Plus Products Reports Audited 2019 4th Quarter and Year-End Financial Results
SAN MATEO, Calif., May 07, 2020 (GLOBE NEWSWIRE) — Plus Products Inc. (CSE: PLUS) (OTCQX: PLPRF) (the “Company” or “PLUS”), a cannabis branded products company in the U.S., today released its audited financial and operational results for the three and twelve months ended December 31, 2019, expressed in U.S. dollars. These filings are available for review on the Company’s SEDAR profile at www.sedar.com and on the Canadian Securities Exchange (the “CSE”) website at www.thecse.com.
Q4 and Year-End Financial Highlights
- Revenues: Net revenues climbed to $13.9M in 2019, representing a 66% year-over-year growth as compared to 2018 net revenues of $8.4M. Net revenues in Q4 2019 reached $3.5M, representing a 4% year-over-year growth as compared to Q4 2018 net revenues of $3.4M. In December 2019, the Company was transitioning to a new distributor, HERBL Distribution Solutions (“HERBL”). Due to this transition, some sales which otherwise would have taken place in December 2019 were pushed out until January 2020.
- Gross Profits: Gross profits grew to $2.8M in 2019 compared to $1.1M in 2018. Gross profit margin in 2019 was 20%, up from 13% in 2018. Gross profits increased to $0.9M in Q4 2019 compared to $0.4M in Q4 2018. Gross profit margin in Q4 2019 grew to 26%, up from 13% in Q4 2018. Higher sales volumes and a focus on increasing operational efficiencies diminished the growth of labor and overhead costs relative to sales, increasing gross profits.
- Operating Expenses: Operating expenses were $27.6M in 2019, up from $7.6M in 2018. Operating expenses were $9.1M in Q4 2019, up from $3.3M in Q4 2018. In 2019, the Company invested in the nationwide launch of its hemp CBD line, entrance into the Nevada adult-use market, and launch of PLUS Mints, along with other investments in hiring talent, gaining market share, as well as building infrastructure and financial capacity to support its future growth.
- Cash Balance: The Company reported $15.2M in cash and cash equivalents at December 31, 2019. PLUS is capitalized with enough cash on hand to continue executing through the entirety of 2020 without any additional fundraising. The Company made significant changes to its business in Q1 of this year to improve cash flow – detailed below – and expects the impacts of these adjustments to benefit PLUS especially well in light of the uncertainty presented by COVID-19.
2019 Business Updates
Product Launches
- In April, the Company launched PLUS Mints as its first non-gummy product line. The low-dose products target consumers looking for a discrete, micro-dose experience with 2.5mg or less of THC per serving.
- In October, the Company introduced a second line of its best-selling gummies including: BALANCE Cucumber Lime, UPLIFT Tangerine, and UNWIND Concord Grape.
Market Launches
- In September, the Company entered the national CBD market with its line of 100% hemp CBD gummies. The products are currently available online at PlusProducts.com in 43 states and select health and wellness retailers throughout the country.
- In October, PLUS gummies hit shelves in Nevada, marking the launch of the Company’s second adult-use market. According to Headset Insights, one quarter after market-entry, PLUS was already the second best-selling gummies brand in the state, a market that consists of over 40 gummy brands.¹
General Highlights
- In July, the Company announced a rebrand of its core PLUS brand, introducing a new look for its line of low-dose, cannabis-infused edibles. The new packaging and product system were designed to go beyond the traditional use of Sativa, Hybrid, and Indica cannabis strains to focus on the science behind unique combinations of THC and CBD.
- In December, PLUS announced the transition of its primary distributor from Calyx Brands to HERBL. After an extensive review, the Company determined that HERBL was best positioned to scale with PLUS and reliably deliver products to retailers at the lowest cost.
- According to BDS Analytics, for the second straight year, PLUS had the two best-selling products in California across all categories. The Company’s signature Sour Watermelon UPLIFT gummies and Blackberry Lemon UNWIND gummies topped the list of over a thousand products sold throughout the state during 2019.²
Post-Period End Business Updates
- In February 2020, the Company entered the wellness and relief segment of the California adult-use market with the introduction of its PLUS CBDRelief brand. The launch represents a significant extension beyond the core PLUS lineup. The new PLUS CBDRelief products were designed with low THC and high CBD ratios to serve the roughly one-third of consumers in the market that are looking to cannabis for relief.³
- In March 2020, the Company announced a series of material changes to the business in an effort to prioritize an accelerated path towards becoming cash flow generative and continuing to establish itself as a leader in the California edibles market. These changes included:
- Reduction of the Company’s workforce by 13 full-time employees, accounting for 20% of its non-production workforce.
- Salary reduction for three executive officers ranging from 20% to 50% in exchange for options that will be issued following the current executive financial blackout period.
- Marc Seguin, the Company’s Chief Revenue Officer, left the organization.
- PLUS and John Legend concluded their engagement. The Company would like to thank Mr. Legend for the part he played in helping to bring the PLUS hemp CBD line to the country.
- The Company announced a plan to restructure its equity incentive program to ensure that it continues to be consistent with the mandate of the shareholder-approved Equity Incentive Plan to “promote the interests of the Company and its shareholders by aiding the Company in attracting and retaining employees.”
Management Commentary
“PLUS emerged from a turbulent year in the cannabis industry well positioned to pursue its vision of building a global portfolio of edibles brands,” stated Jake Heimark, co-founder and CEO. “For the second straight year, we were the largest brand in the largest category of the California edibles market and had the two best-selling products across all categories.4 Now more than ever, we believe that the most successful brands will be those that build a reputation for high-quality products that do not damage your lungs.
“Our home market of California has not been without its complications. The legal cannabis market faces growing pains as it competes with a highly active illicit market, works to streamline a disordered regulatory environment, and supports undercapitalized operators across a nascent supply chain. Despite these factors, we believe that California unequivocally remains the most valuable market for building a branded products company in cannabis. In 2019, the state made up 38% of the global adult-use market and is expected to remain 24% of that market through 2024.5
“In 2020, our strategic initiatives are built around three critical objectives: 1) ensuring the safety and health of our employees, customers, and partners during this pandemic; 2) establishing ourselves as the clear, long-term leader in California edibles; and 3) becoming a cash-flow positive business.
Objectives two and three will be driven by the launch of new brands here in California and the continued growth of our core PLUS brand in the markets in which we are operational today. By relying on core capabilities and known distribution channels to drive capital-efficient growth, we are confident in our ability to achieve both our market and financial goals for 2020 and beyond.
Jake Heimark, co-founder and CEO
Covid-19 Update
In March 2020, there was a global outbreak of COVID-19, which continues to rapidly evolve. The extent to which the virus may impact the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, social distancing, business closures or business disruptions, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.
While cannabis remains an essential business throughout most of California, it is still too early to understand how COVID-19 will impact PLUS or the market as a whole. To date, the Company has not seen a sustained downside impact on consumer demand in its core California market and has been able to fulfill orders without interruption. The Company believes it is well prepared to respond to this crisis. Please visit plusproductsinc.com/coronavirus to see the actions PLUS is taking to respond to this unique challenge.
(1) According Headset Insights in January 2019
(2) According to BDS Analytics GreenEdge Platform in 2019
(3) According to proprietary research conducted through HJR Associates, a third-party firm contracted by the Company
(4) According to BDS Analytics GreenEdge Platform in 2019
(5) According to Arcview | BDS Analytics – State of the Legal Markets 7th Edition
Conference Call Details
At 5:00 pm Eastern Time / 2:00 pm Pacific Time on Thursday, May 7, 2020 the Company will host a conference call and webcast to discuss the financial results and its recent corporate highlights.
Participant Dial-In Numbers:
Toll-Free: (866) 220-4156
Toll / International: (864) 663-5231
*Participants should request the Plus Products Earnings Call or provide conference ID: 2867687
The call will also be webcast at https://edge.media-server.com/mmc/p/rwodgqqw. Please visit the website at least 15 minutes prior to the call to register, download, and install any necessary audio software. Following the conclusion of the call, there will be an archived audio webcast of the conference call available for replay on the Company’s website at PlusProductsInc.com.
Jake Heimark, Co-founder and Chief Executive Officer and Jon Paul, Chief Financial Officer, will be conducting a question and answer session following the prepared remarks.
About PLUS
PLUS is a cannabis and hemp food company focused on using nature to bring balance to consumers’ lives. PLUS’s mission is to make cannabis safe and approachable – that begins with high-quality products that deliver consistent consumer experiences. PLUS is headquartered in San Mateo, CA.
For further information contact:
Jake Heimark
CEO & Co-founder
ir@plusproducts.com
Investors:
Blake Brennan
Investor Relations
blake@plusproducts.com
Tel +1 213.282.6987
Media:
Megan Sekkas
Public Relations
megan@sekkas.com
Tel +310.279.6811
Non-GAAP Measures:
Adjusted uncompressed weighted average shares outstanding and loss per share.
The Company has additionally determined the adjusted uncompressed weighted average shares outstanding and loss per share, basic and diluted. The Company believes these measures to be representative of loss and comprehensive loss on a per share basis; however, these performance measures have no standardized meaning. As such, there are likely to be differences in the method of computation when compared to similar measures presented by other issuers. Management believes that, in addition to conventional measures prepared in accordance with GAAP, some investors use this information to evaluate the Company’s performance. Accordingly, they are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
