Harvest Health & Recreation, Inc. Reports First Quarter 2019 Financial Results
- Total revenue for the three months ended March 31, 2019 increased 131% from prior year.
- Total revenue for Q1 2019 increased 14% compared to Q4 2018.
- Adjusted EBITDA for the 3 months ended March 31, 2019 was ($4.7) million (all dollars are in U.S. dollars, except where noted).
PHOENIX, May 30, 2019–(BUSINESS WIRE)–Harvest Health & Recreation, Inc. (CSE: HARV, OTCQX: HRVSF), a vertically-integrated cannabis company with one of the largest and deepest footprints in the U.S., today reported the company’s first quarter fiscal year 2019 financial results. Harvest has continued to be successful in winning licenses in non-competitive and competitive application processes throughout the country, and has made a number of significant strategic acquisitions and mergers. Harvest’s ability to combine size, scale, capital, regulatory expertise and operational excellence are paramount to its success.
Management Commentary
By adhering to our four core initiatives: building a world class team, aggressively expanding our retail and wholesale footprint across the U.S., building, acquiring and expanding brands and distributing them across our footprint, and continuing on a path of profitable growth, we believe that we can fulfill our objective of becoming the most valuable cannabis company in the world.
Chief Executive Officer Steve White
Financial Highlights for the First Quarter Ended March 31, 2019
- Total revenue was $19.2 million, an increase of 131%, compared to $8.3 million in the first quarter 2018.
- Total revenue increased 14% compared to $16.9 million in the fourth quarter of 2018.
- Gross profit, excluding impact of biological assets, was $7.9 million, an increase of 83%, up from $4.3 million in the first quarter of 2018.
- Gross profit margin, excluding the impact of biological assets, was 41% and 52%, respectively, for first quarter of 2019 and 2018.
- Adjusted EBITDA was ($4.7) million, compared to $1.9 million in the first quarter of 2018.
- Net loss was $20.0 million for the three months ended March 31, 2019, which is reflective of the planned investments in people and infrastructure to support the company’s growth initiatives and planned expansion.
Quarter End Highlights
Team Growth
- In Q1, Harvest significantly added to its management team, including the hiring of: John Cochran, COO – Previous experience includes CEO Loudpack, President Fiji Water and CEO of Pabst Blue Ribbon, Kevin George, CMO – Previous experience includes CMO of Beam Suntory and VPGM of Unilever, and Johnnie Hernandez, Head of Integration – Previous experience includes Head of Retail Best Buy. John, Kevin and Johnnie join a team that combines deep subject matter in cannabis and CPG experience with expertise in building high growth businesses.
Harvest continues to build out its infrastructure, and ended Q1 with 476 FTEs, up from 386 FTEs at the end of 2018.
Capital Markets, Financing Activities and Growth Strategy
- In early 2019, Harvest signed an agreement to offer $500 million of convertible debentures. The debentures are issuable, at Harvest’s sole discretion, in tranches of $100 million and have a 7% interest rate. The initial tranche of debentures will be convertible at the option of the holder to Subordinate Voting Shares of Harvest at a price of $15.38 per Subordinate Voting Share, and each subsequent tranche will be convertible at the option of the holder at a 15% premium to the volume weighted average price (or “VWAP”) of our stock as it trades on the Canadian Securities Exchange for the five trading day period immediately preceding the closing of the relevant tranche. Alternatively, Harvest can require that debentures be converted if the daily VWAP of our stock is greater than a 40% premium to the applicable conversion price of a tranche for any 10 consecutive trading day period.
- Harvest also raised approximately $300 million raised in conjunction with its RTO in November 2018. Accordingly, including both the capital raised in conjunction with the RTO and the convertible debentures, Harvest has secured approximately $800 million in available capital. Funds have and will be deployed on planned capital projects and on planned acquisitions.
Acquisition Activity
- During Q1, Harvest announced pending acquisitions that will increase its geographic footprint and expand its brand portfolio, including:
Falcon, which is expected to serve as a foundation in California for cultivation, manufacturing and distribution, as well as adding well-regarded brands like Cru and High Garden, as well as key personnel to the team.- Verano is expected to add licenses throughout the Midwest and East Coast, add edibles to our brand suite and will further strengthen our senior team.
- Devine Holdings is expected to add to the Arizona footprint.
- CannaPharmacy is expected to add to the East Coast footprint.
On a pro forma basis, Harvest along with Falcon, Verano, Devine and CannaPharmacy, generated $51 million of Revenue in Q1, or over $200 million annualized.
Retail Footprint Expansion
As of March 31, 2019, the Company operated 13 retail locations in 5 states. Significant expansion of cultivation, manufacturing and retail locations is expected to occur throughout 2019.
Balance Sheet and Liquidity
- As of March 31, 2019, the Company had $116.3 million of cash and cash equivalents.
- As of March 31, 2019, the Company had $28.9 million of debt outstanding.
Please see the supplemental information (unaudited) regarding Non-IFRS Financial Measures at the end of this press release.
Conference Call & Webcast
Harvest Health and Recreation, Inc. will host a conference call and audio webcast with Chief Executive Officer Steve White, President Steve Gutterman and Chief Financial Officer Leo Jaschke, Friday May 31st at 8:00am ET.
To participate in the conference call, please dial:
US toll free: + 1-844-695-5522
Canada toll free: + 1-866-605-3852
UK toll free: + 08082389064
International dial in: + 1-412-317-5448
Registration is required; please also plan to dial in at least ten minutes prior to the scheduled start time.
First quarter results will be available at: https://www.harvestinc.com/investors/investors/#financial-information
The conference call will be available for replay for three months at: https://services.choruscall.com/links/harv190423.html
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) Income to Adjusted EBITDA for the periods indicated.
About Harvest Health and Recreation
Headquartered in Tempe, Arizona, Harvest Health & Recreation Inc. is a multi-state cannabis operator (MSO) and vertically-integrated cannabis company. Subject to completion of announced acquisitions, Harvest will have the largest footprint in the U.S., with rights to 230 facilities, of which 142 are retail locations and more than 1,580 employees across 17 states. Since 2011, the company has been committed to aggressively expanding its Harvest House of Cannabis retail and wholesale presence throughout the U.S., acquiring, creating and growing leading brands for patients and consumers nationally and continuing on a path of profitable growth. Harvest’s mission is to improve lives through the goodness of cannabis and is focused on its vision to become the most valuable cannabis company in the world. We hope you’ll join us on our journey: https://harvestinc.com.
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