Elixinol Global published financial results for Q2 2019 today, recording group revenue of $9.9 million.
This represents a 19% increase in revenue for Elixinol Global Limited (ASX:EXL) when compared to the same period in FY18, and 18% quarter on quarter growth when compared to Q1 2019.
This quarter the company saw continued investment in key areas of its business to further growth strategy and increase branded product distribution, while its new Colorado-based production facility became fully operational, more than doubling Elixinol's current output capacity.
In anticipation of upcoming "regulatory driven catalysts" and growing consumer demand, Elixinol Global has increased its inventories and placed sizeable deposits on raw material supply contracts, incurring operating cash outflows of $11.5 million.
Elixinol's Q2 2019 activities also included the launch of Infusion Strategies LLC—as part of a strategic partnership with RFI—which has increased Elixinol's exposure to the CBD-infused food, beverage, dietary supplement, and nutraceuticals industries. Infusion Strategies will be managed by RFI going forward, with a particular focus on "obtaining quality genetics, implementing leading processing and extraction methods and advancing innovation and product development."
Additionally, the company acquired a 25% stake in the US-based Pet Releaf—a leading brand in the high growth cannabidiol (CBD) pet products market—while also being officially granted a highly coveted CBD Processor Authorization by the New York State Department of Agriculture Markets, giving it the ability to scale future operations.
Elixinol Global managed to raise $50 million this quarter in a bid to accelerate its US expansion, while its wholly-owned Dutch based subsidiary Elixinol B.V. continued to make significant progress in Europe thanks to its co-branded product lines sold under the "Naturopathica" brand.
These products are now also available via the online store and 800 physical retail space belonging to the market leading health and wellness retailer, Holland & Barrett, which is predicted to have a significant effect on future sales
Elixinol B.V. also signed an exclusive agreement with MedVec International GmbH, that will see its products distributed into the company's pharmacy and para-pharmacy sales channels in Germany. The exclusivity of the distribution agreement is also subject to a regulation concerning minimum annual sales targets. If these targets are not met then it will cause the agreement to shift from being exclusive to co-exclusive.
Capital expenditure for the quarter totalled $8.1 million, which includes $6.2 million for the company's investment in Pet Releaf and $1.7 million in equipment and fit outs related to the commissioning of the new Colorado production facility. The investment in Pet Releaf is an extension of the previous long-standing relationship between the two companies, with Elixinol having been their exclusive CBD extract supplier since inception.
An additional $2.2 million in cash outflows is also expected to be incurred during Q3 2019, related to the Colorado facility.
Shares in Elxinol Global are currently trading higher today, having reached 3.49 after climbing in value by 1.16% this afternoon.
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