Plus Products Reports Audited 2020 4th Quarter and Year-End Financial Results
SAN MATEO, Calif., April 07, 2021 (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, 2020, 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.
2020 Year-End Financial Highlights
- Gross Profits: Gross profits grew 104% to $5.6M in 2020 compared to $2.8M in 2019. Gross profit margin in 2020 was 35%, up from 20% in 2019. Gross profits reached $0.95M in Q4 2020 compared to $0.9M in Q4 2019. Gross profit margin in Q4 2020 was 30%, up from 26% in Q4 2019.
- Cash Balance: The Company reported $11.6M in cash and cash equivalents at December 31, 2020. Cash and cash equivalents fell by $3.6M during the year. With $1.5M in semi-annual interest payments occurring during the period, the Company consumed just $2.1M in cash from normal operating and investing activities for the full year 2020.
- Revenues: Net revenues climbed to $15.9M in 2020, representing 15% year-over-year growth as compared to 2019 net revenues of $13.9M. Net revenues were $3.1M in Q4 2020. Net revenues were lower than expected due, in part, to the Company’s previously announced transition to a self-service distribution partner which resulted in the return of inventory originally sold to its prior distribution partner in Q4 2020, along with higher than anticipated promotional costs.
- Operating Profits (Losses): Operating losses were $(8.3)M in 2020, representing a 67% improvement year-over-year from $(24.8)M in 2019. Operating losses were $(3.4)M in Q4 2020, representing a 59% improvement year-over-year from $(8.2)M in Q4 2019.
2020 Business Updates:
New Product Highlights
- In February 2020, the Company announced the launch of its PLUS CBDRelief brand. The expansion represented a significant extension beyond the core PLUS line of products and into the wellness and relief market segment, which represents over one-third of cannabis use occasions.1 PLUS CBDRelief has sold into over 340 licensed retailers to date.
- In July 2020, the Company announced the launch of the highest concentrated cannabis gummy in California with its new HI-CUBES brand. Featuring 100% whole plant, full-spectrum oil, HI-CUBES contain only 5 calories and less than 1g of sugar per cube, while still delivering 10mg of THC per serving.
- In September 2020, the Company announced the launch of its new PLUS SLEEP brand into the California adult-use market. PLUS SLEEP gummies are scientifically formulated with a precise blend of cannabinoids intended to help consumers fall asleep quickly and enjoy a full, restful night’s sleep. The product was developed for the 71% of cannabis sleep aid users who are not satisfied with their current remedies.2 PLUS SLEEP has sold into over 250 licensed retailers to date.
- In December 2020, the Company launched its PLUS Strains brand. The initial line-up included three permanent offerings, and one special holiday edition: Lemon Jack (Sativa), Pineapple Express (Hybrid), Granddaddy Purple (Indica), and Sugar Plum (Sativa). Each gummy offers full spectrum cannabis oil and real fruit, containing 5mg of THC per serving. PLUS Strains has sold into over 200 licensed retailers to date.
General Highlights
- In January 2020, the Company undertook a significant restructuring to improve costs including the reduction of 20% of its non-production workforce and executive salary reductions ranging from 20% to up to 50%. The restructuring, in conjunction with higher revenues and a more focused growth strategy, led to a reduction in cash consumption of greater than 85% from 2019 to 2020.
- In June 2020, the Company announced the retirement of CFO Jon Paul, and the transition of Nate Pearson, former Vice-President of Finance, into the role of CFO.
Post-Period End Business Updates
- In January 2021, the Company announced the launch of its 100% hemp CBD Gummies in the United Kingdom exclusively through online CBD marketplace, Elements of Green.
- Also in January 2021, the Company announced that its Sour Watermelon UPLIFT gummies were recognized as LeafLink’s best-selling cannabis edible in the California market and one of the five best-selling edible products across all active U.S. cannabis markets. LeafLink is a leading e-commerce wholesale marketplace for cannabis products.
- In February 2021, the Company announced that it entered into a partnership with CannRx Biosciences, a leading Israeli cannabis firm in the boutique field of cannabis-based botanical medicine, to enhance the onset of the Company’s products.
- Also in February 2021, the Company announced a strategic shift to expand its sales team, internalize all account management, and transition to a self-service distribution partner in the California adult-use market. To facilitate this shift, the Company invested heavily in its internal sales force, expanding the team by greater than fifty percent (50%) since the start of Q4 2020, and partnered with a self-service distribution provider with access to 99% of California’s licensed retailers in order to manage all order fulfillment as of February 15, 2021.
- Also in February 2021, the Company announced that holders of the Company’s 8.00% unsecured convertible debentures (the “Debentures”) originally due on February 28, 2021, approved certain proposed amendments to the terms of the Debentures, including a three-year extension of the maturity date from February 28, 2021 to February 28, 2024 and increase in the coupon rate of the Debentures from 8.00% to 12.00% per annum effective February 28, 2021. In conjunction with the amendments, the Company issued 8.5M warrants to debentureholders as consideration for a consent fee paid to certain holders. Further details can be found here in the Company’s initial announcement regarding the approval of the amendments to the Debentures.
- In March 2021, the Company announced that Jennifer Tung will be leaving her roles as Chief Risk Officer and General Counsel on April 15, 2021. She will remain a special advisor to the Board of Directors.
- Also in March 2021, the Company announced that it is partnering with Eaze Technologies (“Eaze”), one of California’s largest delivery marketplaces for legal cannabis, to launch a co-branded, limited-edition cannabis gummy.
- Also in March 2021, the Company announced that it completed the previously announced conversion of certain Debentures in accordance with the terms of the first supplemental indenture dated February 25, 2021 between the Company and Odyssey Trust Company.
Management Commentary
At the outset of last year, we detailed our goal to rein in costs and set PLUS on a path towards profitability. We knew that 2020 in the cannabis industry would be defined by companies that were able to effectively transition from growth-at-all-cost efforts to strategies that allow companies to capture sustainable growth while leaning on a foundation of solid fundamentals.
Jake Heimark, Co-founder and Chief Executive Officer
In pursuing this goal, we drastically reduced our cash consumption by 85% year-over-year to just $3.6M for the full-year 2020 and were able to expand our gross margins significantly from 20% in 2019 up to 35% in 2020. These changes to the core economics of the business, along with the $11.6M in cash on hand to close the year and recent 3-year extension to the term of our debentures, have greatly expanded our runway to continue executing on our growth efforts.
“Despite the substantial improvements on the cost side, we were still able to achieve 15% growth for the full-year 2020. While our topline performance in the final quarter of the year was not what we had hoped, we have made two important transitions to the business that we believe will set us up well to continue capturing growth in 2021 and beyond.
“The first was the Company’s shift over the last year from a single brand to a portfolio of brands. In making this shift, we expanded our product offerings to ensure that consumers looking for all different types of experiences can turn to PLUS for their cannabis needs. This transition, which incorporated the introduction of products targeted at specific cannabis use cases such as wellness, relief, and sleep, are increasingly relevant as consumers in our industry grow increasingly sophisticated in their choices.
“The second was the Company’s recently announced transition to a self-service distribution partner, which was coupled with an expansion of our sales team and internalization of all account management. Despite the success we have had with our full-service distribution partners, in which we relied on a hybrid of both internal and external personnel to make up our sales force, we believe that the most effective way for us to achieve the broadest distribution for our products is to have a member of the PLUS team representing the Company at every interaction with our retail customers. This transition will make that a reality across the entire California market.
“With one the strongest cannabis brands in California3, a robust product portfolio, plenty of cash on hand, and a recently expanded sales team, we believe PLUS is in a position to excel over the coming year.
“Looking forward to the first quarter of 2021, the Company does expect net revenues will be negatively impacted by a significant one-time accounting shift in which PLUS will move to recognizing revenue at the time its products are sold to licensed retailers for all sales occurring through the Company’s new self-service distributor. Previously, the Company recognized revenue at the point in which inventory was transferred (sold) to its full-service distribution partners. The shift will result in an effective delay in the time at which all sales of products through the Company’s new distributor are recognized relative to sales that occurred to its previous distribution partners.”
(1) According to proprietary research conducted through HJR Associates, a third-party firm contracted by the Company, over one-third of cannabis use occasions are for relieving pain, stress, and anxiety.
(2) BrightField Consumer Survey (July 2020)
(3) According to PLUS’s – Brightfield Brand Health Survey – Wave 2: December 2020; N=1,535 CA edible consumers PLUS had the highest unaided brand awareness among edible users in California.
Conference Call Details
At 5:00 pm Eastern Time / 2:00 pm Pacific Time on April 7, 2021 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: 9539855
The call will also be webcast at https://edge.media-server.com/mmc/p/2xg3e9mb. 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 Nate Pearson, 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.
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.
