INCR — InterCure Ltd.

Summary of InterCure's Q4 2022 Earnings Call

1. Key Financial Results and Metrics

• Revenue: InterCure reported record revenues of approximately $150 million for 2022, a 77% increase from $85 million in 2021. Q4 revenue was $41 million, up 30% year-over-year and 6% sequentially.
• Gross Profit: Gross profit reached over $60 million, representing 41% of revenue, down from 44% in 2021.
• Adjusted EBITDA: For 2022, adjusted EBITDA was $32 million, or 22% of revenue, compared to $22 million in 2021.
• Net Profit: Net profits after tax were just under $70 million, with cash flow from operations at $20 million.
• Cash Position: The company ended the year with $95 million in cash.

2. Strategic Updates and Business Highlights

• InterCure solidified its position as the largest and fastest-growing cannabis company outside North America, focusing on the Israeli market before expanding internationally.
• The company upgraded its cultivation facilities and launched more GMP products than any other company in the industry.
• InterCure expanded its pharmacy chain from 3 locations at the end of 2020 to 28 locations by the end of 2022, with plans to further increase this footprint.
• Strategic partnerships were extended, including with Organigram, to enhance product offerings and distribution capabilities.
• The company is preparing for international expansion, particularly targeting markets in Germany and the UK.

3. Forward Guidance and Outlook

• InterCure anticipates significant market growth in 2023, expecting the Israeli market to expand to 85 tons from 49 tons in 2022, driven by a new prescription reform.
• The company is well-positioned to capitalize on this growth, having scaled up operations and secured additional supply agreements.
• Future capital expenditures (CapEx) are expected to be at least 50% lower than in 2022, focusing on global expansion and pharmacy chain development.

4. Bad News, Challenges, or Points of Concern

• The company faced challenges due to a slowdown in new patient procurement in Israel, attributed to regulatory issues and a lack of prescribing doctors.
• The gross margin declined due to competitive pressures, with struggling companies selling low to medium-quality products at discounted prices.
• There is uncertainty regarding the timing of the prescription reform, which could impact market dynamics and growth.
• The cannabis market in Israel is experiencing consolidation, with some companies exiting, potentially affecting pricing and competition.

5. Notable Q&A Insights

• Management acknowledged that while there is a significant opportunity for growth with the prescription reform, it is difficult to predict the exact timing and impact on market dynamics.
• The current market mix is approximately 70% high-quality products and 30% lower-quality products, with expectations that the market will clean up as struggling companies exit.
• The company is prepared for the anticipated increase in demand, having scaled operations and established partnerships to support growth.
• Concerns were raised regarding the ability of the market to handle a 70% increase in demand, but management expressed confidence in their readiness to meet this challenge.

Overall, while InterCure demonstrated strong financial performance and strategic positioning, it faces challenges related to market dynamics and regulatory changes that could impact future growth.