InterCure Announces First Half of 2024 Results: Revenue of NIS 126 million and Adjusted EBITDA of NIS 21 million

Rhea-AI Summary

InterCure (NASDAQ: INCR) reported its financial results for the first half of 2024, with revenue of NIS 126 million and Adjusted EBITDA of NIS 21 million (17% of revenues). The company achieved its 16th and 17th consecutive quarters of profitability despite challenges from the October 7, 2023 terrorist attack and the war in Gaza. InterCure is receiving compensation from Israeli authorities for damages to its Southern Facility.

The company announced an expansion of its partnership with Cookies™ to Germany, expecting to launch products there in Q4 2024. InterCure anticipates double-digit growth in the second half of 2024 due to expected launches in German and UK markets. The company continues to expand its medical cannabis pharmacy chain, now with 24 active locations.

Positive

• Achieved 16th and 17th consecutive quarters of profitability
• Adjusted EBITDA of NIS 21 million, representing 17% of revenues
• Expansion of partnership with Cookies™ to Germany, with product launch expected in Q4 2024
• Expects double-digit growth in second half of 2024 compared to first half
• Expanded medical cannabis pharmacy chain to 24 active locations
• Received tens of millions of NIS in advance payments from Israeli authorities as compensation

Negative

• Revenue decreased to NIS 126 million in H1 2024 from NIS 147 million in H2 2023
• Adjusted EBITDA margin decreased to 17% in H1 2024 from 21% in H2 2023
• Southern Facility damaged by terrorist attack, affecting operations and revenues
• access to Southern Facility due to ongoing war situation

Insights

Financial Analyst

InterCure's first half 2024 results reveal a resilient performance amidst challenging circumstances. Revenue of NIS 126 million and Adjusted EBITDA of NIS 21 million (17% margin) demonstrate the company's ability to maintain profitability despite the impact of the October 7th attack. The 16th and 17th consecutive profitable quarters underscore a robust business model.

Key positives include:

• Expected compensation from Israeli authorities for facility damages
• Expansion into German market with Cookies™ partnership
• Projected double-digit growth in H2 2024

However, investors should note the revenue decline from H2 2023 (NIS 147 million) to H1 2024 (NIS 126 million). The company's ability to execute its expansion plans and restore full capacity at its Southern Facility will be important for future growth.

Market Research Analyst

InterCure's strategic moves in the European cannabis market are noteworthy. The expansion of the Cookies™ partnership into Germany, Europe's largest cannabis market, positions the company for significant growth. This aligns with the broader trend of cannabis market globalization.

The company's plans to launch over 30 new GMP SKUs in H2 2024 through collaborations with Cookies, Binske and Organigram indicate a strong product pipeline. This diversification could help offset challenges in the Israeli market.

However, the success of these initiatives will depend on:

• Regulatory landscape in target markets
• Consumer acceptance of new products
• Effective execution of international expansion

Investors should monitor these factors closely as they will be critical to InterCure's future performance and market position.

Legal Expert

The legal aspects of InterCure's situation present both opportunities and challenges. The company's entitlement to full compensation from Israeli authorities for damages to its Southern Facility is a significant positive. This legal provision helps mitigate the financial impact of the October 7th attack and subsequent war.

Key legal considerations include:

• Timely receipt of compensation payments
• Compliance with international cannabis regulations
• Potential legal hurdles in new markets

The company's ability to navigate these legal complexities will be important for its expansion plans. Investors should pay attention to any regulatory changes in target markets, particularly Germany and the UK, as they could significantly impact InterCure's growth strategy.

• Revenues during the first half of 2024 reached NIS 126 million, alongside an Adjusted EBITDA¹of NIS 21 million (Approximately 17% of revenues).
  
• Both quarters (Q1 and Q2 of 2024) ended with positive EBITDAs and profit from operations and represents InterCure’s 16^th and 17^th consecutive quarter of profitability².
• Revenues for the first half of 2024 were affected by damages caused by the terrorist attack on October 7, 2023, and the war in Gaza.
• InterCure is entitled to full compensation from the Israeli authorities for all direct and indirect damages caused to its Southern Facility located at Kibbutz Nir Oz. To date, InterCure has already received tens of millions of NIS as partial advance payments from the Israeli authorities.
• Announced Expansion of its strategic partnership with Cookies™ to Germany and expects to launch first Cookies products in Germany in the fourth quarter of 2024.
• Restoring the Southern Facility continues in accordance with receiving advance payments from the Israeli authorities.
• Expects double digit growth throughout the second half of 2024 (compared to first half of 2024) due to expected launches in German and UK markets.

NEW YORK and HERZLIYA, Israel, Aug. 29, 2024 (GLOBE NEWSWIRE) -- InterCure Ltd. (NASDAQ: INCR) (TASE: INCR) ("InterCure" or the "Company") is pleased to announce its financial and operating results for the six months ended June 30, 2024. All amounts are expressed in New Israeli Shekels (NIS), unless otherwise noted.

First Half 2024 Financial Highlights and Milestones

• Revenue was NIS 126 million, and the adjusted EBITDA for the six months ending June 30, 2024 was NIS 21 million, approximately 17% of revenues. Compared to the second half of 2023 (which was only partly affected by the terrorist attack on October 7, 2023 and the war in Gaza) with NIS 147 million of revenue and NIS 31 million of adjusted EBITDA.
• The October 7^th terror attack effected the Company’s revenues in first half of 2024 due to damages to its southern facility located at Kibbutz Nir Oz (the "Southern Facility").
• The Company's operating profit was NIS 11 million.
• Both quarters (Q1 and Q2 of 2024) represents the 16^th and 17^th consecutive quarters of profitability for InterCure, with both quarters showing positive Adjusted EBITDA and profit from operations.
• Continued expansion of the Company's dedicated medical cannabis pharmacy chain to a total of 24 active locations as of today. As of October 2023, the Company holds 100% of Cannolam LTD including the full rights to Cookies™ international agreements, alongside Israel’s largest chain of dedicated medical cannabis pharmacies, Givol™.
• Since October 7, 2023, war situation was declared by the Israeli government. As of this date, there is limited access to the Company’s Southern Facility.
• According to Israeli Law, due to the location of the Company’s Southern Facility, the Company is entitled to full compensation for all the direct and indirect damages caused to the Southern Facility by the terrorist attack and the war in Gaza.
• Restoring the Southern Facility continues with accordance of receiving advance payments from the Israeli authorities.
• To date, the Company has received tens of millions of NIS as advance payments from the Israeli authorities in relation to such compensation and expects to receive additional substantial advance payments to support the Southern Facility restoration.
• The Company’s cash on hand was NIS 21 million while the Company has unused credit line of over NIS 22 million and it is expecting to receive additional substantial advance payments from the Israeli authorities as part the compensation it is entitled to due to damages caused to the Southern Facility.
• Expands its European footprint with new strategic agreements with Cookies™. Enhancing branded product offerings with the most-recognized global cannabis brand and expects to launch Cookies Corners licensed pharmacies in Germany and UK, alongside differentiated online platforms with the official cookies retail experience.
• Continued execution of the Company's global expansion plan. Plans to launch more than 30 new GMP SKUs during the second half of 2024 executing collaborations with Cookies, Binske, Organigram and others.
• Expects double digit growth throughout the second half of 2024 compared to first half of 2024.

Alexander Rabinovitch, CEO of InterCure noted: "Yesterday, we announced the expansion of our strategic partnership with Cookies to the German market, the largest market in Europe, which is experiencing accelerated growth and becoming a key target market for Intercure. Intercure grew double-digit in the first half and presented profitable quarters, the 16th and 17th in a row. This consistent performance highlights our business model's strength and commitment to leading the pharmaceutical cannabis market even in this challenging time. In the first half, we heavily invested in the restoration of the company's main facility located at Kibbutz Nir Oz. The facility was damaged by the terrorist attack and is expected to gradually return to full capacity in the coming quarters, in accordance with receiving compensation from the authorities for the direct and indirect damages which the company is entitle to."

Alexander Rabinovitch continued: "Intercure is set for a significant growth in the coming quarters and years in all territories, and to that end, we have executed strategic actions to strengthen the company's high quality cultivation and supply chain in Canada and Europe. Entering the German market with great impact by the company's leading product lines, including Cookies, the globally most recognized cannabis brand , is a significant step in our commitment to provide high-quality, pharma-grade cannabis to patient communities and creating value to our shareholders."

InterCure is thankful to its managers and employees for their commitment and to its strategic partners in Israel and worldwide who stand with us during this time of war.

Key Half Year Financial Highlights – Cannabis Sector

	H1-24		H2-23		H1-23		H2-22		H1-22		H2-21		H1-21
Revenues	125,733		146,939		208,614		206,178		182,506		141,396		78,281
Gross Profit(1)	40,442		40,394		67,945		81,558		77,399		61,295		34,694
GP Margin	32%		27%		33%		40%		42%		43%		44%
Adjusted EBITDA(2)	20,829		31,201		29,669		40,714		43,411		35,132		21,765
Adjusted EBITDA(2)Margin	17%		21%		14%		20%		24%		25%		28%

Notes

	(1)		Gross profit before effect of fair value.
	(2)		EBITDA adjusted for changes in the fair value of inventory, share-based payment expense, impairment losses (and gains) on financial assets, non-controlling interest and other expenses (or income). This is a non-IFRS financial measure and does not have a standardized meaning prescribed by IFRS, please see “Non-IFRS Measures” below.

About InterCure (dba Canndoc)
InterCure (dba Canndoc) (NASDAQ: INCR) (TASE: INCR) is the leading, profitable, and fastest growing cannabis company outside of North America. Canndoc, a wholly owned subsidiary of InterCure, is Israel’s largest licensed cannabis producer and one of the first to offer Good Manufacturing Practices (GMP) certified and pharmaceutical-grade medical cannabis products. InterCure leverages its market leading distribution network, best in class international partnerships and a high-margin vertically integrated "seed-to-sale" model to lead the fastest growing cannabis global market outside of North America.

For more information, visit: https://www.intercure.co

Non-IFRS Measures
This press release makes reference to certain non-IFRS financial measures. Adjusted EBITDA, as defined by InterCure, means earnings before interest, income taxes, depreciation, and amortization, adjusted for changes in the fair value of inventory, share-based payment expense, impairment losses (and gains) on financial assets, non-controlling interest and other expenses (or income). This measure is not a recognized measure under IFRS, does not have a standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other companies. InterCure’s method of calculating this measure may differ from methods used by other entities and accordingly, this measure may not be comparable to similarly titled measured used by other entities or in other jurisdictions. InterCure uses this measure because it believes it provides useful information to both management and investors with respect to the operating and financial performance of the company. A reconciliation of Adjusted EBITDA to an IFRS measure (revenue), which is incorporated by reference to this press release, is available in InterCure’s MD&A included in our Annual Report on Form 20-F under the heading “Results of Operations”, available under the Company’s profile on EDGAR at www.sec.gov.

Forward-Looking Statements
This press release contains forward-looking statements. Forward-looking statements may include, but are not limited to, the Company’s success of its global expansion plans, its expansion strategy to major markets worldwide, statements relating to the security events in Israel, as well as statements, other than historical facts, that address activities, events or developments that InterCure intends, expects, projects, believes or anticipates will or may occur in the future. These statements are often characterized by terminology such as "believes," "hopes," "may," "anticipates," "should," "intends," "plans," "will," "expects," "estimates," "projects," "positioned," "strategy" and similar expressions and are based on assumptions and assessments made in light of management’s experience and perception of historical trends, current conditions, expected future developments and other factors believed to be appropriate. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statements. Many factors could cause InterCure’s actual activities or results to differ materially from the activities and results anticipated in forward-looking statements, including, but not limited to, the following: the Company’s success of its global expansion plans, its continued growth, the expected operations, financial results business strategy, competitive strengths, goals and expansion and growth plans, expansion strategy to major markets worldwide, the impact of the COVID-19 pandemic, the impact of the war in Israel and the war in Ukraine and the conditions of the markets generally. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond InterCure’s control, which could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such risks and uncertainties include, but are not limited to: changes in general economic, business and political conditions, changes in applicable laws, the U.S. regulatory landscapes and enforcement related to cannabis, changes in public opinion and perception of the cannabis industry, and reliance on the expertise and judgment of our senior management. More detailed information about the risks and uncertainties affecting us is contained under the heading "Risk Factors" included in the Company's most recent Annual Report on Form 20-F and in other filings that we have made and may make with the Securities and Exchange Commission in the future.

Contacts

InterCure Ltd.
Amos Cohen, Chief Financial Officer
amos@intercure.co

¹ Adjusted EBITDA means EBITDA for the cannabis sector adjusted for changes in the fair value of inventory, share-based payment expense, impairment losses (and gains) on financial assets, non-controlling interest and other expenses. This is a non-IFRS financial measure and does not have a standardized meaning prescribed by IFRS, please see "Non-IFRS Measures" below.

² Adjusted EBITDA.

InterCure LTD CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS As of June 30, 2024 (Unaudited)
Condensed Consolidated Interim Statements of Financial Position
	As of June 30
	NIS in thousands
		2024				2023
	(Unaudited)				(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		19,899				102,653
Restricted cash		948				13,788
Trade receivables, net		61,672				42,623
Other receivables		158,045				91,747
Inventory		126,466				156,443
Biological assets		3,388				7,058
Financial assets measured at fair value through profit or loss		399				192
Total current assets		370,817				414,504
NON-CURRENT ASSETS:
Other receivables		439				-
Property, plant and equipment and right-of-use asset		98,611				96,970
Goodwill		223,609				284,181
Deferred tax assets		27,042				23,625
Financial assets measured at fair value through profit or loss		1,922				2,565
Investment in associate and loan		18,447				20,000
Total non-current assets		370,070				427,341
TOTAL ASSETS		740,887				841,845
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short term loan and current maturities		81,755				56,521
Trade payables		83,071				104,605
Other payables		39,965				39,524
Contingent consideration		4,082				6,145
Short term loan from non-controlling interest		-				957
Total current liabilities		208,873				207,752
LONG-TERM LIABILITIES:
Long term loans		51,317				84,067
Liabilities in respect of employee benefits		841				1,079
Lease liability		17,741				21,295
Total long-term liabilities		69,899				106,441
EQUITY:
Share capital, premium and other reserves		649,013				634,383
Capital reserve for transactions with controlling shareholder		2,388				2,388
Capital reserve for transactions with non-controlling interests		13,561				-
Receipts on account of shares		-				8,541
Accumulated losses		(204,518	)			(136,552	)
Equity attributable to owners of the Company		460,444				508,760
Non-controlling interests		1,671				18,892
TOTAL EQUITY		462,115				527,652
TOTAL LIABILITIES AND EQUITY		740,887				841,845

Condensed Consolidated Interim Statements of Profit or Loss and Other Comprehensive Income
	For the 6-months ended on June 30								Year ended December 31
	NIS in thousands
		2024				2023				2023
	(Unaudited)				(Unaudited)				(Audited)
Revenue		125,733				208,614				355,553
Cost of revenue before fair value adjustments		85,291				140,669				247,214
Gross income before impact of changes in fair value		40,442				67,945				108,339
Unrealized changes to fair value adjustments of biological assets		1,218				4,339				261
Loss from fair value changes realized in the current year		1,029				5,316				3,505
Gross Profit		40,631				66,968				105,095
Research and development expenses		219				256				388
General and administrative expenses		18,374				21,856				42,610
Sales and marketing expenses		27,454				27,800				53,269
Other expenses, net		(16,414	)			2,919				47,138
Changes in the fair value of financial assets through profit or loss, net.		(201	)			12				665
Share based payments		686				2,358				2,592
Operating Profit		10,513				11,767				(41,567	)
Financing income		1,031				2,252				5,883
Financing expenses		10,070				11,842				25,601
Financing expenses (income), net		9,039				9,590				19,718
Profit before tax on income		1,474				2,177				(61,285	)
Tax (expense) benefit		(1,480	)			1,640				(2,248	)
Total comprehensive Profit (loss)		(6	)			3,817				(63,533	)
Profit (loss) attributable to:
Owners of the Company		1,433				5,097				(61,959	)
Non-controlling interests		(1,439	)			(1,280	)			(1,574	)
Total		(6	)			3,817				(63,533	)
Interest / Financing expense (income) net		9,039				9,590				19,718
Tax expenses (benefit)		1,480				(1,640	)			2,248
Depreciation and amortization		6,337				6,442				13,166
EBITDA		16,850				18,209				(28,401	)
Share-based payment expenses		686				2,358				2,592
Other expenses (income), net (without other income from the Tax authorities)		416				2,919				75,292
Impairment losses and (gains) on financial assets through profit and loss		(201	)			12				665
Fair value adjustment to inventory		(189	)			977				3,244
Adjusted EBITDA		17,562				24,475				53,392
Earnings per share
Basic earnings (loss)		0.03				0.11				(1.36	)
Diluted earnings (loss)		0.03				0.11				(1.36	)

FAQ

What were InterCure's (INCR) revenue and EBITDA for the first half of 2024?

InterCure reported revenue of NIS 126 million and Adjusted EBITDA of NIS 21 million for the first half of 2024.

How did the October 7, 2023 terrorist attack affect InterCure's (INCR) operations?

The attack damaged InterCure's Southern Facility, affecting revenues and operations. The company is receiving compensation from Israeli authorities for these damages.

What expansion plans does InterCure (INCR) have for 2024?

InterCure is expanding its partnership with Cookies™ to Germany, expecting to launch products there in Q4 2024. The company also anticipates launches in the UK market.

How many consecutive profitable quarters has InterCure (INCR) achieved as of Q2 2024?

InterCure has achieved 17 consecutive quarters of profitability as of Q2 2024.

What growth does InterCure (INCR) expect for the second half of 2024?

InterCure expects double-digit growth in the second half of 2024 compared to the first half, driven by anticipated launches in German and UK markets.