Tue, 26 Jan 2021

Variable Gross Margin of 16% at Q3 2020 is up from 5% reported the same quarter last year as Company benefits from higher margin revenue

SANTA ROSA, CA / ACCESSWIRE / November 30, 2020 / GABY Inc. ('GABY' or the 'Company') (CSE:GABY)(OTCQB:GABLF), a California-focused, Cannabis and CBD consumer goods and distribution company, is pleased to provide its third quarter 2020 results (ended September 30, 2020).

Q3 2020 Financial Highlights

  • Revenue was $0.8 million compared to $5.8 million during the same quarter in 2019
  • Net loss was $1.5 million compared to $2.3 million the same quarter last year.
  • Adjusted EBITDA from Continuing Operationsi was (1.4 million) i compared to ($2.8 million) i during the same quarter last year. The improvement of $1.4 million was primarily due to a decrease in SG&A expenses of $1.5 million. Variable Gross Margin improved to 16% compared to 5% during the same quarter in 2019 due to management's commitment to maximizing efficiencies and reducing costs as it drives toward sustained profitability.

Adjusted EBITDA from Continuing Operationsi for the periods ended below are calculated as follows:

The improved Adjusted EBITDA from Continuing Operationsi and improved Variable Gross Margin in the quarter reflects a number of initiatives that GABY has implemented early in 2020 and continued through to Q3 2020, including focusing on higher margin revenue mix at retail, relocating and consolidating all operations into one leased facility, shutting down or disposing of operations that would not be profitable near term or required excessive capital investment to become profitable, simplifying operations and increasing efficiencies and partnering with cultivators in a longer term less transactional relationship to stabilize inventory pricing on a go forward basis.

The strategic initiatives introduced by GABY at the end of Q1 2020 enabled the reduction of its net losses to $1.5 million for the three ('QTD') months ended September 30, 2020, which represented improvements of 35% or $0.8 million over the same quarter last year.

This progress occurred despite revenue of $0.8 million QTD decreasing from $5.8 million for the same quarter last year. The revenue decrease reflects a number of internal factors, including GABY's strategic shift to lower-volume, higher-margin revenues, namely shifting from wholesale to retail revenue. This shift in revenue, stemmed primarily from the Company's decision to stop buying raw materials for resale on a speculative basis. This shift in approach to its wholesale operations enabled the company to realize greater margins and mitigated the risk associated with price fluctuations of the commodity product but reduced the revenue generated from the broader speculative trading business. In 2020 the Company limited its wholesale or bulk brokerage business to a more restricted agency relationship sourcing for a small group of specific buyers thereby reducing risk and increasing margin on reduced volume.

'2020 has been a year of stabilization, where we focused on the fundamentals and on building a foundation to survive the structural and economic headwinds that we've all seen plague the nascent cannabis industry. A strong, economically sound foundation is the only way we can sustain ourselves through these early days', said Margot Micallef, Founder, President and Chief Executive Officer of GABY. 'All of the changes we made this year have positioned us to meet our goal to be profitable on a run rate basis by year end. Our focus for the remainder of the year continues to be to pursue sustainable growth, both organically and by acquisition', she concluded.

GABY's shares trade on the Canadian Securities Exchange ('CSE') under the symbol 'GABY' and on the OTCQB under the symbol 'GABLF'. For more information, visit www.GABYinc.com.

For further inquiries, please contact:

Margot Micallef, Founder & CEO at Margot@GABYinc.com or Investor Relations at IR@GABYinc.com or 800-674-2239.

(i) NOTE- NON-GAAP MEASURES

Adjusted EBITDA from Continuing Operations

Adjusted EBITDA from Continuing Operations in respect of the comparative periods of Q3-20 below does not have any standardized meaning as prescribed by IFRS, and, therefore, is considered a non-GAAP measure and may not be comparable to similar measures presented by other issuers. The non-GAAP measure of Adjusted EBITDA from Continuing Operations, combined with IFRS measures, such as revenue and net loss, is a useful measure to our investors as management relies on it to provide a measure of operating cash flows before servicing debt, income taxes, capital expenditures and other gains and losses. A reconciliation of EBITDA from Continuing Operations to the nearest GAAP measure is provided in the table above.

Disclaimer and Forward-Looking Information

The CSE does not accept responsibility for the adequacy or accuracy of this release. Certain information set forth in this news release may contain forward-looking statements that involve substantial known and unknown risks and uncertainties, certain of which are beyond the control of the Company. Forward-looking statements are frequently characterized by words such as 'plan', 'continue', 'expect', 'project', 'intend', 'believe', 'anticipate', 'estimate', 'may', 'will', 'potential', 'proposed' and other similar words, or statements that certain events or conditions 'may' or 'will' occur. These statements are only predictions. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. The Company assumes no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Sonoma Pacific Distribution, Inc., is a subsidiary of GABY. Sonoma Pacific holds a type 11 cannabis license in the State of California. Unlike in Canada which has Federal legislation uniformly governing the cultivation, distribution, sale and possession of medical cannabis under the Cannabis Act (Federal), readers are cautioned that in the United States ('U.S.'), cannabis is largely regulated at the State level. Cannabis is legal in the State of California. However, cannabis remains illegal under U.S. federal laws. Notwithstanding the permissive regulatory environment of cannabis at the State level, cannabis continues to be categorized as a controlled substance under the Controlled Substances Act in the U.S. and as such, cannabis-related practices or activities, including without limitation, the manufacture, importation, possession, use or distribution of cannabis are illegal under U.S. federal law. To the knowledge of the Company, the business operated by Sonoma Pacific is conducted in a manner consistent with the State law of California, as applicable, and it is in compliance with regulatory and licensing requirements applicable in the State of California. However, readers should be aware that strict compliance with State laws with respect to cannabis will neither absolve GABY, or its subsidiary of liability under U.S. federal law, nor will it provide a defense to any federal proceeding in the U.S. which could be brought either GABY or its subsidiary. Any such proceedings brought against GABY or its subsidiary may materially adversely affect the Company's operations and financial performance generally and in the U.S. market specifically.

Neither the CSE nor its Regulation Services Provider accepts responsibility for the adequacy or accuracy of this release.

SOURCE: GABY Inc.



View source version on accesswire.com:
https://www.accesswire.com/618889/GABY-Inc-Reports-Third-Quarter-2020-Financial-and-Operational-Results

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