InterCure Ltd. Q1 FY2022 earnings call

• Total revenue in Q1 2022 was $34 million, almost 3x that of Q1 2021, with sequential growth of 9% and an annual run rate of $138 million.
• Adjusted EBITDA in Q1 was $8 million, a more than 100% growth, and EBITDA margin was 24%. Seventh consecutive quarter of positive cash flow from operations and ninth consecutive quarter of profitable growth.
• Reached record profits before tax of almost $8 million in Q1, a 250% year-over-year growth. Ended Q1 with $91 million cash in hand.
• Scaled up operations across segments, including cultivation sites in Israel using unique genetics and protocol. Had over five product launches during the quarter, including the first 100% pesticides-free products.
• International supply chain scaled, with more than six cultivation sites globally. Established strategic partnership with Clever Leaves for additional supply access to medical cannabis markets.
• In Israel, the market added approximately 3,000 new patients, bringing the total to over 112,000 subscriptions. Had 22 pharmacy locations for medical cannabis, 14 actively dispensing during Q1. Gross margin over 42% and EBITDA margin over 26% in Q1. Expecting licenses for remaining pharmacies in 2022.
• Entered strategic partnership with Altman Health in Israel and signed an agreement to acquire 100% of Better, with closing expected in Q3 2022 subject to regulatory approvals.

Total revenue for the first quarter of 2022 was $34 million, almost 3x greater than the first quarter of 2021, with an annual run rate of $138 million. Adjusted EBITDA in the first quarter was $8 million. Gross margin for the first quarter was higher than 42% and EBITDA margin was higher than 26%. Revenue contribution: The company's revenue comes from its medical cannabis dispensing operation and related product sales, with growth driven by organic growth in the medical cannabis segment.

• Expect revenue growth to continue in the second quarter and throughout 2022.
• Expect to launch first branded dispensing operation and pharmaceutical products in the UK, Australia, and Germany in 2022.
• Global expansion is expected to have an accretive impact on financials, especially in the back end of 2022.

• Israeli import regulations may add barriers and complexity to the import process, which could impact local markets and product availability. New importation protocol 'new 109' may be implemented by the end of the month and could affect operations.
• The cannabis industry is highly regulated, and obtaining licenses for pharmacies and complying with regulations can be a challenge and may impact financials in the short term.

Q: Given the domestic medical supply in Israel unable to keep up with growing medical demand and IMCA's stance on prioritizing domestic cultivation or foreign imports, what's the impact on pricing and product availability in the near term?

A: If new regulation slows or stops importation to Israel, prices of highest quality products are expected to go up. InterCure's local cultivation quality is high, but the market still depends on importation.

Q: How do the new import regulations from the IMCA affect InterCure's partnership with Clever Leaves in Israel along with cultivation and wholesale strategy?

A: It's hard to speculate on the exact impact yet. But InterCure has experience in correcting similar regulations in the past and is well-prepared with local cultivation ability and a focused team on cracking the new regulations.

Q: About cash flow and potential uses of capital going forward, will free cash flow be sustained as growth initiatives continue?

A: Expect positive cash flow from operations to continue, but will invest in CapEx for scaling up operations. Well-prepared and sees opportunities for M&A and strategic growth with the cash position.

Q: Thoughts on Germany's potential legalization and worthwhile investments upfront?

A: Believes markets like Germany will eventually evolve into adult use regulation. Part of strategy is building brand equity in pharmaceutical grade markets in Germany and other markets, and it's a question of when rather than if for regulation to come