Thank you for standing by, and welcome to the MediPharm Labs conference call to discuss its first quarter 2025 results. Our speakers on today's call are David Pidduck, President and Chief Executive Officer, and Greg Hunter, Chief Financial Officer. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After management's presentation, we will take questions from the analyst community on the telephone and then take written questions through the Q&A feature on the webcast. The information contained in this presentation should be considered together with the more detailed information, disclosure, financial data, and statements available on the company's website and on SEDAR + Profile.
As seen on slide two and three, I would like to note that this earnings call contains forward-looking information that is based on the company's current expectations, estimates, and beliefs as of today's date, and will also use terms that are non-IFRS financial measures. Please review the company's most recent disclosure materials for the risks associated with the use of forward-looking information and the use of non-IFRS financial measures in this presentation. Please note that all dollar amounts mentioned on today's call are in CAD unless otherwise noted. I would like to turn the call over to Mr. David Pidduck.
Good morning, everyone, and thank you for joining us today. We will focus on the strategic progress and momentum in our business that has driven our improved results. Later in the call, I will discuss the evolving situation involving a dissident shareholder. Since becoming CEO in 2022, the MediPharm team and I have worked tirelessly to implement this strategic plan that focused on growing and diversifying revenues, improving margins, lowering operating costs, strengthening our balance sheet, and building out our international medical business, where we believe we have a clear competitive advantage. As part of this strategy, we acquired VIVO in 2023 with the objective of combining two leaders in the medical wellness cannabis industry with complementary strengths and the ability to deliver a diversified revenue stream in multiple markets.
Most notably, VIVO provided us with an expanded international platform via the established Australian and German medical cannabis brand Beacon Medical. Today, the VIVO business has been fully integrated into MediPharm, and I can say it has been a transformational transaction and a genuine success story in the cannabis industry. The positive Q1 results we'll discuss today and the broader improvements across our business are evidence of the success of this acquisition and the overall strategy endorsed by our board. For shareholders, we believe we have the platform and a strong financial base to deliver further growth, both organic and inorganic. That, in turn, will position the company to deliver long-term shareholder value. We had a successful first quarter of 2025, continuing the steady improvement since I joined the company in 2022 across all our key financial metrics.
Two key indicators that we believe measure our performance and demonstrate improvement across our business are gross profit and adjusted EBITDA. As seen on slide five, our gross profit in Q1 2025 of CAD 4.2 million, or 38.7% of sales, was our highest gross margin we've achieved in many years. As seen on slide six, this chart demonstrates the consistent progress we've made. When I joined the company three years ago, we had a negative gross margin, meaning we were losing money on every sale we were making. Adjusted EBITDA was -CAD 6 million per quarter when I joined in 2022. Clearly, this was not sustainable, and if we did not change course, we would have ended up bankrupt, like many other cannabis companies have over the past few years. Instead, we generated a new plan that would get us to profitability.
Through hard work and commitment by the team, we undertook many initiatives over the past several years to grow revenues, increase gross profits, and reduce operating expenses. The positive trends in gross margin and adjusted EBITDA are proof that our plan is working. As I mentioned a moment ago, several peers in the cannabis sector have excessive debt, insufficient cash, negative working capital, and are generally in a very weak financial position. Many sell products below cost, some do not pay excise taxes, and many have stretched accounts payables and lose money. Several have entered CCAA protection and/or gone bankrupt and have wiped out shareholders' investments. As a result of our improved financial performance in recent quarters, MediPharm now enjoys a strong balance sheet, a favorable cash position, and positive working capital. We are able to invest in working capital and virtually no debt.
We also own all our facilities outright, and we are very proud to be up to date on excise taxes and accounts payable, unlike many others in the sector. All of this is testament to our focus on strategic execution and creating long-term sustainable value. Given our financial strength, MediPharm stands out as an attractive international distribution partner, and we are able to invest quickly in emerging growth opportunities globally. As an example, you will see that we have now begun to deploy some of our cash to support our international growth through investments in working capital, specifically in inventory and accounts receivable. These investments are driving our strong international revenues. Being well run, financially stable, and a proven reliable partner has enabled us to secure many B2B partnership opportunities in both Canada and abroad.
We actually pay our bills, which is not always a given by others in our industry. Our strong cash position also gives us flexibility to consider various M&A opportunities in a quickly consolidating market, which cannot be understated. Let's take a more detailed look at our international business, which has quickly become the most exciting segment for us. On slide eight, you can see the evidence of our international success with the upward trend in our international revenues since 2022. International sales now represent more than 50% of our total revenues in each of the past two quarters and is the fastest growing segment of our business. Many Canadian licensed producers, or LPs, have been approached by international customers regarding possible supply of their cannabis products, including flower, in some cases for premium prices.
For most of these producers who are new to the international market, the complexity and unique challenges of the international cannabis supply chain are significant. These complexities include regulatory issues, export and import permit management, logistics, changing quality testing requirements, and cash flow and other commercial and operational challenges. Many LPs have found that the allure of premium prices is offset by difficulties in navigating the complexities in these international markets. MediPharm has solved these challenges while developing and earning the trust of our partners. We have several years of experience in selling into markets in the U.K., Germany, Australia, Brazil, and other European countries. We also have a competitive advantage by possessing a robust suite of licenses, including good manufacturing practice, GMP, and our drug establishment license, the DEL, that are required in the pharmaceutical industry.
We benefit from long-standing global relationships and partnerships, established regulatory and supply chain pathways, and commercial agreements and operational processes to smoothly facilitate international sales. As a result, we have a growing reputation as a reliable supplier. This position of strength enables MediPharm to work with several existing and new international partners to significantly increase revenues. We have already begun to serve as a partner in bringing together high-quality cannabis products from Canadian LPs, including flower, and then facilitating the smooth and efficient supply of these products to international markets. The VIVO acquisition accelerated our international growth, led by the Beacon brand, which is very strong in Australia and robust in Germany and elsewhere. A couple of other quick highlights before I turn it over to Greg. More information on some of these can be found in our investor deck.
In Brazil, Teuto has now received their controlled substance import authorization quota, a key step to the coming 2025 product launch. We have signed five new international distribution partners. Our clinical trial investments continue to progress through the respective milestones. Our inhaler technology from Remidose is being launched in various countries, and our Hope facility sale to Rubicon for CAD 4.5 million is on track to close in Q2, thus allowing us to monetize a dormant non-core asset. Clearly, as you can see, there is momentum across our business. This is being driven by the implementation of our strategy, which is focused on leveraging our key operational and product advantages to drive growth both internationally and domestically. We're excited about the future. At this point, I'll ask Greg to review our Q1 financial results in greater detail.
Thanks, Dave, and good morning, everyone. MediPharm Management has been focused on growing our revenue base through both organic and inorganic initiatives while reducing expenses and cash burden with the goal of becoming a profitable and cash flow positive organization. The results of these efforts can be seen in our Q1 results, highlighted by the major milestone of becoming EBITDA positive. Revenue for the first quarter of CAD 10.8 million increased CAD 1 million, or 10.6%, vs the same quarter a year ago, driven by the expansion of our international business. International medical cannabis revenue increased CAD 2.8 million, or 87%, vs prior year to CAD 5.9 million. The growth was broad-based across our German, Australian, and U.K. customers and across our flower, oil, and dronabinol product portfolio. The international medical business represented approximately 55% of total revenue in the quarter vs 33% in the prior year.
Canadian medical cannabis revenue for the quarter was CAD 3.2 million and increased 3.7% sequentially from Q4 2024. Canadian adult use and wellness revenue of CAD 1.3 million in the quarter declined versus prior year and sequentially as we have chosen to prioritize profitability over volume in this highly competitive market. It is common knowledge that many cannabis companies sell products at a loss or at very low margins to achieve market share goals. MediPharm is not willing to sacrifice profitability for the sake of market share, and that has been a major factor in our margin expansion. Gross profit for the quarter was CAD 4.2 million, or 38.7% of revenue, and improved significantly vs Q1 2024 gross profit of CAD 2.7 million, or 27.4%. This was MediPharm's highest gross profit and gross profit margin in many years.
As you can see on the slide, gross profit margin has steadily improved over the past three years, driven by product mix, production efficiencies, and cost reductions. Management continues to focus on efficiencies to drive gross profit. General and administrative expenses for the quarter of CAD 3 million decreased CAD 1.2 million, or 29%, vs prior year. In addition, G&A decreased CAD 0.7 million, or 19%, sequentially from Q4 2024. Marketing and selling expense of CAD 1.2 million for the quarter was consistent with prior year and prior quarter. Total operating expenses, which includes G&A, marketing and selling, and R&D expense, was CAD 4.4 million for the quarter and decreased CAD 1.3 million, or 23%, vs prior year, and decreased CAD 0.8 million, or 15%, sequentially vs Q4 2024. Management continues to focus on further expense reduction opportunities. Adjusted EBITDA for the quarter was positive CAD 141,000 and improved CAD 1.1 million from prior year's CAD 949,000 loss.
This improvement in adjusted EBITDA was driven by continued revenue growth, margin expansion, and the reduction of expenses. While we do not provide guidance, we are very encouraged by the EBITDA trend and expect it to continue to move in a positive direction, although there may be variability from quarter to quarter as international markets develop. Moving to a few notable items on the balance sheet. Our cash balance at the end of Q1 was CAD 8.4 million and declined versus the prior quarter as we invested in inventory to support our international expansion and growth. We plan to maintain this level of working capital to be able to remain nimble so we can quickly respond to growth opportunities as they arise. Trade and other receivable balance at Q1 is CAD 7.8 million, and 89% of trade accounts receivable is aged 60 days or less.
Trade and other payable balance at Q1 is CAD 8.5 million, and unlike many other cannabis companies, we are up to date on cannabis excise duties, sales taxes, and trade payable obligations. The company has virtually no debt and full ownership of three production facilities with an appraised value greater than CAD 20 million. As Dave mentioned, we expect to see a further strengthening of our balance sheet when the CAD 4.5 million sale of the Hope facility closes during the current quarter. Although we still have work ahead of us to enhance our profitability profile and become cash flow positive, Q1 was a significant step in the right direction. International medical cannabis revenue increased 87% vs prior year and represented 55% of total revenues in the quarter. Gross profit margin for the quarter was 38.7% and was the highest in over five years.
Adjusted EBITDA was positive for the first time in over five years. Finally, as previously discussed, we have a strong balance sheet relative to our peers. As a result of our strong balance sheet and significantly improved financial performance, we are well positioned to continue to invest in organic and inorganic growth opportunities as the industry continues to mature. With that, I'll turn it back to Dave to discuss our upcoming AGM.
Thanks, Greg. I now want to address the activist shareholder, Apollo Technology Capital Corp, led by Mr. Regan McGee. As many of you already know, Apollo filed a dissident proxy circular nominating six alternative candidates for the MediPharm Board of Directors at our upcoming AGM on June 16th. Some of you may have even been contacted directly by representatives of Apollo. The board has serious concerns about Apollo and its nominees, most notably with Mr. McGee. Let me take a few moments to provide you with some of our reasons for concern. Mr. McGee believes he is qualified to run MediPharm despite having limited public company director experience and no cannabis nor pharmaceutical experience. In fact, he has many challenges involving his own company, Nobul Technologies, which I'll outline in greater detail shortly.
Mr. McGee has also so far failed to present an alternative vision for the company for us to consider. First, let me be clear. Myself and the board tried to engage Mr. McGee in a constructive manner when he first approached us. We are always willing to engage with our shareholders, and we extended the same courtesy to Mr. McGee. However, our efforts were quickly derailed when he attempted to pressure myself and another director into selling him our shares at a premium to market, but disturbingly, on terms not being offered to other shareholders. When that tactic failed, he then insisted that the company provide to him a dilutive private placement for more than CAD 3 million to help him gain control of the board. The board did, in good faith, carefully consider the unsolicited offer.
Given that Mr. McGee threatened that MediPharm should take Apollo's money vs selling the dormant Hope facility, or else he would accuse the board of neglect of its fiduciary duties. The board concluded that such transaction with Apollo would not be in the best interest of shareholders and flatly refused the offer. From there, the discussions quickly devolved into threats made by Mr. McGee against several directors, including myself and our Chair, Chris Taves. Mr. McGee went even further than that, by also threatening our family members. He also spread untrue and defamatory information to associates of ours with no relationship to MediPharm. At one point, Mr. McGee showed up at our manufacturing facility, demanding entry, and harassed and threatened an employee.
Mr. McGee is Chairman and CEO of Nobul Technologies, a private company involved for the past two years in a $100 million lawsuit against several of its former directors who resigned en masse over an allegedly toxic atmosphere and alleged misrepresentation about how the business generated revenue. In its filings related to that same case, a well-known Toronto-based institutional investor, K2 & Associates, accused Mr. McGee of siphoning money from Nobul through exorbitant compensation and non-arms-length transactions for his own personal use. That case is still progressing through the courts. More recently, Nobul announced a merger in March 2024 with Check-Cap Limited, a NASDAQ-listed company. Despite this merger not closing, it appears that Nobul has still managed to somehow have millions of dollars of cash transferred to its accounts from Check-Cap.
Interestingly, the Chairman of Check-Cap, who played a part in authorizing the cash transfer to Nobul, is David Lontini, who is now being included on the Apollo list of nominees for MediPharm's Board. Prior to Check-Cap, we do not believe Mr. Lontini had any experience as a Board member for a public company. Last week, Chris Taves, our Board Chair, and myself, along with the company's legal counsel, were sued for a total of $100 million by none other than Mr. McGee. We are the latest names added to a growing list of more than 10 active litigation files involving the highly litigious and dispute-prone Regan McGee. This disturbing history suggests that Mr. McGee puts his own interests above those of shareholders and should be excluded from your consideration as a director.
We are also concerned that only two of the six nominees Mr. McGee has put forward have any cannabis experience, and all such cannabis experience has been primarily in the recreational space, which is very different from the medical space where MediPharm's focus lies. The nominees are also interlocked in multiple ways, meaning they have business relationships outside of MediPharm that could impair their ability to make independent decisions. Let's move on now to take a look at Apollo's alleged holdings in MediPharm, which they claim represents about 3% of MediPharm's shares. This is a small stake in our company, acquired only in the last few months. Yet Apollo is now seeking full control of your company without offering a single penny of premium to the rest of our shareholders. This is a brazen attempt to seize power through the back door, bypassing any fair value transaction.
Make no mistake, anyone demanding control of a public company's Board with such a small, newly acquired position must meet an exceptionally high bar. They owe shareholders a detailed, credible plan for value creation. Apollo has presented nothing of the sort. No strategy, no vision, no roadmap, leaving shareholders with only vague assertions and no concrete alternatives to consider. We have no assurances an alternative strategy is forthcoming. Lastly, it's interesting to consider whether Apollo genuinely has concerns regarding MediPharm's performance and the competence of its management and board. If so, one may ask why it aggressively purchased its entire 3% block of MediPharm shares in the open market in the last 2.5 months, forcefully engaged management to participate in a dilutive private placement, and implemented a pressure-filled campaign to purchase MediPharm shares from insiders directly.
Next, let me address Apollo's comments about our share price performance against the S&P/TSX Composite Index, which reflects Apollo's inexperience in the cannabis industry. It also misses entirely how MediPharm has performed against its peers since I became CEO, as outlined in the chart on slide 13. As you can see, for the time period from the end of 2022, when our plan started to reap rewards to now, our share price has outperformed the largest cannabis companies in Canada and the leading Global Marijuana Life Sciences Index. Let me conclude with a summary of our company, which supports why you should vote to protect your investment using the green proxy. Our business is more diversified than ever. We are seeing meaningful growth in the international markets. We have distinct competitive advantages that will drive our continued success.
Our financial strength is improving every quarter, and we have a proven ability to complete successful acquisitions. The future has never looked brighter, assuming we have a chance to continue to execute our strategy. This is not the time to change course. I truly believe that the foundations have been laid for a re-rating opportunity based on our improved financial metrics, strong balance sheet, and growth prospects. We believe the strategy and team currently in place is the best way to create sustainable value. We need you now to stand up for your company. Our annual meeting is on June 16th, and our shareholders will be receiving our proxy materials shortly. We urge you to review the materials and to vote with the green proxy. Now I'll turn it over to the operator for questions.
At this time, I would like to remind the analysts, in order to ask a question, press star one on your telephone keypad. All others, you may ask a question online using the Q&A button and typing your question in. We will pause for a moment to compile the roster. Our first online question: Do you expect the international business to keep growing?
Thank you, operator. This is Dave. Our international business is doing very well, actually. Many cannabis companies are seeking to grow their international business now. You see many making announcements about their intent to get into the market. We expect to see growth probably on three fronts: selling more products to existing channels, and we've been in many of these markets for a long time; selling into new markets: New Zealand, France, other European countries; selling to new customers in our existing markets. I think we expect our international business, yes, to continue to grow. We recently signed five new international distribution partners. We've launched the new inhaler product, and we expect to see more positive developments. As we've said in the call, international now represents a large portion of our revenues, and it's seeing significant growth. It's important; our international business is a medical market.
It is really complex in terms of regulations and other challenges. We are experienced in navigating those complexities. I think we are well positioned based on our licenses, our relationships, our reputation, and our history. There are lots of learnings over years. We are now investing in working capital. As Greg mentioned, we are deploying some of our cash to invest in working capital, specifically to support our international growth. The short answer is, yes, we expect international business to keep growing in a meaningful way.
Your next question: You've been promising better returns for years, yet the share price stays flat.
Yeah, I think, as we mentioned—so thanks for the question. As I mentioned, I joined the company in 2022. I often say that's after the significant crash in the market. The graph that we show—and I think we can put the graph maybe back up on the slide here if we could—shows from essentially when I started to our performance now. I would say the cannabis industry, as everyone knows, has been challenging for most companies in the space. All share prices have suffered. Capital's exited the market. The market's overcrowded and requires consolidation, and we think we have a role to play in that process. It takes time. We're in it for the long run. We believe we will see returns in due course because we're financially stable. We're diversified. We're experienced. We have an international presence. We have pharmaceutical investments.
Some companies, they ended up in CCAA. They saw their share price go to zero, and investors wiped out. We are proud to be part of a team that is on a different trajectory. Many companies are going concerned in their financial reports. I think the share price graph we showed shows that we have actually outperformed all of the major cannabis companies since December 2022, as well as the Global X Marijuana Life Sciences Index. In the long term, we believe that companies with stable financials and a growing business will be rewarded with share price appreciation. We intend to be in that group.
We obviously are going to be one of the survivors, but today we are very proud to have shared positive EBITDA results, as well as a number of strategies and areas of focus that we believe are going to continue to make the company stronger, which will in turn get reflected in stronger share price.
Your next question: What is the status of the sale of Napanee?
I think the Napanee is our facility that we've announced—oh, sorry—the Napanee facility we have announced that a deal that we prior had fell through. The facility was actually never for sale. We were approached unsolicited to sell, and they had offered a reasonable price. The potential acquirer actually was unable to come through with the funds that they had. In the time between signing and close, our international business, as we mentioned, some of which is supported from our Napanee business, exploded. The interesting thing is it's probably a bit of a blessing that we didn't sell the Napanee facility, even though we had an agreement that they were going to continue to supply us to help and support our international business. The Napanee facility is no longer for sale. We're actually investing in the Napanee facility. We're actually putting more business through the Napanee facility.
We're actually growing more product at the Napanee facility. Related facility question, just if someone else has the question, how are we doing with the sale process for our Hope facility? That is on track to be sold to Rubicon, and that should close in Q2. Everything looks positive for that to come together. That is a facilities update for folks.
Your next question: Why should investors be worried about Apollo? What are your biggest concerns with them?
This is the question we get from many shareholders as we speak to them. I think you need to look at the litigious history of this dissident. He has a history of lawsuits against his own directors and investors. He has been accused of siphoning off cash from other companies he controls. We believe he intends to do the same thing with your cash for purposes not aligned with shareholder interests. We intend to stop him from doing that. I would direct your attention to our AGM website, www.medipharmlabsagm.com, and we will be communicating more detail and background. I have personally had dealings with Mr. McGee, and it is hard to imagine his approach, and it is a very aggressive approach. It is hard to imagine his approach working with our international partners, with our pharmaceutical partners who value stable leadership and cooperative relationships.
As a shareholder, I'd be very worried about the competence and intentions of any team he has put forward and what that would do to your business. We have a strong cash position. We have a strong asset base. The goal of many activists is to try and get control of those assets and cash to deploy as they see fit. Looking at the history of this dissident, it doesn't inspire confidence.
Again, if you would like to ask a question, you can type it in on the webcast at the Q&A button. That concludes our Q&A session. I will now turn the call back over to David Pidduck for closing remarks.
Thank you, Operator, and thanks to everyone who participated. If you have any additional questions, please contact us through the details shown on this slide. For all the latest development and materials related to the annual and special meeting of shareholders, visit medipharmlabsagm.com regularly. Remember, vote with the green proxy. Just one comment: there's going to be a lot of misinformation and even some statements that are patently false coming from the dissident group. We are always open to discuss any issues with shareholders. We're going to try and keep shareholders posted on the medipharmlabsagm.com website. As we see things come up in press releases, we will address them to provide the best information for shareholders to make their decisions. Thank you, everyone, for taking the time today. Everyone, have a great day.
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