IM Cannabis Q4 2024 Earnings Call Transcript

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March 31, 2025
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Operator

Good morning, and welcome to I'm Cannabis' fourth quarter and full year twenty twenty four earnings conference call. Today's conference call is being recorded. At this time, I would like to turn the conference over to Anna Taranko, Director of Investor and Public Relations. Anna?

Anna Taranko
Anna Taranko
Director - Investor & Public Relations at IM Cannabis

Good morning, and thank you, operator. Joining me for today's call are IIM Cannabis, chief executive officer, Oren Schuster, and chief financial officer, Ulrich Borenberg. The earnings and press release that accompanies this call is available on the investor relations section of our website at investors.imkannabis.com. Today's call will include estimates and other forward looking information and statements, including statements concerning future results of operations, economic conditions and anticipated courses of action and are based on assumptions, expectations, estimates and projections as the date here of this information may involve known and unknown risks uncertainties and other factors that may cause actual results to differ materially from those expressed or implied by such statements Factors that could cause or contribute to such differences are described in detail in the company's most recent filings available on SEDARplus at www.cedarplus.ca and edgarwww.sick.gov. Furthermore, certain non IFRS measures will be referred to during this call.

Anna Taranko
Anna Taranko
Director - Investor & Public Relations at IM Cannabis

The term non IFRS adjusted EBITDA loss or non IFRS adjusted EBITDA will hereafter be referred to as adjusted EBITDA loss or adjusted EBITDA as applicable. Any estimates or forward looking information or statements provided are accurate only as of the date of this call, and the company undertakes no obligation to publicly update any forward looking information or statements or supply new information regarding the circumstances after the date of this call. Please also note that all references on this call reflect currency and Canadian dollars unless otherwise stated. With that, it's my pleasure to turn the call over to Arun Shuster, CEO of IIM Cannabis. Arun, please go ahead.

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

Thank you, Anna. Good morning, everyone, and thank you for joining us today. As a medical cannabis company based in Germany and Israel, the April 2024 partial legalization in Germany was a game changer. Since then, the German market and our sales in Germany have experienced extraordinary growth at a tremendous velocity. But my personal 2024 highlights were the continuous improvements we made both strategically and operationally, building a solid, lean basis from which to drive sustainable growth in 2025.

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

In 2024, we started to shift our focus from the transition years in 2022 and 2023 towards delivery. At the same time, we continued fine tuning to maintain our efficiency and agility. This is an ongoing process. It is especially important in the dynamic cannabis market to ensure that we keep our competitive edge. As a company, we have two areas of focus in 2024.

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

One, full integration and active cost management to drive efficiencies and two, building a strong payment supply chain to support growth in 2025. On an operational level, we continue to lean into active cost management and full integration to drive efficiencies. We reduced our overall operating expenses by $4,000,000 or 17% to a total of $18,700,000 in 2024. This decrease builds on the 43% decrease we had in 2023, where we spent a total of 22,600,000.0, coming from 40,000,000 in 2022. Overall, we have managed to reduce our operating expenses by 53% since 2022.

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

The reduction in the operating expenses is mostly impactful in q four of twenty twenty four, where we are starting to see initial impact of the saving we initiated during this year. We fully integrated our marketing and supply teams with the goal of building the operational infrastructure and stable supply chain we need to drive growth in Germany in 2025. As a positive upside, we started to see the first results of our efforts in 2024. We imported a total of 11 new strains in Germany in the second half of twenty twenty four with our integrated supply chain for an outstanding sales of about 14% in Germany. In total, we added three new suppliers and launched 16 new strains in 2024.

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

When we look at the adjusted EBITDA after all these measures, our adjusted EBITDA in Q4 was a gain of 500,000.0 versus a loss of 4,300,000.0 in Q4 twenty twenty three, an improvement of almost 5,000,000. In Q4, we moved into positive adjusted EBITDA. When we look at the full year, we see a loss of 1,100,000.0 for 2024 versus a 8,000,000 loss in 2023, an improvement of almost 7,000,000. Moving on to the local level. In Germany, in addition to creating a stronger, fully integrated supply chain, we continue to develop the network of pharmacies we work with directly and worked on building a stronger sales team, consolidating our position as one of the top 10 medical cannabis brands in Israel.

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

Our sales increased by over 183% in 2024 versus 2023, reached 15,500,000.0, with supply being the limiting factor, especially in Q4. What I think best sums up the results in Germany is this. Germany made up 40% of IMC total revenue in the second half of twenty twenty four versus 11% in all of 2023. Looking at these results, it is clear that the strategic shift we made to concentrate our resources on the German market was the right one. In Israel, our team managed to mitigate the impact of the war on our business.

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

The decline in the number of medical cannabis patients, as well as the shift in focus and resources towards the German market. On an operational level in Israel, we launched or relaunched 27 strains across six beds in 2024, maintaining top line sales. In addition, we moved to a different production facility to reduce our production cost. We expect to see the full effect of this move in 2025. We took a good look at our distribution, outsourcing financing distribution network, and adding distribution partners, further reducing costs and improving service.

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

We spent the better part of 2024 clearing out slow moving non premium stock and all inventory for about three point nine million. The quality of this product was not one that we, as IMC, can stand behind. This impacted our cost of sales, gross margin, and gross profit. In Q4, we cleared out final $700,000 We do not anticipate a similar scale of write off in 2025. To sum up 2024, I'm delighted with the progress we made internally both strategically and operationally while delivering growth.

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

We now have a solid foundation, which is the right size to build on in 2025. You can clearly see the progress we made in 2024 yearly results. When we look towards 2025, we will be moving our focus from internal to external while working a strategic tightrope. While we need to invest to drive growth in Germany, on the other hand, we do not want to lose the efficiency and agility in our lean structure. I especially look forward to seeing the results for a new solid integrated supply chain in Q1, which is shaping up to be the best quarter in sales we have had to date in Germany.

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

I will now hand the call over to Uwe, who will review our fourth quarter and full year twenty twenty four financial results. Uwe?

Uri Birenberg
Uri Birenberg
Chief Financial Officer at IM Cannabis

One of these quarter milestones that Owen already mentioned. The adjusted EBITDA in Q4 twenty twenty four resulted in a profit of 500,000.0 compared to an EBITDA loss of 4,300,000.0 in q four twenty twenty three, which is an improvement of almost $5,000,000. Our q four results were mainly impacted by the following points. Our revenue in Q4 increased by 25% versus Q4 twenty twenty three. This growth was driven mainly by an increase of 280% in the German revenue.

Uri Birenberg
Uri Birenberg
Chief Financial Officer at IM Cannabis

We continued with our expense reduction process, which resulted in a decrease in operating expenses of approximately 42% versus Q4 twenty twenty three. I will now take you through the overview of the Q4 twenty twenty four and 2024 full year financial results for the company's operation. Revenues for 2024 and 2023 were €54,000,000 and €48,800,000 respectively, representing an increase of €5,200,000 or 11%. The increase is mainly attributed to the accelerated growth in Germany, with an increase in revenue of EUR 10,000,000 and decreased revenue in Israel of EUR 4,800,000.0 net. The decrease in Israel is attributed to the Ronindi cancellation, which resulted in a decrease in revenue of approximately $8,500,000 compared to 2023.

Uri Birenberg
Uri Birenberg
Chief Financial Officer at IM Cannabis

Excluding the Ronin revenue in 2023, we have an increase of revenue in Israel as well of approximately 3,700,000.0 or 12%. Revenue for the three months ended 12/31/2024 and 2023 were 13,300,000 and 10,700,000.0 respectively, representing an increase of 2,600,000.0 or 25%. The increase is mainly attributed to the accelerated growth in Germany with an increase in revenue of 3,700,000.0 and decreased revenue in Israel of 1,100,000. The decrease in Israel is that reported the Ronin deal cancellation, which resulted in decrease in revenue of NAND3.4 million compared to 2023. Excluding the Ronin revenue in Q4 twenty twenty three, we have an increase of revenue in Israel as well of approximately 2,300,000 or 39%.

Uri Birenberg
Uri Birenberg
Chief Financial Officer at IM Cannabis

For the twelve and three months ended 12/31/2024, Germany's share of total revenue has significantly increased compared to the corresponding period in 2023. This increase has had a considerable impact reflected in higher average price due to the favorable market condition and growing demands. The cost of revenue for 2024 and 2023 were €45,600,000 and €38,000,000 respectively, representing an increase of €7,600,000 or 20%. This is mainly due to increasing material cost of approximately $8,100,000 of which clearing all raw materials of approximately $3,900,000 and increased inventory sales resulted in an increase of approximately €4,000,000 which is offset by a reduced in other cost net of approximately €500,000 The cost of revenue for the three months ended 12/31/2024 and 2023 were €10,700,000 and €9,600,000 respectively, representing an increase of €1,100,000 or 12%. This is mainly due to the increased material cost of approximately €1,000,000 including clearing all raw material of €700,000 Gross profit for 2024 and 2023 were €8,500,000 and €9,800,000 respectively, representing a decrease of 1,400,000 or 14%.

Uri Birenberg
Uri Birenberg
Chief Financial Officer at IM Cannabis

Gross profit for the three months ended 12/31/2024 and 2023 was €2,700,000 and €800,000 respectively, representing an increase of SEK1.8 million or 238%. Gross profit included losses for realized fair value adjustment on inventory sold off 0 and 1,000,000 for 2024 and 2023 respectively. Gross Margin after fair value adjustment for 2024 and 2023 respectively were 16% versus 2020% versus 8% for the three months ended December 2023. G and A expenses for 2024 and 2023 were 8,000,000 and 11,000,000 respectively, representing a decrease of €3,000,000 or 27%. G and A expenses for the three months ended 12/31/2024 '20 '20 '3 were €1,200,000 and €3,300,000 respectively, representing a decrease of €2,100,000 or 64%.

Uri Birenberg
Uri Birenberg
Chief Financial Officer at IM Cannabis

The G and A expenses are comprised mainly from salaries to employees in the amount of €2,200,000 and 600,000.0 for the twelve and three months ended 12/31/2024, professional fees in the amount of 2,000,000 and minus 300,000.0 for the twelve and three months ended 12/31/2024, depreciation and amortization in the amount of 0.6 and 200,000.0 for the twelve and three months ended 12/31/2024 insurance costs in the amount of 1,300,000.0 and 300,000.0 for the twelve and three months ended 12/31/2024 and other expenses in the amount of 1,900,000.0 and 400,000.0 for the twelve and three months ended 12/31/2024. Selling and marketing expenses for 2024 and 2023 were 7,100,000.0 and 10,800,000.0 respectively, representing a decrease of 3,700,000.0 or 34%. Selling and marketing expenses for the three months ended December 2023 were 1,800,000.0 and 2,800,000.0 respectively, representing a decrease of 1,000,000 or 36%. The decrease in selling and marketing expenses for 2024 is mainly attributed to our new report agreement of approximately $2,100,000 and $700,000 respectively. In addition, a decrease of 1,600,000.0 and 300,000.0 respectively in selling and marketing expenses.

Uri Birenberg
Uri Birenberg
Chief Financial Officer at IM Cannabis

Total operating expenses for 2024 and 2023 were 18,700,000.0 and 22,600,000.0. In Q4 twenty twenty four the total operating expenses were €3,500,000 compared to €6,000,000 in Q4 twenty twenty three, a decrease of €2,500,000 or 42%. Operating expense ratio for 2024 was 30%, excluding the one time expense outcome of a running deal cancellation versus 46% for 2023, representing an increased efficiency of about 36%. Operating expenses ratio for the three months ended 12/31/2024, excluding the one time expense outcome of our in deal cancellation, was 22% versus 56% for the three months ended 12/31/2023, representing an increased efficiency of about 60%. The efficiency ratio improvement is resulting from decreased operational cost and increased revenue.

Uri Birenberg
Uri Birenberg
Chief Financial Officer at IM Cannabis

Adjusted EBITDA loss for 2024 and 2023 was £1,100,000 compared with £8,000,000 representing a decrease of 87%. Adjusted EBITDA profit in Q4 twenty twenty four was SEK0.5 million compared to an EBITDA loss of SEK4.3 million in Q4 twenty twenty three. Net loss for 2024 was 11,800,000.0 compared to 10,200,000.0 for 2023. Net loss in Q4 twenty twenty four was 1,200,000.0 compared to 3,500,000.0 in Q4 twenty twenty three. Diluted loss per share for 2024 was 4.51 compared to a loss of 4.45 per share in the same period for year 2023.

Uri Birenberg
Uri Birenberg
Chief Financial Officer at IM Cannabis

Diluted loss per share for Q4 twenty twenty four was 0.32 compared to a loss of 1.47 per share in Q4 twenty twenty three. As of the balance sheet, cash and cash equivalent as of 12/31/2024 were £900,000 compared to £1,800,000 on 12/31/2023. Total assets as of 12/31/2024 were 39,200,000.0 compared to 48,800,000.0 on 12/31/2023, a decrease of 9,600,000.0 or 19.7%. The decrease is mainly attributed to the Roanem agreement cancellation of 9,500,000.0, of which mainly attributed to goodwill 3,500,000.0 intangible asset CHF 1,400,000.0 inventory CHF 800,000.0 trade receivables CHF 1,300,000.0 property, plant and equipment CHF 800,000.0 and reduction of cash and cash equivalent of CHF $300,000 In addition to the Ronin Revocation Agreement effect, there is a total asset decrease of $100,000 mainly due to the increase of $7,500,000 in trade receivable offset by £5,900,000 reduction in inventory and the reduction of £1,100,000 in intangible assets. Total liabilities as of 12/31/2024 were £36,000,000 compared to 35,100,000.0 on 12/31/2023, an increase of 900,000 or 3%.

Uri Birenberg
Uri Birenberg
Chief Financial Officer at IM Cannabis

The anemic payment cancellation effect is a decrease of 6,800,000.0 of which mainly attributed to put option liability $2,000,000 purchase consideration payable $2,200,000 trade payables $1,600,000 lease liabilities $400,000 and a decrease of $300,000 in deferred tax liability. In addition to the Enigma vocation agreement effect, there is a total liability increase of SEK 7,700,000.0, mainly due to increase of SEK 3,500,000.0 in trade payables and an increase of SEK 3,300,000.0 in warrants and convertible debt. The company is planning to finance its operation from its existing and future working capital resources as well as from available credit facilities and will continue to evaluate additional sources of capital and financing as needed. I would like now to turn the call back to Oren for closing remarks. Oren?

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

Thank you, Oren. To sum up 2024, while I'm very proud of the growth IMC delivered in Germany, I'm delighted with the progress we made internally both strategically and operationally. In q four, with our positive adjusted EBITDA, we are starting to see the initial impact of the saving we initiated during 2024 through our active cost management and full integration. This gives us a very strong foundation leading into 2025, where we already see that q one is shaping up to be the best quarter in sales we have had it to date in Germany. I will now hand the call over to the operator to begin our question and answer session.

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

Operator?

Operator

Thank you. In order to ask a question, please raise your hand and use your mobile or desktop application and wait for your name to be announced. I repeat, in order to ask a question, please raise your hand using your mobile or desktop application and wait for your name to be announced. Aaron Gray, please go ahead.

Aaron Grey
Managing Director, Equity Research at Alliance Global Partners

Hi.

Aaron Grey
Managing Director, Equity Research at Alliance Global Partners

Thanks very much for the questions today. So first question for me, just wanted to touch on Germany. So great to hear that 1Q is off to a great start. So just if we just touch back on 4Q, and again, this is specifically on Germany. It does look like it was a little bit softer.

Aaron Grey
Managing Director, Equity Research at Alliance Global Partners

Obviously, you've had tremendous growth in 2Q and 3Q for Germany. Looks like some of that growth stopped and still hit about 5,000,000 from what I'm seeing here. But you talked about whether dynamics specifically, you know, in the quarter that slows some of that growth that seems to have come back in 1Q or just some of the dynamics that's going on, within the German market there that might have led some

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

I don't Okay. Thank you for the question, Aaron. So, like you said, we started with a very strong growth in q two and q three. In q four, we had some delays, and, but, we we, I think that I said that that, it was just a delay, and the q one looks very good. And, it's not something that is part of the ongoing.

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

I think that it's part of building the supply chain. It's a long process, and I think that the target was to be very stable with the supply in '25. And, we are going into '25 with the much stronger supply chain. And, I believe that we will see it also in the the quantities and, in '25.

Aaron Grey
Managing Director, Equity Research at Alliance Global Partners

Okay. Thanks. And then can you comment on any changes you're seeing in the competitive dynamic for Germany? Obviously, there's a lot of operators internationally that are putting a lot of focus on the German market. So changing competition, whether it be pricing or otherwise, that you're starting to

Aaron Grey
Managing Director, Equity Research at Alliance Global Partners

see?

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

The the German market is very dynamic. I think that what we see is the the market is changing from week to week. There is definitely a competition in the market. It's still, we see more or less the same leading competitors.

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

And, so this is what we feel right now. The German market value products are very successful in the German market, and, it's very clear. So I don't foresee very big change. The market will be competitive. It's part of our plans.

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

I believe that there will be a price compression. There is a price compression, and it's part of what we took in our plan from the beginning.

Aaron Grey
Managing Director, Equity Research at Alliance Global Partners

Okay. I appreciate that color. And then just kind of picking back off of that. With the price compression, how should we think about the margin profile? So we still had 20% gross margin for the quarter, that EBITDA positive there.

Aaron Grey
Managing Director, Equity Research at Alliance Global Partners

So how should we think about the margin progression for the year as we think about potential growth but also some pricing pressure?

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

So it's difficult it's very difficult to to know how the market will develop because, also the there have been some political changes in Germany. But, I think that, we we don't think that, we will go down with the margins, in our estimates. We even think that, it might be better than, than it is now.

Uri Birenberg
Uri Birenberg
Chief Financial Officer at IM Cannabis

If I may add, you cannot take year '24 as a reference for future expectations regarding gross margin simply because of the one time event related to inventory over the year. So we cleaned all our old inventory, and, we are set for new inventory to sell and there is a big demand in Germany, also in Israel. So I'm expecting it to be better than what you see in 2024 for sure. You could say exactly how much, it's a little bit complicated, but 20% that you mentioned is not the levels that we've It's Louis Bernberg, the CFO.

Aaron Grey
Managing Director, Equity Research at Alliance Global Partners

Okay. That's helpful. Last question for me just on Israel, seems to have stabilized a bit there. You know, I had seen a little bit of softness. So are are you feeling comfortable with that market now?

Aaron Grey
Managing Director, Equity Research at Alliance Global Partners

I know there's been a lot of shakeout, between competitors, you know, fewer products coming from Canadian LP. So just comment in quickly on the broader, you know, Israeli market and how you're expecting for that to evolve in 2025?

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

So as of now, we we don't foresee any significant growth in the in the Israeli market. And so we think that it will be more or less stable unless we will see some regulations change. And the focus on growth for us is mainly in Germany.

Aaron Grey
Managing Director, Equity Research at Alliance Global Partners

Okay. Alright. Thanks very much. I'll jump back into the queue.

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

Okay. Thank you. Thank you very much, everyone.

Operator

Thank you. In order to ask a question, please raise your hand using your mobile or desktop application and wait for your name to be announced. Are there any further questions?

Oren Shuster
Oren Shuster
CEO & Chairman at IM Cannabis

Okay. Thank you, operator, and thank you all for joining

Executives
    • Anna Taranko
      Anna Taranko
      Director - Investor & Public Relations
    • Oren Shuster
      Oren Shuster
      CEO & Chairman
    • Uri Birenberg
      Uri Birenberg
      Chief Financial Officer
Analysts
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Key Takeaways

  • In the second half of 2024, Germany accounted for 40% of IMC’s total revenue versus 11% in all of 2023, driving a 280% increase in Q4 German revenue and a 183% sales jump for the full year.
  • Operating expenses were reduced by 17% in 2024 to 18.7 million—down 53% since 2022—with Q4 expenses cut by 42% year-over-year through active cost management and full integration.
  • The company achieved positive adjusted EBITDA of 0.5 million in Q4 2024 versus a 4.3 million loss in Q4 2023, and improved full-year adjusted EBITDA to a 1.1 million loss from an 8 million loss in 2023.
  • IMC fully integrated its marketing and supply teams to build a streamlined supply chain, importing 11 new strains in H2 2024, launching 16 new strains, and adding three suppliers to support 2025 growth.
  • In Israel, IMC relaunched 27 strains across six beds, moved to a lower-cost production facility, and cleared 3.9 million of non-premium inventory—anticipating no similar write-offs in 2025.
AI Generated. May Contain Errors.
Earnings Conference Call
IM Cannabis Q4 2024
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