InterCure Ltd. Q3 FY2021 earnings call

• Achieved seven consecutive quarters of high digit growth and improved profitability, with five consecutive quarters of positive cash flow.
• Crossed one-ton mark in GMP medical cannabis products dispensed monthly, serving over 70,000 patients, and achieving an annual revenue run rate over CAD 100 million.
• Increased gross profits and adjusted EBITDA run rate of CAD 23 million.
• Acquired Cannomed retail assets, with revenues and profitability of these assets increasing by over 30% since integration.
• First company to meet new importation requirements (109 reg) from Israeli Medical Cannabis Agency, resuming importation from strategic partners.
• Ramped up cultivation and manufacturing in facilities, completed new product launches, and CEO purchased over 420,000 shares.
• Received 5.2 million shares back from SPAC sponsors, adding significant value to shareholders.

For the third quarter of 2021, InterCure reported revenue of CAD 25 million (ILS 62 million). This is three times greater than the third quarter of 2020 revenue of CAD 9 million and up 36% sequentially. The cannabis sector had EBITDA of approximately CAD 6 million (ILS 14 million) for the third quarter. Revenue has grown from CAD 3 million in 2018 to a run rate of over CAD 100 million, representing a significant increase in revenue contribution over the years.

• Expect growth to continue in the fourth quarter and throughout 2022 as focused on executing profitable growth strategy.
• Growth depends on how fast regulations evolve in Israel and other territories like Europe.

• Regulatory changes that could impact importation, cultivation, and dispensing of medical cannabis.
• Supply chain issues that might affect meeting growing demand for branded products.
• Competition in the international cannabis market.

Q: Vivien Azer asked about gross margin and pathway to fully optimized gross margin, and top line growth cadence.

A: Alex Rabinovitch said normalized gross margin reached ~45% in Q3, once fully integrated gross margin would be above 50%, and growth depends on regulatory evolution in Israel and Europe.

Q: Shaan Mir inquired about innovation activities with the acquired trade house and processes for enabling remaining retail pharmacies for medical cannabis dispensing.

A: Alex said acquisition of trade house expected to be accretive in 2022, with focus on integrating it to serve dispensary and pharmacies; process for enabling remaining pharmacies varies by district in Israel, taking 6 months to a year plus in some cases.

Q: Matthew Baker asked about current size of Israel market in tonnes and dollars, import vs local demand, and realistic regulatory changes in Israel over next 12-18 months.

A: Alex estimated Israeli market run rate over 40 tonnes, market size nearly CAD 300 million, importation serves ~30-40% of demand; expected cannabis reform in Israel, including medical cannabis license process evolution and equalizing Israeli GMP to EU-GMP, with exportation regulation expected to start shipments in December.