify forward-looking information and are based on
the parties’ current belief or assumptions as to the outcome and
timing of such future events, and may be impacted as a result of
general economic conditions or the ongoing COVID-19 pandemic.
Actual future results may differ materially.
The forward-looking information contained in
this release is made as of the date hereof and the parties are not
obligated to update or revise any forward-looking information,
whether as a result of new information, future events or otherwise,
except as required by applicable securities laws. Because of the
risks, uncertainties and assumptions contained herein, investors
should not place undue reliance on forward looking information. The
foregoing statements expressly qualify any forward-looking
information contained herein. Risk factors related to the Company
are described in the Company’s Listing Statement dated March 25,
2019, a copy of which is available under the Company’s profile on
SEDAR.
This press release does not constitute an offer
to sell or a solicitation of an offer to buy any of the securities
in the United States. The securities have not been and will not be
registered under the United States Securities Act of 1933, as
amended (the “U.S. Securities Act”) or any State securities laws
and may not be offered or sold within the United States or to U.S.
Persons unless registered under the U.S. Securities Act and
applicable State securities laws or an exemption from such
registration is available. Not for distribution to U.S. Newswire
Services or for dissemination in the United States. Any failure to
comply with this restriction may constitute a violation of U.S.
securities laws.
Unlike in Canada which has Federal legislation
uniformly governing the cultivation, distribution, sale and
possession of medical cannabis under the Cannabis Act (Federal),
readers are cautioned that in the U.S., cannabis is largely
regulated at the State level. To the knowledge of Vibe Bioscience
Ltd., there are to date a total of 33 states, plus the District of
Columbia, that have legalized cannabis in some form.
Notwithstanding the permissive regulatory environment of medical
cannabis at the State level, cannabis continues to be categorized
as a controlled substance under the Controlled Substances Act in
the U.S. and as such, cannabis-related practices or activities,
including without limitation, the manufacture, importation,
possession, use or distribution of cannabis are illegal under U.S.
Federal law. Strict compliance with State laws with respect to
cannabis will neither absolve Vibe Bioscience Ltd. of liability
under the U.S. Federal law, nor will it provide a defense to any
Federal proceeding, which may be brought against Vibe Bioscience
Ltd. Any such proceedings brought against Vibe Bioscience Ltd. may
adversely affect its operations and financial performance.
Contact Information |
|
Company
Contact: |
Mark Waldron, CEO |
Phone: +1 833-420-VIBE |
Email:
info@vibebycalifornia.com |
Website:
www.vibebycalifornia.com |
|
Investor Relations
Contact: |
Glen Nelson |
Phone: +1 833-420-VIBE x 107 |
Email:
ir@vibebycalifornia.com |
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