Harvest Health & Recreation Inc. Reports Third Quarter 2020 Financial Results
- Third quarter revenue was $61.6 million, up 86% from the third quarter 2019 and 11% sequentially
- Third quarter adjusted EBITDA was $10.5 million, compared to $4.1 million in the second quarter of 2020
- 2020 revenue target increased to greater than $225 million, up from $215-220 million
PHOENIX, Nov. 10, 2020 /CNW/ — Harvest Health & Recreation Inc. (“Harvest” or the “Company”) (CSE: HARV, OTCQX: HRVSF), a vertically integrated cannabis company and multi-state operator in the U.S., today reported its financial and operating results for the third quarter 2020. All financial information is provided in U.S. dollars unless otherwise indicated.
Third Quarter 2020 Financial Results
- Total revenue in the third quarter was $61.6 million, an increase of 86% from $33.2 million in the third quarter of 2019, and up 11% compared to $55.7 million in the second quarter of 2020.
- Gross profit excluding biological adjustments in the third quarter was $28.7 million, compared to $11.6 million in the third quarter of 2019, and $23.4 million in the second quarter of 2020.
- Gross profit margin excluding biological adjustments in the third quarter was 46.6%, compared to 35.0% in the third quarter of 2019, and 42.1% in the second quarter of 2020.
- Net loss was $2.1 million for the third quarter, compared to a net loss of $39.1 million in the third quarter of 2019 and $18.3 million for the second quarter 2020.
- Adjusted EBITDA excluding biological adjustments in the third quarter was $10.5 million, compared to ($10.9) million in the third quarter of 2019 and $4.1 million in the second quarter of 2020.
Please see the supplemental information regarding unaudited results and Non-IFRS Financial Measures at the end of this press release.
Third Quarter 2020 Business Highlights
- During the third quarter of 2020, Harvest opened one new dispensary in Phoenix, Arizona and one new dispensary in Cranberry Township, Pennsylvania.
- As of September 30, 2020, Harvest owned, operated, or managed 37 retail locations in seven states, including 15 open dispensaries in Arizona. Harvest owned and operated dispensaries exclude retail locations serviced through Interurban.
Subsequent Events
- Subsequent to September 30, 2020, Harvest opened two retail locations in Camp Hill and King of Prussia, Pennsylvania.
- On October 2, 2020, Harvest terminated the agreement to sell two California retail assets to Hightimes Holdings for $6 million in preferred stock.
- On October 28, 2020, Harvest completed a bought deal financing raising gross proceeds of approximately $32.4 million including the overallotment option. Units sold in the offering were priced at Cd$2.26 per unit and included one subordinate voting share and one-half warrant. Each warrant has an exercise price of Cd$3.05 and duration of 30 months.
- On October 30, 2020, Harvest completed the purchase and license transfer of THChocolate, LLC, including cannabis manufacturing licenses in Colorado. The consideration paid was immaterial.
- On November 2, 2020, Harvest announced a settlement agreement with Devine Holdings. Under the terms of the agreement, Harvest will acquire three vertical medical cannabis licenses in Arizona exchange for the repayment by Devine Holdings of an outstanding $10.45 million receivable owed to Harvest concurrently with the license acquisition.
- On November 3, 2020, Arizona voters approved Prop 207, a ballot initiative to allow recreational cannabis consumption in Arizona.
Outlook
Harvest is increasing its full year 2020 revenue target to greater than $225 million, up from the prior target of $215-220 million. We remain focused on improving the profitability of our business and we expect our gross margins will continue to trend upwards overall, with some quarterly fluctuations due to mix and market changes. This forecast assumes no meaningful impacts or disruptions to our operations as a result of the COVID-19 pandemic.
Management Commentary
Our third quarter results demonstrate further progress toward our primary goal of returning to profitability through revenue growth, cost controls, and investments in our core markets of Arizona, Florida, Maryland, and Pennsylvania.
Chief Executive Officer Steve White
We are focused on preparing for recreational cannabis in Arizona in 2021 and continuing to build on this positive momentum as we execute on our plan.
Conference Call & Webcast
Harvest Health and Recreation Inc. will host a conference call and audio webcast with Chief Executive Officer Steve White and Chief Financial Officer Deborah Keeley, Tuesday November 10, 2020 at 5:00 PM Eastern Time.
Registration for this event is required. Please use this link to register: http://www.directeventreg.com/registration/event/3878799
Following registration, an email confirmation will be sent including dial in details and unique conference call codes. Registration will remain open during the call however we recommend advance registration to access the event.
Third quarter results will be available at:
https://investor.harvesthoc.com/financials/default.aspx
The live conference call webcast and replay will be available at:
https://investor.harvesthoc.com/financials/default.aspx
Non-IFRS Financial and Performance Measures
The Company provides additional financial metrics that are not prepared in accordance with IFRS. Management uses non-IFRS financial measures, in addition to IFRS financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes and to evaluate the Company’s financial performance. This non-IFRS financial measure is Adjusted EBITDA.
Management believes that these non-IFRS financial measures reflect the Company’s ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business, as they facilitate comparing financial results across accounting periods and to those of peer companies. Management also believes that these non-IFRS financial measures enable investors to evaluate the Company’s operating results and future prospects in the same manner as management. These non-IFRS financial measures may also exclude expenses and gains that may be unusual in nature, infrequent or not reflective of the Company’s ongoing operating results.
As there are no standardized methods of calculating these non-IFRS measures, the Company’s methods may differ from those used by others, and accordingly, the use of these measures may not be directly comparable to similarly titled measures used by others. Accordingly, these non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
Reconciliations of Non-IFRS Financial and Performance Measures
The table below reconciles Net Loss to Adjusted EBITDA for the periods indicated.
About Harvest Health & Recreation Inc.
Headquartered in Tempe, Arizona, Harvest Health & Recreation Inc. is a vertically integrated cannabis company and multi-state operator. Since 2011, Harvest has been committed to expanding its retail and wholesale presence throughout the U.S., acquiring, manufacturing, and selling cannabis products for patients and consumers in addition to providing services to retail dispensaries. Through organic license wins, service agreements, and targeted acquisitions, Harvest has assembled an operational footprint spanning multiple states in the U.S. Harvest’s mission is to improve lives through the goodness of cannabis. We hope you’ll join us on our journey: https://harvesthoc.com
Facebook: @HarvestHOC
Instagram: @HarvestHOC
Twitter: @HarvestHOC
Additional Information
The financial information reported in this news release is based on unaudited management prepared financial statements for the quarter ended September 30, 2020. Accordingly, such financial information may be subject to change. Financial statements for the period will be released and filed under the Company’s profiles on SEDAR at www.SEDAR.com by November 29, 2020. All financial information contained in this news release is qualified in its entirety with reference to such unaudited financial statements. While Harvest does not expect there to be any material changes, to the extent that the financial information contained in this news release is inconsistent with the information contained in the unaudited financial statements, the financial information contained in this news release shall be deemed to be modified or superseded by Harvest’s unaudited financial statements. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation for purposes of applicable securities laws.
