- NAC posts eighth straight quarterly loss but $17-million revenue in Q3 2019
- First nine months of fiscal 2019 marks $18.3-million net loss for NAC, $37-million revenue
- NAC has contracts with 146 pharmacies with eye on potential wholesale margin
Canada’s biggest retail pot chain posted a loss for the eighth straight quarter as it ramped up store openings following the legalization of recreational cannabis late last year, but made $17-million in revenue with the help of a 33-per-cent profit margin in its third quarter as the company aims to open more stores.
National Access Cannabis (NAC) reported a net loss of $4.8-million in the three-month period ended May 31. This is double the $2.3-million net loss in the year-ago period, which was before adult-use marijuana was legal. Revenue reached $17-million for the company’s third quarter, compared with less than $530,000 a year ago.
For the first nine months of its fiscal 2019 year, which included the first 7-1/2 months of adult-use cannabis legalization, NAC posted a net loss at $18.3-million with revenue at $37-million.
“Significant start-up costs have been incurred to build the infrastructure to open a total of 24 retail locations as at May 31, 2019,” NAC said in its Management Discussion and Analysis report.
“Revenue has increased significantly for the nine months ended May 31, 2019, due to the opening of cannabis retail locations in Manitoba, Alberta and Saskatchewan.”
The retail chain has since opened an additional 10 stores.
“The increase (in gross profit) is primarily attributed to the expansion into the retail cannabis industry and commissions revenue from federal licence holders, which have no direct costs associated with this income source,” NAC stated, referring to licensed producers.
“The company is in the development stage of expanding by opening and acquiring locations throughout Canada while continuing to explore other business opportunities within the cannabis industry.”
But despite plans to grow its retail business, the steepest profits came from its smaller sales of medical cannabis, which could be poised to expand if regulations are amended to allow the pharmacies that NAC has contracted to sell medical marijuana.
Revenue from medical cannabis education clinics in the third quarter reached just $286,163, but at a gross profit margin of 89 per cent and a net loss of $398,488. Revenue from retail cannabis stores in the three-month period ending May 31, however, reached $16.8-million with a gross profit margin at 32 per cent and a net loss at $607,703.
While the relatively large revenue from retail marijuana sales underscore the driving force behind efforts of cannabis companies to open stores, NAC continues to eye the potential profits from the higher margins available from medical product sales.
NAC operates six medical clinics in five provinces and is paid a 15-20 per cent commission of the retail price by the licensed producer, but these commissions are not expected to be a significant source of revenue this year due to retail becoming its primary revenue source, it said.
Instead, NAC is eyeing potential medical cannabis opportunities through its service agreements with 146 pharmacies, most of which are in Ontario. When legally permissible, these partnerships will enable pharmacies to refer patients to National Access Cannabis Medical Inc. (NACM) clinics, of which NAC owns 51 per cent.
“Until pharmacies can dispense on site, NACM will generate revenue for the services it provides at partner pharmacies through the education grants it receives from federal licence holders,” NAC said, referring to licensed cannabis producers.
“If pharmacies are provided with a licence to dispense, NACM will generate revenue through the wholesale margin that it earns for supporting the pharmacies in acquiring cannabis medicines from federal licence holders.”