Heritage Cannabis Reports Q4 2023 and Year-End Financial Results
- Heritage Cannabis Holdings Corp. achieved over 50% growth in gross margin for the year and 628% growth for the fourth quarter.
- The company reported increased revenues driven by the success of its RAD vape products and Adults Only brand.
- Cost of sales decreased, leading to improved gross margins.
- Strategic operational and corporate moves, such as appointing a new CFO, expanding product listings in Québec, and procuring an EU GMP certified extraction machine, were made to boost production and market reach.
- None.
Achieved over
“Remaining true to our vision of sustainable growth, Heritage continued to optimize our products in 2023 while maintaining a close focus on production efficiencies, operational spending, and high gross margin sales, all of which were key in achieving growth in gross margin of over
Selected Financial Highlights
Selected financial highlights for the three- and twelve-month periods ended October 31, 2023 and 2022 include the following:
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Three months ended |
Years ended |
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(in $CDN) |
Oct 31, 2023
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Oct 31, 2022
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Oct 31, 2023
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Oct 31, 2022
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Gross revenue |
11,409,434 |
11,148,059 |
42,054,936 |
41,996,297 |
Net revenue (net of excise tax) |
7,977,839 |
8,038,105 |
29,794,289 |
29,566,385 |
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|
|
|
|
Cost of sales |
4,875,162 |
7,611,993 |
17,709,500 |
21,599,867 |
Gross margin |
3,102,677 |
426,112 |
12,084,789 |
7,966,518 |
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|
|
|
|
General and administrative expenses |
5,803,160 |
5,953,751 |
20,144,123 |
20,588,796 |
Other Income (Expenses) |
(12,520,156) |
(22,718,884) |
(13,262,707) |
(14,297,205) |
Comprehensive Income (Loss) |
(14,123,548) |
(26,895,045) |
(19,906,411) |
(23,937,773) |
2023 Financial Highlights
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The Company reported gross revenue of
for the three months ended October 31, 2023, an increase of$11,409,434 compared to the gross revenue of$261,373 for the three months ended October 31, 2022. The increase in gross revenue was primarily due to the continued success of the Adults Only brand vapes and concentrates, with vapes and concentrates seeing sales of$11,148,059 in the three month’s ending October 31, 2023, an increase of$8,229,739 , compared to$489,033 for the three month's ending October 31, 2022. This was offset by flower revenues of$7,740,706 , a decrease of$1,745,387 as compared to$659,263 in the three month's ending October 31, 2022.$2,404,650
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The Company reported gross revenue of
for the year ended October 31, 2023, an increase of$42,054,936 compared to gross revenue of$58,639 for year ended October 31, 2022. The increase in gross revenue was primarily driven by other revenues of$41,996,297 in the current year, an increase of$1,617,593 as compared to$1,111,250 in the previous year. This was offset by flower revenues of$506,343 in the current year, a decrease of$6,700,210 as compared to$582,009 in the previous year, as well as tincture revenues of$7,282,219 in the current year, a decrease of$2,227,355 as compared to$350,152 in the previous year and vape and concentrate revenues of$2,577,507 in the current year, a decrease of$30,116,466 as compared to$136,221 in the year ending October 31, 2022.$30,252,687
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Cost of sales for the three months ended October 31, 2023 was
, a decrease of$4,875,162 compared to$2,736,831 for the three months ended October 31, 2022. The decrease represented a$7,611,993 24% improvement, as a percentage of sales, in the current period. As stated in previous quarters, the Company is continuously reviewing its processes for optimization either on the manufacturing side or through material costing which continued to positively impact the results in the current quarter.
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Cost of sales for the year ended October 31, 2023 was
, a decrease of$17,709,500 , compared to$3,890,367 for the year ended October 31, 2022. The decrease represented a$21,599,867 9% improvement, as a percentage of sales, in the current period. The improvement was a result of continued production refinements to enable more efficient production and improved inventory management strategies.
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Gross margin for the three months ended October 31, 2023 was
($3,102,677 27% ) compared to gross margin of ($426,112 4% ) for the three months ended October 31, 2022. The increase in gross margin of (+$2,676,565 23% ) was primarily a result of continually improving production efficiencies and maintaining an overall excise duty rate of under30% of gross revenues.
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Gross margin for the year ended October 31, 2023 was
compared to gross margin of$12,084,789 for the year ended October 31, 2022. The increase in gross margin of$7,966,518 was a result of improved production efficiencies over the course of the year, maintaining a lower excise rate in the period and an improved inventory control system resulting in a decrease of inventory adjustments of$4,118,271 from$1,752,837 for the year ended October 31, 2022, to$2,471,371 for the year ended October 31 2023.$718,534
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For the three months ended October 31, 2023, the Company recorded a comprehensive loss of
or$14,123,548 loss per share compared to a comprehensive loss of$0.01 or$26,895,045 loss per share for the three months ended October 31, 2022. The decrease in comprehensive loss of$0.03 during this period was attributable to increased non-excisable sales, decreased inventory costs and production efficiencies in the period.$12,771,497
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For the year ended October 31, 2023, the Company recorded a comprehensive loss of
or$19,906,411 loss per share compared to a comprehensive loss of$0.02 or$23,937,773 loss per share for the year ended October 31, 2022. The decrease in comprehensive loss of$0.03 during the period was due to the gross margin gains noted above and the cost management in general and administrative expenses which was partially offset by the intangible asset and goodwill impairment in the period.$4,031,362
Q4 2023 Growth, Operational, and Corporate Highlights
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On August 15, 2023, the Company announced the appointment of Jasmine Paige as Interim Chief Financial Officer (“CFO”), replacing Dan Phaure as he pursues new opportunities.
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On September 6, 2023, the Company announced that products from its Pura Vida brand were approved for listing by Société québécoise du cannabis for retail and online distribution in the province of
Québec . This is a noteworthy achievement for Heritage as it continues to expand its product offerings and increase distribution acrossCanada , now actively selling products in every province in the country.Québec is the fourth-largest market inCanada and while the Company’s products have been available online through partner medical platforms in the province, Heritage looks forward to directly building a strong portfolio of offerings forQuébec consumers.
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On October 11, 2023, the Company announced the procurement of an EU GMP certified extraction machine to be added to the existing fleet of extractors which is anticipated to double the Company’s hydrocarbon processing capacity. The extractor has the capacity to add 3,600,000 grams of cannabis processing and is EU GMP certified – a global standard for manufacturing practices - allowing for increased international sales of Heritage’s cannabis derivative products to countries such as
Germany , theUnited Kingdom ,Australia , and others as cannabis legalization continues to expand across the globe.
Heritage has been experiencing an increased demand for its products both acrossCanada , andthe United States where the Company has already launched products inNew York ,Missouri , andWest Virginia . This new extractor is expected to help to boost production in order to meet the growing Canadian retail demand, as well as create supply to enter global markets as demand for EU GMP certified extracts grows internationally. Additionally, Heritage has been actively pursuing and participating in the vibrant B2B market and amping up production of extracts will support this important and growing sector of the market.
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On October 23, 2023, the Company announced that it had officially commenced recreational product sales in the state of
New York . Manufacturing of Heritage’s RAD branded vape and concentrate products began in the state during the summer of 2023, and the Company achieved its first commercial sale inNew York – Heritage’s third state where its brands are now available.
Heritage continues to target the legal markets in the US with an asset light model, and inNew York has a manufacturing and distribution agreement with a local partner that produces and sells products using Heritage’s innovative formulations and flavours that the RAD brand is known for. Heritage plans to introduce additional RAD products including live resin, rosin, and infused pre-rolls, and is expanding product offerings with additional Heritage brands.
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On October 30, 2023, the Company announced its intention to sell the Company’s real estate properties in
Ontario (the “Ontario Property”) andBritish Columbia (the “BC Property”) to BJK Developments Ltd. (the “BJK Purchaser”) for a net purchase price of (the “Purchase Price”) and lease the$9,714,475 Ontario and BC properties back from the BJK Purchaser (the “Sale and Leaseback Transaction”). Pursuant to the Sale Leaseback Transaction, Heritage entered into ten (10) year lease agreements with the Purchaser, for its Health Canada licensed Ontario Property and BC Property, where the Company will continue to operate its best-in-class manufacturing and processing capabilities for its domestic and international business segments. Further, the lease terms include a 12-month free rent period, representing approximately of savings during the period, which commences at closing; and, that the Company also retains an option to repurchase the Ontario Property and BC Property for a period of two years, from the BJK Purchaser, pursuant to option agreements.$1,389,000
The Purchase Price was used to set-off the amount owing by the Company to its lender, BJK Holdings Ltd. (“BJK”), a related entity of the BJK Purchaser, reducing the Company’s remaining term debt by approximately57% to . The remaining term financing, as amended within a Third Amending Agreement has been extended through to January 31, 2025, with interest calculated at the Royal Bank of Canada prime lending rate (“RBC Prime”) minus$7,303,640 1.75% . In addition, the Company retains its revolving line of credit of up to (the “LOC”) with BJK, which has also been extended until January 31, 2025.$5,000,000
In connection with the Third Amending Agreement, Heritage agreed to amend existing warrant certificates held by BJK dated October 8, 2021 which entitled BJK to subscribe for and purchase up to 10,000,000 common shares in the capital of Heritage at an exercise price of per common share, and dated September 29, 2022 which entitled BJK to subscribe for and purchase up to 50,000,000 common shares in the capital of Heritage at an exercise price of$0.25 per common share (the “Existing Warrants”). Effective, October 31, 2023, the Company amended the Existing Warrants so that the expiry date for BJK to exercise the Existing Warrants is extended from February 28, 2025, to February 28, 2026, and so that the exercise price of the Existing Warrants shall be repriced to$0.10 per Common Share.$0.07
Financial Statements
The consolidated financial statements of the Company as at and for the three- and twelve-month periods ended October 31, 2023, and accompanying management's discussion and analysis have been filed with the securities regulators and are available on SEDAR+ at www.sedarplus.ca under the Company’s issuer profile.
About Heritage Cannabis Holdings Corp.
Heritage is a leading cannabis company offering innovative products to both the medical and recreational legal cannabis markets in
ON BEHALF OF THE BOARD OF DIRECTORS OF HERITAGE CANNABIS HOLDINGS CORP.
“David Schwede”
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 October 31, 2023, and dated February 26, 2024. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in the forward-looking information and forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended.
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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240226605087/en/
Kelly Castledine
Tel: 647-660-2560
kcastledine@heritagecann.com
Source: Heritage Cannabis Holdings Corp.
FAQ
What was the gross margin growth for Heritage Cannabis Holdings Corp. for the fourth quarter?
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