IM Cannabis Corp (IMCC) 2024 Q3 法說會逐字稿

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The expansion of the market as well as I did in the last quarter. I would like to put this growth into perspective by taking you through the details of ourselves in Germany in 2024.

They clearly show that the strategic shift we made to concentrate our resources on the German market was the right one.

Our sales increased by over 200% in Q2 versus Q1 to reach $3.5 million in Q3. We again increased sales by 66% versus Q2 to reach $5.8 million in Q3.

Since Q2. We have been driving the market growth and are positioned among the top cannabis companies in Germany.

While I am very proud representing these numbers. Our focus in the last few months has actually been behind the scenes on building a solid foundation for 2025.

We stand the quarter leaning further into a clear target integration of the German and Israeli teams. The goal was to build a strong consistent supply chain and the laser focused on how to improve the efficiency and accuracy of how we use our resources.

I believe that this foundation will be the basis to drive accelerated growth in Germany in 2025.

Behind every success, there is a strong unified team in Q2. The Israeli and German colleagues started working very closely to build the new supply channel from Israel to Germany.

Cannabis supply chains are notoriously difficult to build with all the local regional and international regulations that need to be followed.

They manage this in a record time. The first three Israeli ground trains launched in Q3.

The teamwork behind these first three strains is gathering steam and has led to new projects and opportunities.

We are in the process of onboarding several new suppliers and expect to see the results during 2025 just as important as a stable supply chain to deliver growth is sufficient resource management to sustain the growth.

Our Q3 2024 revenues increased from $12.4 million in Q3 2023 to $13.9 million this quarter while our operating expenses decreased from $4.9 million in Q3 2023 to$ 4.1 million in Q3 2024.

As a result, our operating expenses ratio was 30% in Q3 2024. In comparison with 40% in Q3 2023.

A remarkable 25% increase in efficiency.

This decrease has been driven by several factors but the integration between the two teams has been fundamental by sharing the same resources. We have been able to significantly lower costs, our active cost management, a stretch to all aspects of the business, from purchasing and logistics to sales marketing, making our execution much more efficient.

Our goal is to keep this foundation to drive sustainable growth in 2025.

While our journey to lean an company over the last year has not always been easy. I'm very proud of how efficient we have become, how well we are using our resources to deliver growth.

The progress we have already made on both the supply chain and our self efficiency gives us a very strong foundation to deliver accelerated growth in Germany in 2025.

Taking a look at our Israeli business. As in Q2, we continue to shift resources to support the German business and continue to work toward maximizing our profitability in Israel for our Israeli business. This translates into a clear focus on the premium and premium markets.

Over the past few months, our market has been influenced by several factors.

The ongoing war has continued to impact our supply chain causing delays in shipments.

We have also seen a reduction in the number of medical cannabis patients with a decline of 10% from July to October while the war initially delayed the medical cannabis license renewal process. It does not explain the sustained decrease in the absence of sufficient data. We assume that the changes brought about by the July 2024 reform are causing complications in the prescription process.

On the operational level. In our Israeli business, we relaunched lot 420 a premium Canadian grant with a total of three strands.

All three strains were very well received by the market selling through quickly.

The same occurred with super sativa.

The leading string in our iron craft be these results clearly show on how we can capitalize on our understanding of both the premium market drivers as well as the patients' needs deliver. Says as in the previous quarter, we are continuing to clean our slowmo nonpremium stock, clearing out old inventory for about $0.6 million which again impacted our cost of sales gross margin and gross profit to sum up Q3 2024.

What the girl fancy delivered in Germany is clearly a highlight. Most importantly, we focused on building a solid foundation, fully integrating the two teams to strengthen our supply chain and drive efficiencies that will the basis to deliver accelerated growth in 2025 in Germany.

I will now hand the call over to Oren Shuster will review the third quarter 2024 financial results.

Thank you, Owen. Our Q3 results were mainly impacted by the following points.

Our revenue in Q3 increased by 12.2% versus Q3, 2023. This growth was driven mainly by an increase of 278% in the German revenue.

Our selling price per gram of the white flour increased 42% in this time period to $6.2 per gram.

In addition, our operating expenses decreased by 16% versus Q3 2023.

We continue closely monitoring our inventory and a good for about $0.6 million for slow moving stock.

The need equity or an agreement revocation resulted in reduced revenue and expenses versus previous periods.

I will now take you through the overview of the Q3 2024 financial results for the company's operations revenue for the nine months ended September 30th 2024 and 2023 were$ 40.7 million and $38.1 million respectively. Representing an increase of $2.6 million or 7%. The increase is mainly attributed to the accelerated growth in Germany with an increase in revenue of $6.3 million and decreased revenue in Israel of $3.7 million. Net.

The decrease in Israel is attributed to the orin bill cancellation which resulted in a decrease in revenue of approximately $5.1 million compared to the nine months ended September 2023 excluding the revenue in Q3 2023 we have an increase of revenue in Israel as well of approximately $1.4 million or 6% revenue for the three months ended September 30th 2024 and 2023. Were $13.9 million and $12.4 million respectively, representing an increase of $1.5 million or 12%.

The increase is mainly attributed to the accelerated growth in Germany with an increase in revenue of $4.3 million and decreased revenue in Israel of$ 2.8 million. Net. The decrease in Israel is attributed to the orin cancellation which resulted in decreasing revenue of $3.2 million compared to the three months ended September 2023 excluding the earning revenue in Q3 2023 we have an increase in revenue as well in Israel of approximately $0.4 million or 5% total.

White fly sold for the nine months ended. September 30th 2024 was 6,408 kg at an average selling price of $6.01 per gram compared to 6,528 kg for the same period in 2023 at an average selling price of $5 0.34 per gram for the three months ended September 30 2024. Total's bright flower salt was 2,202 kg at an average selling price of $6.2 per gram compared to 2,558 kg for the same period in 2023 at an average selling price of $4.35 per gram.

Mainly attributed to the inventory life cycle products, diversity discounts given an increased competition in the region for the nine and three months ended September 30th 2024. Germany's share of total revenue has significantly increased compared to the corresponding period in 2023.

This increase has had a considerable impact reflecting in a higher average price due to the favorable market conditions and growing demands. Together, these factors have contributed to an overall positive effect on our revenue performances.

The cost of revenue for the nine months ended September 30th 2024 and 2023 were $34.9 and $28.4 million respectively. Representing an increase of $6.5 million or 23%. This is mainly due to the increase of material cost of approximately $7.1 million of which clearing all raw material of approximately $0.94 million. A code for slow inventory of approximately$ 2.2 million and increased inventory sales resulted with an increase of approximately$ 4 million which is offset by reducing other cost net of approximately $0.6 million.

The cost of revenue for the three months ended September 30 2024 and 2023 were $10.7 and $9.6 million respectively, representing an increase of $1.1 million or 11%. This is mainly due to the increased cost of approximately $1.2 million including an increase of $0.6 million for slow inventory.

This is offset by a decrease in other cost net of approximately $0.1 million gross profit for the nine months ended September 30 2024 and 2023 were $5.8 million and $9 million respectively, representing a decrease of $3.2 million or 36% gross profit for the three months ended September 30th 2024 and 2023 were $3.1 million and $2.6 million respectively. Representing an increase of $0.5 million or 19% loss, profit including losses from real life fair value adjustment on inventory sold of $0.05million and $0.7 million for the nine months ended September 30 2024 and 2023 respectively.

It was margin after fair value adjustment in the nine months ended September 30th 2024 and 2023 respectively were 14% versus 25% and 23% versus 21%. For the three months ended September 3,024 and 2023 G A expenses for the nine months ended September 30th 2024 and 2023 were $6.8 million and $7.7 million respectively. Representing a decrease of $0.9 million or 11%.

General and administrative expenses for the three months ended September 30th 2024 and 2023 were 2.4 and $2.1 million respectively. Representing an increase of $0.3 million or 10%.

The G&A expenses are compromised mainly from salaries to employees in the amount of $1.6 million and $0.5 million for the nine and three months ended September 30 2024 professional fees in the amount of$ 2.3million and $0.9 million for the nine and three months ended September 30 2024 depreciation and amortization in the amount of 0.4 and $ 0.4 million for the nine and three months ended September 30 2024 interest cost of an amount of$ 1 million and $0.34 million for the nine and three months ended September 30 2024 and other expenses in a total amount of $1.5million and$ 0.5 million for the nine and three months ended September 30 2024 selling and marketing expenses for the nine months ended September 30 2024 and 2023 were $5.3million and$ 8 million respectively.

Representing a decrease of$ 2.7 million or 34% selling and marketing expenses for the three months ended September 30 2024 and 2023 were$ 1.5 and$ 2.6 million respectively. Representing a decrease of $1.1 billion or 41%.

The decrease in selling and marketing expenses for the nine and three months ended September 3,024 is mainly attributed to our name, revoke agreement of approximately$ 1.3 million and $70.7 million respectively.

In addition to a decrease of $1.4 million and $0.3 million respectively in selling and marketing expenses.

Total operating expenses for the nine months ended September 2024 and 2023 were 15.2 million and 16.6 million in Q3 2024 the total operating expenses were $4.1 million compared to $4.9 million in Q3 2023. A decrease of $ 0.8 million or 16%.

Mainly due to decrease in salaries of approximately$ 0.3 million depreciation expenses of $0.2 million and insurance of $0.1 million operating expenses ratio for the nine months ended. September 30th 2024 was 31% excluding the onetime expense outcome of the Indian cancellation versus 44% for the nine months ended. September 30 2023 representing an increased efficiency of about 30% operating expenses ratio for the three months ended.

September 30th 2024 was 30% versus 40% for the three months ended. September 30 2023 representing an increased efficiency of about 25%.

The efficiency ratio improvement is resulting from the increased operational costs and increased revenue non I OS adjustment a loss for the nine months ended September 2024 and 2023 was$ 4.7 million compared with $3.7 million representing an increase of 25% non FRS adjustment, EBITDA loss in Q3 2024 was $0.2 million compared to an EBITDA loss of $1.3 million in Q3 2023 representing an increase of 82% net loss in the nine months ended September 2024 was $10.6 million compared to $6.7 million in the nine months ended September 2023.

Net loss in Q3 2024 was $1.1 million compared to $2.1 million in Q3 2023 diluted loss per share for the nine months ended September 2024 was $4.29 compared to a loss of $2.95 per share in the same period for year 2023 diluted loss per share for Q3 2024 was $0.41 compared to a loss of $0.96 per share in Q3 2023.

As of the balance sheet cash cash equivalent as of September 302024 $2 million compared to $1.8 million on December 31st 2023 total assets as of September 30 2024 were $44.6 million compared to $48.8 million on December 31st 2023 a decrease of $4.2 million or 8.6%.

The decrease is mainly attributed to the over agreement cancellation of $9.5 million of which mainly attributed to goodwill of $3.5 million intangible asset $1.4 million inventory, $0.8 million receivables,$ 1.3 million property plant and equipment, $0.8 million and reduction of cash and cash equivalent of approximately 0.3 million.

In addition to our new revocation agreement effect, there is a total asset increase of $5.3 million mainly due to increase of $8.1 million in trade receivables and increase of cash and cash equivalent of 0.5 million. Offset by$ 4.8 million reduction in inventory and reduction of $0.9 million in intangible assets total liabilities. As of September 2024 were $40.4 million compared to $35.1 million on December 31st 2023 an increase of 5.3 million or 15%. The decrease was mainly due to the oim agreement cancellation of$ 6.8 million of which mainly attributed to put option liability. $2 million purchase consideration payable $2.2 million trade payables. $1.6 million lease liabilities $0.4 million and a decrease of $ 0.3 million in deferred tax liability.

In addition to the vocation agreement effect, there is a total liability increase of$ 12.1 million mainly due to an increase of $8.9 million in trade payables and an increase of $1.6 million in other accounts payable.

The company is planning to finance its operations from existing and future working capital resources as well as from available credit facilities and we will continue to evaluate additional sources of capital and financing as needed.

I would now like to turn the call back to you, Owen for closing remarks. Owen.

Thank you.

While the growth we delivered in Germany, this quarter is a highlight. We spent the quarter focused on building a solid foundation for 2025.

We lean further into the full integration of the German and Israeli teams.

Our goal was to build a strong consistent supply chain along with a laser focus on how to improve the efficiency and accuracy of how we use our resources.

I believe that the foundation we built this quarter will be the basis to drive further accelerated growth in Germany in 2025.

I will now hand the call over to the operator to begin our question and answer session operator.

Thank you to ask a question. Please raise your hand using your mobile or desktop application or press star nine on your telephone keypad and wait for your name to be called.

I repeat to ask a question. Please raise your hand using your mobile or desktop application or press star nine on your telephone keypad and wait for your name to be called.

I think there are no questions. So thank you operator and thank you all for joining our call today.

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