Aleafia Health (OTC:ALEAF) started off 2019 a lot better than its recent stock performance indicates. The Canadian cannabis producer's share price nearly doubled year to date by early February. Now, though, Aleafia stock is down 17% so far this year.  

The company reported its second-quarter results before the market opened on Wednesday. Here's what you'll want to know from Aleafia's Q2 update.

Marijuana leaf

Image source: Getty Images.

By the numbers

Aleafia reported gross revenue in the second quarter of 3.95 million in Canadian dollars. This reflected a 159% increase from the first-quarter gross revenue total of CA$1.5 million. The company's net revenue, which excludes excise taxes, totaled CA$3.83 million, up 152% quarter over quarter.  

The company reported a gross profit of CA$2.9 million. This was a huge improvement from the loss of CA$58,000 posted in the first quarter of 2019.

Aleafia announced an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) net loss of CA$2.68 million in the second quarter. This result was significantly better than the Q1 adjusted EBITDA loss of CA$4.75 million.

The company's cash position stood at around CA$58 million as of June 30, 2019. Aleafia had CA$36.8 million in cash at the end of the first quarter. 

Behind the numbers

Aleafia's revenue in the second quarter was the highest in the company's history. That's not surprising, with the Canadian adult-use recreational cannabis market fueling its strong sales growth. The company's cannabis sales skyrocketed 377% quarter over quarter to CA$2.53 million. In addition, Aleafia's research and consultation revenue jumped 43% from the previous quarter to CA$1.42 million.

The company's bottom-line improvement stemmed in large part from its tremendous revenue growth. However, Aleafia also made great progress in cutting costs. The company reported that its total expenses fell 41% from the first quarter to around CA$12.1 million. 

This big drop in spending resulted mainly from operational synergies from Aleafia's acquisition of Emblem Cannabis. These synergies included cutting duplicative staff positions.

Speaking of Emblem, the wholly owned subsidiary reported 6,959 active registered medical cannabis patients as of the end of the second quarter. That's Emblem's highest number of medical cannabis patients so far.

Aleafia's stronger cash position is the result of a public offering completed in the second quarter. This offering raised gross proceeds of more than CA$40 million.

Looking ahead

Wall Street analysts think that Aleafia' share price could have more upside potential over the next 12 months than any other cannabis stock. Aleafia Health CEO Geoffrey Benic is also very bullish about his company's future, stating that "the best is yet to come."

Benic believes that Aleafia has "a tremendous amount of room to grow." The company has entered the German medical cannabis market by expanding Emblem's joint venture with Acnos Pharma GmbH. It's boosting its production capacity, completing outdoor planting at its Port Perry facility.

With increased production capacity and expanding cannabis markets, Aleafia Health could be a small Canadian cannabis stock for investors to keep their eyes on in the coming months.

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