Over the weekend, shares of the Supreme Cannabis Co. (TSX:FIRE)(OTCQX:SPRWF) skyrocketed off the back of the company’s Q3 results. FIRE stock has corrected since; currently selling for $1.98 on the TSX.
But in anticipation of these results (released yesterday), shares exploded; climbing to $2.05 CAD on Friday.
Investors were clearly expecting good things. They weren’t wrong.
The results showcase two very important takeaways for investors. The first was an increase in operational performance and revenue year-over-year. And the second was the approval for the company’s 7ACRES facility 90,000 sq ft expansion.
Fire Stock – Revenue Increase:
In line with adult-use legalization in Canada, the company’s net revenue increased dramatically compared to the year-ago period. Q3 2019 net revenue was $10 million—a 382% increase from Q3 2018 when sales were only $2.1 million. Further, the company showcased increasing quarterly sales with a 29% increase from Q2 2019.
Sales revenue from adult-use recreational markets increased 63% quarter over quarter.
Fire Stock – Expansion Approval
During the quarter, the company’s 7ACRES facility received approval for “90,000 sqft of additional production capacity”. Now, Supreme expects to have an annual output of 26,250kg; almost double what it had the capacity for, prior to this approval.
The Supreme Cannabis CEO Navdeep Dhaliwal said the following:
“This quarter saw a marked increase in revenue on both an annual and quarter-over-quarter basis. This revenue growth was driven by an increase in our capacity at the 7ACRES facility, a ramping up of our product packaging capabilities and, we believe, consumer preference for high-quality cannabis,”
Fire Stock – Q3 Overview
Q3 was an important period. As a “business-to-business” cannabis company, Supreme sells 7ACRES products to other businesses and doesn’t worry about packaging, retail sales, or clinical usage.
As such, it began supplying high-end flower to the province of New Brunswick and retailers in Saskatchewan. The company now distributes to 8 provinces in Canada.
With increasing consumer demand, the company is planning on introducing more “premium strains to Canada’s adult-use market” and to cater to this, “will be commercializing new cultivars over the remainder of the calendar year”.
The company’s business model sees it sell dried flower to wholesale buyers—it count’s Tilray Cannabis (NASDAQ:TLRY) as its largest wholesale agreement.
Fire Stock – Cannabis Extractors
With a focus on its derivatives product line, Supreme continued working with cannabis extractor MediPharm Labs (TSXV:LABS) to produce its premium oil products. The high-margin cannabis derivatives sector is expected to be legalized across Canada later in the year.
But There’s More News…Further Expansion
The company surprised investors with another announcement yesterday. 7ACRES, has obtained approval for five additional flowering rooms at its Ontario facility. The rooms will total a further 50,000 sq ft of production space.
This increases annual production capacity from 26,250kg to 33,580kg. The news is a positive step towards licensing all of its 25 flowering rooms; once achieved, the company anticipates approximately 50,000kg of cannabis output.
Are you a FIRE stock investor? Were you pleased with the company’s Q3 results?
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