Shares in Zenabis Global Inc. (TSX: ZENA) rose 80 per cent as the company reported its first quarter of positive earnings.
The licensed Canadian cultivator released its earnings report Tuesday for its first quarter 2020, ended March 31.
Zenabis reported consolidated net revenue of $19.9 million, an 11 per cent increase from $17.9 million in the prior quarter. The majority of the growth came from the company’s cannabis segment, which increased 18.5 per cent to $12.6 million from $10.6 million over the same period.
A host of quarterly efficiency gains was reported by the company. Gross margin before fair value changes to cannabis inventory was 39.7 per cent of net revenue, compared to 31.6 per cent in the prior quarter.
Net revenue per gram of weed sold was $3.38, compared to $2.87 in Q4 2019. Cannabis production costs were also down, to $0.63 from $0.97.
Zenabis reported a consolidated net loss of $1.5 million or $0.00 per share, fully diluted, compared to $127.0 million or $0.53 per share in Q4 2019.
Some of the best news for investors is the company’s first quarter of positive cash flow. Zenabis posted $2.3 million in adjusted earnings before interest, taxes, depreciation and amortization. The gains are a significant improvement from a loss of $10.4 million in the previous quarter.
The first quarter 2020 reflected cost savings of around $15 million, Zenabis said in the statement, relative to the prior quarter on the cannabis side of the business.
Improved overall sales, penetration into provincial markets and cost cutting programs have contributed to its first positive EBITDA, CEO Kevin Coft said.
“These cost reductions have so far yielded savings of approximately $10 million per quarter while continuing to grow our business,” he said in the statement. “The full benefit of these cost reductions will not be realized until the second quarter of 2020.”
Payroll costs are being reduced by an estimated $2.8 million moving into the next quarter, Zenabis says.
Read more: Zenabis Global axes 175 BC employees
Operational highlights over the quarter include an initial production run of vape cartridges for PAX Labs, a licence to export cannabis to the EU and the first purchase order for dried cannabis from a certified importer in Israel.
Top photo via Zenabis