LAVAL, Quebec--(BUSINESS WIRE)--Crescita Therapeutics Inc. (TSX: CTX and OTC US: CRRTF) (“Crescita” or the “Company”), a growth-oriented, innovation-driven Canadian commercial dermatology company, today reported its financial results for the first quarter ended March 31, 2023 (“Q1-F2023”). All amounts presented are in thousands of Canadian dollars (“CAD”) unless otherwise noted.
Financial Highlights
Q1-F2023 vs. Q1-F2022
- Revenue was $4,602 compared to $4,951, down $349;
- Gross profit was $2,736 compared to $2,712, up $24;
- Operating expenses were $2,972 compared to $3,088, down $116;
- Adjusted EBITDA1 was $161 compared to $66, up $95;
- Ending cash was $10,275, up $2,037 for the quarter.
“We generated 62% year-over-year growth in commercial skincare sales this quarter. The team worked together to deliver our strongest segment performance through product launches, brand innovation and effective sales strategies. In our manufacturing and services segment, we experienced a reduction in sales versus last year, due to a delay in shipments to a major customer as a result of a supply chain issue,” commented Serge Verreault, President and CEO of Crescita.
“Supported by a strong balance sheet, we remain committed to executing our four-pillar growth strategy and to seek recurring revenue opportunities to generate sustainable growth in the long-term,” concluded Mr. Verreault.
Q1-F2023 Corporate Developments
Re-Launch of Alyria® as a Direct-to-Consumer Brand
- Following a complete rebranding and various product reformulations, we relaunched Alyria® as a direct-to-consumer medical-grade dermocosmetic brand in the Canadian skincare market. Alyria is primarily targeted at millennials and marketed and sold exclusively online in Canada through Amazon.ca and alyriaskincare.com. The relaunch of Alyria strengthens our ecommerce channel expansion and provides the opportunity to engage with a new consumer group.
The Launch of ART FILLER®
- We launched the ART FILLER injectables (the “Fillers”) in the Canadian medical aesthetic market through our new dedicated sales force. The ART FILLER collection is an exclusive range of dermal fillers made of hyaluronic acid (“HA”), designed to smooth and fill in wrinkles, and create/restore the volumes and contours of the face. We distribute the Fillers under an exclusive Canadian distribution and promotion agreement with Laboratoires FILLMED. The Fillers were approved by Health Canada in Q2-F2022.
Q1-F2023 Financial Results
Note: The Management’s Discussion and Analysis (“MD&A”), the Condensed Consolidated Interim Financial Statements and accompanying notes for the three months ended March 31, 2023 are available at www.crescitatherapeutics.com/investors and have been filed with SEDAR at www.sedar.com.
Summary Financial Results
In thousands of CAD, except per share data and number of shares |
Three months ended March 31, |
|||||||||||
|
2023 |
|
|
2022 |
|
|
Change |
|||||
|
$ |
$ |
$ |
|||||||||
Commercial Skincare |
|
2,492 |
|
|
1,536 |
|
|
956 |
|
|||
Licensing and Royalties |
|
21 |
|
|
- |
|
|
21 |
|
|||
Manufacturing and Services |
|
2,089 |
|
|
3,415 |
|
|
(1,326 |
) |
|||
Revenues |
|
4,602 |
|
|
4,951 |
|
|
(349 |
) |
|||
Cost of goods sold |
|
1,866 |
|
|
2,239 |
|
|
(373 |
) |
|||
Gross profit |
|
2,736 |
|
|
2,712 |
|
|
24 |
|
|||
Gross margin (%) |
|
59.5 |
% |
|
54.8 |
% |
|
4.7 |
% |
|||
Research and development |
|
160 |
|
|
127 |
|
|
33 |
|
|||
Selling, general and administrative (“SG&A”) |
|
2,437 |
|
|
2,595 |
|
|
(158 |
) |
|||
Depreciation and amortization |
|
375 |
|
|
366 |
|
|
9 |
|
|||
Total operating expenses |
|
2,972 |
|
|
3,088 |
|
|
(116 |
) |
|||
Operating loss |
|
(236 |
) |
|
(376 |
) |
|
140 |
|
|||
Interest (income) expense, net |
|
(98 |
) |
|
15 |
|
|
(113 |
) |
|||
Foreign exchange (gain) loss |
|
(36 |
) |
|
71 |
|
|
(107 |
) |
|||
Share of (profit) loss of an associate |
|
(8 |
) |
|
12 |
|
|
(20 |
) |
|||
Net loss on convertible note measured at fair value through profit or loss |
|
13 |
|
|
- |
|
|
13 |
|
|||
Loss before income taxes |
|
(107 |
) |
|
(474 |
) |
|
367 |
|
|||
Deferred income tax expense |
|
166 |
|
|
- |
|
|
166 |
|
|||
Net loss |
|
(273 |
) |
|
(474 |
) |
|
201 |
|
|||
Adjusted EBITDA1 |
|
161 |
|
|
66 |
|
|
95 |
|
|||
Loss per share |
|
|
|
|
|
|
||||||
Basic |
$ |
(0.01 |
) |
$ |
(0.02 |
) |
$ |
0.01 |
|
|||
Diluted |
$ |
(0.01 |
) |
$ |
(0.02 |
) |
$ |
0.01 |
||||
Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
||||
Basic |
|
20,334,153 |
|
|
20,936,672 |
|
|
(602,519 |
) |
|||
Diluted |
20,334,153 |
20,936,672 |
(602,519 |
) | ||||||||
Selected Balance Sheet Information |
|
|
|
|||||||||
Cash and cash equivalents, end of period |
|
10,275 |
|
|
11,742 |
|
|
(1,467 |
) |
|||
Selected Cash Flow Information |
|
|
|
|||||||||
Cash provided by operating activities |
|
2,131 |
|
|
659 |
|
|
1,472 |
|
|||
Cash used in investing activities |
|
- |
|
|
(45 |
) |
|
45 |
|
|||
Cash used in financing activities |
|
(99 |
) |
|
(168 |
) |
|
69 |
|
|||
Revenue
We have three reportable segments: 1) Commercial Skincare (“Skincare”), which manufactures and sells branded non-prescription skincare products for the Canadian and international markets, and also commercializes Pliaglis®, NCTF®, ART FILLER®, and Obagi Medical in Canada; 2) Licensing and Royalties (“Licensing”), which primarily generates revenue from licensing our intellectual property related to Pliaglis or our transdermal delivery technologies; and 3) Manufacturing and Services (“Manufacturing”), which generates revenue from contract manufacturing and product development services.
For the three months ended March 31, 2023, total revenue was $4,602 compared to $4,941 for the three months ended March 31, 2022, representing a decrease of $349. Manufacturing revenue decreased by $1,326 year-over-year, mainly due to a delay in shipments to a major customer as a result of a supply chain issue. Our Skincare segment posted an increase of $956 mainly due to higher product sales from our core brands across all channels and geographies, as a result of new product launches and promotions and, to a lesser extent, the timing differences of order fulfillments year-over-year. Licensing revenue of $21 in Q1-F2023 represented guaranteed royalties above the annual contractual minimum under our agreement with Cantabria Labs Inc.
Gross Profit
For the three months ended March 31, 2023, gross profit was $2,736, representing a gross margin of 59.5%, compared to $2,712 and 54.8%, respectively, for the three months ended March 31, 2022. The net increase in gross profit and gross margin of $24 and $4.7%, respectively, were primarily a result of the growth in our Skincare sales and the favorable impact of cost efficiencies, product and channel mix, as well as foreign exchange rates, partly offset by the decrease in Manufacturing revenue.
Operating Expenses
For the three months ended March 31, 2023, total operating expenses were $2,972 compared to $3,088 for the three months ended March 31, 2022, representing a net decrease of $116. The decrease was mainly driven by lower SG&A expenses of $158, primarily due to lower headcount-related and share-based compensation expenses.
Deferred Income Tax Expense
For the three months ended March 31, 2023, we recognized $166 in deferred income tax expense related to taxable income generated in the Crescita Skin Sciences Inc. legal entity.
Cash and Cash Equivalents
Cash and cash equivalents were $10,275 at March 31 2023, reflecting a net increase of $2,037 for the quarter, mainly due to the decrease in accounts receivable and contract assets.
Non-IFRS Financial Measures
We report our financial results in accordance with International Financial Reporting Standards (“IFRS”). However, we use certain non-IFRS financial measures to assess our Company’s performance. We believe these to be useful to management, investors, and other financial stakeholders in assessing Crescita’s performance. The non-IFRS measures used in this press release do not have any standardized meaning prescribed by IFRS and are therefore not comparable to similar measures presented by other issuers. These measures should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with IFRS. The following are the Company’s non-IFRS measures along with their respective definitions:
- EBITDA is defined as earnings before interest, income taxes, depreciation of property, plant and equipment, and amortization of right-of-use asset and intangible assets.
- Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation of property, plant and equipment and amortization of right-of-use asset and intangible assets, share of (profit) loss of associates, fair value (gains) losses, share-based compensation costs, goodwill and intangible asset impairment, and foreign exchange (gains) losses, as applicable.
Management believes that Adjusted EBITDA is an important measure of operating performance and cash flow and provides useful information to investors as it highlights trends in the underlying business that may not otherwise be apparent when relying solely on IFRS measures. Below is a reconciliation of EBITDA and Adjusted EBITDA to their closest IFRS measures.
In thousands of CAD dollars |
Three months ended March 31, |
||||||||
2023 |
|
|
2022 |
|
|
Change |
|||
$ |
|
|
$ |
|
|
$ |
|||
Net loss |
(273 |
) |
(474 |
) |
201 |
|
|||
Adjust for: |
|
|
|
||||||
Depreciation and amortization |
375 |
|
366 |
|
9 |
|
|||
Interest (income) expense, net |
(98 |
) |
15 |
|
(113 |
) |
|||
Deferred income tax expense |
166 |
|
- |
|
166 |
|
|||
EBITDA |
170 |
|
(93 |
) |
263 |
|
|||
Adjust for: |
|
|
|
||||||
Share-based compensation |
22 |
|
76 |
|
(54 |
) |
|||
Foreign exchange (gain) loss |
(36 |
) |
71 |
|
(107 |
) |
|||
Share of (profit) loss of an associate |
(8 |
) |
12 |
|
(20 |
) |
|||
Net loss on convertible note measured at fair value through profit or loss |
13 |
|
- |
|
13 |
|
|||
Adjusted EBITDA |
161 |
|
66 |
|
95 |
|
|||
Caution Concerning Limitations of Summary Financial Results Press Release
This summary earnings press release contains limited information meant to assist the reader in assessing Crescita’s performance, but it is not a suitable source of information for readers who are unfamiliar with Crescita and is not in any way a substitute for the Company's Consolidated Audited Financial Statements and notes thereto, MD&A and latest Annual Information Form (“AIF”) which can be found on the Company’s profile on SEDAR at www.sedar.com.
About Crescita Therapeutics Inc.
Crescita (TSX: CTX and OTC US: CRRTF) is a growth-oriented, innovation-driven Canadian commercial dermatology company with in-house R&D and manufacturing capabilities. The Company offers a portfolio of high-quality, science-based non-prescription skincare products and early to commercial stage prescription products. We also own multiple proprietary transdermal delivery platforms that support the development of patented formulations to facilitate the delivery of active ingredients into or through the skin. For more information visit, www.crescitatherapeutics.com.
Forward-looking Information
This press release contains “forward-looking information” within the meaning of applicable securities laws. All information in this press release, other than statements of current and historical fact, represents forward-looking information and is qualified by this cautionary note. Often, but not always, forward-looking information can be identified by words such as: “anticipate”, “intend”, “plan”, “goal”, “seek”, “believe”, “aim”, “project”, “estimate”, “expect”, “strategy”, “future”, “likely”, “may”, “should”, “will” and similar references to future periods. Examples of forward-looking information include, but are not limited to, statements made in this press release under the heading “Financial Highlights”, and regarding the Company’s objectives, plans, goals, strategies, growth, performance, operating results, financial condition, business prospects, opportunities and industry trends, and similar statements concerning anticipated future events, results, circumstances, performance or expectations.
Forward-looking information is neither historical fact nor an assurance of future performance. Instead, it based only on current beliefs, expectations, and assumptions regarding the future of the Company’s business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions.
Because forward-looking information relates to the future, it is subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Company’s control.
Crescita’s actual results and financial condition may differ materially from those indicated in forward-looking information. Therefore, you should not unduly rely on any forward-looking information. Important factors that could cause Crescita’s actual results and financial condition to differ materially from those indicated in forward-looking information include, among others:
- economic and market conditions including the uncertainty in the global economy created by the war in Ukraine;
- the impact of inflation and rising interest rates together with the threats of stagflation and recession;
- the Company’s ability to execute its growth strategies;
- the degree or lack of market acceptance of the Company’s products;
- reliance on third parties for marketing, distribution and commercialization, and clinical trials;
- the impact of changing conditions in the regulatory environment and product development processes;
- manufacturing and supply risks;
- increasing competition in the industries in which the Company operates;
- the Company’s ability to meet its contractual obligations;
- the impact of product liability matters;
- the impact of litigation involving the Company and/or its products;
- the impact of changes in relationships with customers and suppliers;
- the degree of intellectual property protection of the Company’s products;
- the impact of the COVID-19 pandemic and the response thereto of governments and consumers;
- developments and changes in applicable laws and regulations; and
- other risk factors described from time to time in the reports and disclosure documents filed by Crescita with Canadian securities regulatory agencies and commissions, including the sections entitled “Risk Factors” in the Company’s most recent annual MD&A and AIF.
As a result of the foregoing and other factors, no assurance can be given that future results, levels of activity or achievements indicated in any forward-looking information will actually be achieved. Any forward-looking information in this press release is based only on information currently available to management and speaks only as of the date on which it is provided. Except as required by applicable securities laws, Crescita undertakes no obligation to publicly update any forward-looking information, whether written or oral, that may be provided from time to time, whether as a result of new information, future developments or otherwise.
____________________
1Please refer to the Non-IFRS Financial Measures section of this press release.
