Nov 23, 2020
Operator
Ladies and gentlemen, thank you for standing by, and welcome to Plus Products Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode.
After the presentation, there will be a question-and-answer session [Operator Instructions]. I would now hand the conference over to your speaker today, Mr.
Cole Stewart, Investor Relations Manager. Please go ahead, sir.
Cole Stewart
Thank you, operator. Good afternoon, and welcome to the Plus Products third quarter 2020 financial results conference call.
A replay of this call will be archived on the Plus Investor Relations Web site at plusproductsinc.com. Before we begin, please let me remind you that during the course of this conference call, Plus' management may make forward-looking statements.
These forward-looking statements are based on current expectations that are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. For more information on the company's risks and uncertainties related to these forward-looking statements, please consult the company's MD&A and other regulatory filings available at sedar.com.
Any forward-looking statements should be considered in light of these factors. Please also note any outlook we present today is as of today and management does not undertake any obligation to revise any forward-looking statements in the future.
Any references to market share or market growth from third parties during the prepared remarks have been cited in our news release disseminated this afternoon. In addition to the financial information presented in this call, please review the company's third quarter 2020 financial statements and associated notes filed on the company's SEDAR profile at www.sedar.com.
With me today on the call are Mr. Jake Heimark, Co-Founder and Chief Executive Officer and Nate Pearson, Chief Financial Officer.
With that, I'd like to hand the call over to Jake.
Jake Heimark
Thank you, Cole. First off, we hope that everyone is staying safe during these holidays.
Our highest priority at PLUS continues to be protecting the health and safety of our employees, our customers and our partners. For detailed information on the steps we have taken in response to COVID-19, please visit plusproductsinc.com/coronavirus.
Now onto our highlights for the third quarter. At the outset of this year, we detailed our goal to set Plus on a clear path towards profitability.
We knew that in 2020 in this cannabis industry companies would be defined by their ability to effectively transition from growth at all cost strategies to ones that allow the companies to capture sustainable growth while leaning on a foundation of solid fundamentals. We believe we have made that transition at Plus.
During the quarter our gross margin reached 40%, more than tripling over the same period last year, further demonstrating our operational improvements we consumed less than half million dollars in cash and achieved our first EBITDA positive month adjusted for stock based compensation in September. While we still have work to do to reach consistent robust profitability, we believe the progress we have made this year has been substantial.
The company is on course to consume roughly half as much cash in all of 2020 as it did in the third quarter of 2019 alone. Commercially, we took significant steps in expanding our product portfolio in both size and purpose with two new product launches in the quarter.
We delivered the most concentrated cannabis coming in the California market to consumers with our Hi-Cubes product line, a launch it was followed shortly by the introduction of our first line of sleep focused THC products. A majority of consumers looking for cannabis centric sleep aids are still unsatisfied, a finding made clear by the success of Plus Sleep, which sold into over 200 accounts during the first two months following its launch.
While sales in the third quarter were not as robust as the first half of the year, we believe the short term slowdown in growth mostly attributable to a wholesale price increase on our core product line will be well worth the improved unit economics and long term sustainability of the Plus brand on shelves. Despite increasing competition across California and within the gummies category specifically, Plus continues to demonstrate its ability to dominate key markets, claiming a leading 25% of the gummies category in the Bay Area alone this year according to Trees market data.
With an increasingly extensive product portfolio and reaching consumers across all cannabis use cases, Plus' ramping investment in it's California sales organization in order to expand account penetration and market share across the state. We believe these efforts will be amplified by the continued growth of the California cannabis market.
According to Arcview State of Legal Markets, the adult use market in California is expected to grow by more than $3 billion over the next four years. With the projected market size of $7.2 billion in 2024, California is expected to be larger than the next four largest projected US markets combined.
Those markets are Colorado, Florida, New York and Michigan. While we remain exceptionally bullish on our California prospects, we will continue to deploy resources into the businesses we have built in the Nevada adult use and national hemp CBD markets.
In Nevada, despite manufacturing complications during the initial wave of COVID-19 restrictions, Plus achieved over $1.5 million in retail sales during its first year on shelves, while maintaining a spot as a top five brand in a market with over 50 competitors. Turning our attention towards 2021, Plus will look for opportunities to expand our footprint beyond California, Nevada and hemp CBD.
We will continue to prioritize depths over breadth in building market presence, but the acceleration of cannabis markets across the US cannot be ignored. With expected profitability on the horizon, over $12.5 million in cash on hand and one of the leading edibles brand in the industry's largest legal market, we believe Plus is poised for continued growth over both the short and long term.
With that, I'll now pass the call over to Nate to go over our financial results in greater detail. Nate, please go ahead.
Nate Pearson
Thanks Jake. Net revenues reached $3.7 million in Q3 2020, up from Q3 2019 net revenues of $3.5 million.
During the period, the company continued to have strong cannabis revenues in the California adult use market with contributions from the Nevada adult use market and its national hemp CBD product line. In July, the company increased the wholesale price of its core product line, resulting in temporary slowdown in sales during the first two months of the period.
The company exited the period with strong sales in the final months and expects Q4 2020 net revenues to exceed $4 million. Gross profits climbed to $1.4 million in Q3 2020, up from $0.5 million in Q3 2019.
Gross profit margin was 40% in Q3 2020, as Jake mentioned, up from 13% in Q3 2019. Reduced costs per unit derived from operating efficiencies along with a higher average selling price per unit due to price increase are the key factors driving improved gross margins.
Plus operating net loss of $1.5 million in Q3 2020 represent an 84% improvement year-over-year from a loss of $9.5 million in Q3 2019. The company recorded $12.6 million in cash and cash equivalents at September 30, 2020.
Cash and cash equivalents fell by only $400,000 during the third quarter. Additionally Plus is working toward a solution to address the maturity of the company's 8% unsecured convertible subordinated debentures totaling $25 million [Technical Difficulty] February 28, 2021, and expect to engage PI Financial Corp to support its efforts.
We look forward to updating the market further on this matter. With that we conclude our financials.
Operator, please open the line for questions.
Operator
[Operator Instructions] Our first question comes from Jason Zandberg with PI Financial. Please go ahead.
Jason Zandberg
Just recognize that the improvement in gross margins were quite strong and have been continuing. What do you expect the outlook for that gross margin line.
It is 40% something that we should model going forward? Do you think there's some further improvements?
Any outlook on gross margin would be helpful.
Jake Heimark
We've definitely seen some strong improvements, we've guided in the past fairly conservatively under promising and over delivering. We've gotten to this point quicker than we expected.
We're still conservative looking ahead, especially given the pretty uncertain developments around the pandemic here in the United States. That of course has impacts on our labor force and cost of labor.
But we think that something north of 40% is structurally something that can be expected moving forward. I wouldn't guide to something significantly in excess of 40%.
It might bounce a bit higher above that. Q4 of course has a couple of large holidays, which will increase costs relative to units produced.
So I don't expect a huge outperformance in Q4, but something around the 40% or just north of that is where we would expect to be, which is fairly in line with mature CPG, which is very much how we think about our manufacturing operations. We think about them as sort of -- as close to best-in-class in traditional CPG as possible and something close to 40% something reasonable to expect to.
Jason Zandberg
Just wanted to talk about distribution. So you had three quarters of using Herbal as a distributor in California.
Just wanted to get your thoughts in terms of number of dispensaries that you're in now, regional strength, anything that -- sort of get a look into your distribution network as it stands now?
Jake Heimark
We've had some growth, especially in the Bay Area in the accounts that we're in and we've had really strong sales there. I think something we've learned over the course of the year and we've talked about today is that it's important for us to invest in our sales force, especially in the south of the state, California is a very large state, more than 30 million people on it.
And in some ways, it's like having multiple states in one. And so we've had some real great performance in Northern California and I expect by investing in our team and elsewhere in the state, we'll see similar things over the next year.
Operator
Thank you [Operator Instructions]. And Cole, I'm not showing any further questions in the queue.
Jake Heimark
Thank you, operator. Thank you, Cole, Nate, and Blake.
I thank you all for joining our call today, everybody was able to make it and for your ongoing support of the company. With that, I will turn the call back to the operator to close the lines.
Operator
Thank you, sir. And ladies and gentlemen, thank you for participating in today's program.
You may now disconnect. Good day.