James E. Wagner Cultivation Corporation (TSXV: JWCA) announced its third quarter 2019 financial results yesterday, registering $749,000 in sales for the three month period. Revenues were up 32% on a sequential quarter over quarter basis for the firm, largely due to operational excellence.
This growth in revenue is attributable to a 28% increase that James Wagner experienced in yield on a per plant basis, bringing the average yield up to 236 grams per plant, from that of 204 grams seen the previous quarter. On a per gram basis, the firm saw revenues of $6.64 while production costs dropped to $2.39 per gram. Last quarter, the firm recorded per gram revenues and production costs of $5.90 and $4.14 respectively, demonstrating the continued streamlining of operations to fine tune standard operating procedures.
“As we complete the final quarter of our fiscal year, we will continue to focus on building out production capacity and distributing premium branded products for medical use and the fast-growing Canadian recreational market. Our strong progress in fiscal Q3, which has continued into the current quarter, has set the stage for rapid revenue growth and profitability, and a tremendous finish to fiscal 2019.”Nathan Woodworth, CEO and President of James E Wagner Cultivation
Expenses were down on a year over year basis for the firm, largely due to a one time listing expense in the third quarter of 2018 to the tune of $1.79 million. Total expenses came in at $2.88 million, with wages and benefits of $1.00 million accounting for the largest portion, followed by that of rent at $0.63 million. Expenses were down 10.68% on a quarter over quarter basis, largely as a result of increased production which enabled James Wagner to be able to capitalize certain costs related to production.
Revenues for the quarter totaled $749,294, with wholesale sales being the largest portion of the sales mix at $639,179. The remainder of sales came in the format of direct to patient. Gross profit before unrealized changes in fair value of biological assets came in at $10,368.
Looking towards the balance sheet, the firm currently has a cash position of $3.77 million, up from $2.25 million in the prior quarter. Inventory is currently sitting at $2.18 million, while the value of biological assets comes in at $3.47 million, both of which doubled when compared to the previous quarter.
Accounts payable increased to $1.12 million from that of $0.93 million in the prior quarter, while the current portion of the long term debt is sitting at $4.90 million. It should be noted however that $4.89 million of long term debt is classified as such due to a revolving loan that comes due on February 28, 2021. There is a provision within the credit agreement however that makes it payable on demand after July 1, 2019 and as a result the debt is classified as being current.
While revenues were up sequentially on a quarter over quarter basis, the real story lies in the guidance provided by James Wagner for the fourth quarter of fiscal 2019, as well as the first quarter of fiscal 2020. The firm expects to presumably more than double its revenue in the final quarter of the year, providing guidance of being at breakeven on a net and comprehensive income basis for the three month period. Chief Executive Officer Nathan Woodworth commented on the conference call that the firm expects to post a break even net income for the period once unrealized biological assets take effect, which will be a milestone for the company.
The first quarter of fiscal 2020 is then anticipated to post a positive net income, with revenues exceeding expenses before the effect of unrealized changes in the fair value of biological assets comes into play. This ultimately is expected to lead into a cash flow positive second quarter, territory that has been aspired to by many producers however remains to be something that we have yet to see in the sector.
The increased revenue is a result of Health Canada licensing James Wanger’s new facility, known as JWC2, which is now in the process of cultivating cannabis, as well as the opening of recreational markets which is expected in the first quarter of fiscal 2020. The additional capacity is expected to have few increased costs associated with production, as a result of already having the necessary people in place for this capacity.
James E Wagner Cultivation closed yesterdays session at $0.59, down 4.84% on the day.
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As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.