Heritage Cannabis Reports Q3 2022 Financial Results and Sixth Consecutive Quarter of Increased Revenue
Heritage Cannabis Holdings Corp. reported significant financial growth for Q3 2022, achieving gross revenue of $10,799,784, a 111% increase year-over-year. The nine-month gross revenue reached $30,848,238, up over 167%. The company marked its second consecutive quarter of positive EBITDA, driven by expanding sales channels and product offerings. Despite challenges from a regional labor strike affecting sales, operational efficiencies improved, reducing costs. However, the company reported a comprehensive loss of $2,793,327 for Q3 2022, down from $6,637,449 in Q3 2021.
- Second consecutive quarter of positive EBITDA.
- Gross revenue increased by 111% year-over-year for Q3 2022.
- Nine-month gross revenue increased over 167% compared to the prior year.
- Comprehensive loss of $2,793,327 in Q3 2022, despite improvements.
- Sales impacted by a labor strike, 39% lower sales to the province.
“What we have accomplished in the third quarter is a tremendous achievement by the entire team at Heritage. Given the sector headwinds and after normalizing for isolated events in the quarter, we are proud to state that we have marked our second consecutive quarter of positive EBITDA. It is also our sixth consecutive quarter of increasing revenue which has been driven by the team focusing on growing revenue through the addition of sales channels and the further expansion of our already successful portfolio of products,” said
Selected Financial Highlights
Selected financial highlights for the three- and nine-month periods ended
|
Three months ended |
Nine months ended |
|||
(in $CDN) |
$ |
$ |
$ |
$ |
|
|
|||||
Gross revenue |
10,799,784 |
5,111,945 |
30,848,238 |
11,544,016 |
|
Net revenue (net of excise tax) |
7,495,885 |
4,314,314 |
21,528,280 |
9,410,105 |
|
|
|
|
|
|
|
Cost of sales |
5,025,046 |
3,069,069 |
13,987,874 |
6,163,343 |
|
Gross margin |
2,470,839 |
1,245,245 |
7,540,406 |
3,246,762 |
|
|
|
|
|
|
|
General and administrative expenses |
5,390,047 |
8,335,897 |
14,635,045 |
18,894,828 |
|
Other Income (Expenses) |
54,380 |
(527,022) |
8,421,679 |
(1,129,923) |
|
Comprehensive Income (Loss) |
(2,793,327) |
(6,637,449) |
2,957,272 |
(14,999,542) |
Q3 2022 Financial Highlights
-
The Company reported gross revenue of
for the three months ended$10,799,784 July 31, 2022 , an increase of compared to gross revenue of$5,687,839 for the three months ended$5,111,945 July 31, 2021 , representing an increase of111% . The growth was driven by a continued increase in the Company’s vape and concentrate offerings as well as the launch of the flower vertical. The increase from the prior year is a direct result of increasing our provincial listings and the continued advancement of our inclusion on third party medical platforms although the positive impact was partially offset in the quarter due toThe British Columbia General Employees' Union (BCGEU) labour strike given sales to the province were39% lower than the average of the previous two quarters.
-
For the nine-month period ended
July 31, 2022 , the Company recorded gross revenue of an increase of$30,848,238 compared to gross revenue of$19,304,222 for the nine months ended$11,544,016 July 31, 2021 , representing an increase of over167% . The increase in gross revenue was the result of the Company continued strong listing demand through the provincial boards in spite of the BCGEU labour strike and continued focus on cash management practices which are focused on managing inventory growth and availability.
-
Cost of sales for the three months ended
July 31, 2022 was , an increase of$5,025,046 compared to$1,955,977 for the three months ended$3,069,069 July 31, 2021 . Cost of sales decreased on a percentage of sales basis as a result of improved operational efficiencies, which although were negatively impacted by system inventory corrections relating to the inventory system management launch and refinement. It is anticipated that these one-time negative impacts will be reduced or eliminated over the next quarter.
-
Cost of sales for the nine months ended
July 31, 2022 was , an increase of$13,987,874 , compared to$7,824,531 for the nine months ended$6,163,343 July 31, 2021 . Cost of sales increased as a function of the increased sales results and improved on a percentage of sales basis as a result of a continued focus on improving facility efficiencies.
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For the three months ended
July 31, 2022 , the Company recorded a comprehensive loss of or$2,799,327 loss per share compared to a comprehensive loss of$0.00 or$6,637,449 loss per share for the three months ended$0.01 July 31, 2021 . The improvement over the prior period was due to the gross margin gains noted above and the cost management in general and administrative expenses combined with a unrealized decrease in loss on contingent payables.$416,000
-
For the nine months ended
July 31, 2022 , the Company recorded a comprehensive income of or$2,957,272 income per share compared to a comprehensive loss of$0.00 or$14,999,542 loss per share for the nine months ended$0.02 July 31, 2021 . The decrease in loss was primarily attributable to a non-cash accounting policy-related gain of due to the change in fair market value between the share price used for the Premium 5 first milestone payment and the quoted share price at the time of award combined with the improvements in the operating business noted above.$8,571,429
Q3 2022 Growth, Operational, and Corporate Highlights
-
On
June 6, 2022 , Heritage announced that it had signed a definitive agreement for the supply of its products for sale on the medical platform of a major LP with one of the leading market shares inCanada . The major LP completed its initial purchase of Heritage brands, including RAD, Premium 5, and CB4, and are now offering Heritage products on the platform with the first shipment of 12 stock keeping units (“SKUs”) completed in May. The relationship will also encompass white labelling of some products based on Heritage’s product quality, variety, consistency, industry proven technology and innovation. -
The third quarter of 2022 continued to see growing sales across Heritage’s portfolio of innovative products and expanded distribution channels, including the launch of Heritage products on two of the largest market share online medical platforms in
Canada . As sales momentum builds, the Company remains focused on increasing margins and cost containment. Spending and capital expenditures by Heritage are measured by their expected return on investment and ability to generate near-term revenues. -
Heritage continues to add new stock keeping units (“SKUs”) across all
Canada and is participating in regular product calls by the provinces. Heritage proactively manages its offerings to stay price competitive in all segments, while also delivering innovative products and new flavour profiles to keep up with consumer demands, and successfully win provincial product calls. -
On
June 17, 2022 , the Company announced that 7,109,090 Common shares in the capital of the Company (the “Bonus Shares”) were issued at a deemed price of as compensation bonus to certain executive employees and consultants (the “Parties”) based on corporate measures and individual performance of those individuals in 2021. The fair value of shares issued were measured at$0.05 5 , determined based on the quoted share price at the issuance date, and recorded as share-based payment in the unaudited interim condensed consolidated financial statements for the three- and nine-month periods ended$355,455 July 31, 2022 .
The Bonus Shares were issued in reliance on certain prospectus exemptions available under National Instrument 45-106 – Prospectus Exemptions, and are subject to a four month and one day statutory hold period. As 3,745,454 of the Bonus Shares were issued to the Parties of the Company, the issuance of Bonus Shares (the "Compensation Bonus") constituted a "related party transaction" pursuant to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Company relied on exemptions from the formal valuation and minority approval requirements of MI 61-101 (pursuant to subsections 5.5(a) and 5.7(a)) as the fair market value of the securities distributed to, and the consideration received from, the related party did not exceed25% of the Company's market capitalization. The Compensation Bonus was approved by the Company’s board of directors. No special committee was established in connection with the Compensation Bonus or the participation of the applicable officers and directors in the Compensation Bonus, and no materially contrary view or abstention was expressed or made by any director of the Company in relation thereto.
Financial Statements
The consolidated financial statements of the Company as at and for the three- and nine-month periods ended
About
ON BEHALF OF THE BOARD OF DIRECTORS OF HERITAGE CANNABIS HOLDINGS CORP.
“David Schwede”
CEO
The Canadian Securities Exchange does not accept responsibility for the adequacy or accuracy of this release.
Forward-Looking Statements
This press release contains certain "forward-looking information" within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the
By identifying such information and statements in this manner, the Company is alerting the reader that such information and statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such information and statements.
An investment in securities of the Company is speculative and subject to several risks including, without limitation, the risks discussed under the heading "Risks and Uncertainties" in the Company's annual management discussion and analysis for the year ended
In connection with the forward-looking information and forward-looking statements contained in this press release, the Company has made certain assumptions. Although the Company believes that the assumptions and factors used in preparing, and the expectations contained in, the forward-looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements. The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and the Company does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws. All subsequent written and oral forward-looking information and statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this notice.
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Tel: 647-660-2560
kcastledine@heritagecann.com
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