Aleafia Health Inc. (TSX: AH, OTCQX: ALEAF) (“Aleafia Health” or the “Company”) is pleased to report its financial results for the three and 12 months ended December 31, 2021. The Company’s 2021 unaudited, consolidated financial statements and management discussion and analysis for the fourth quarter and 12-month periods will be available in the Investors section of the Company’s website at aleafiahealth.com and will be filed on SEDAR and available at sedar.com.
“The core strategic objectives that will drive Aleafia Health to sustained profitability reflect a pivot to focus on branded cannabis revenue. Branded revenue is comprised of ‘sticky,’ recurring medical revenue at attractive gross margins and robust growth in adult-use cannabis revenue where Aleafia continues to aggressively take market share,” said Aleafia Health CEO Tricia Symmes. “We are focused on achieving Top 10 in total LP market share in 2022, driven by leadership in the value cannabis category. Aleafia’s five cannabis brands span the spectrum from premium and craft flower to the value category with Divvy, where we already enjoy significant leadership. The company’s market share rose from 30th in Q1 2021, when we launched our House of Brands, to 15th in Q4 2021, representing the third highest change in market share rankings out of 40 Canadian Licensed Producers (“LPs”).(1) Q4 retail sales increased 37% relative to Q3. Our Divvy value brand is consistently among the top searched brands at the Ontario Cannabis Store website.”
“In 2021, the total net revenue of $36.1 million represents a highly diversified sales mix. Driven by robust growth in adult-use and medical sales, these two sales channels represented 80% of total net revenue, a complete turnaround from 2020, where bulk-wholesale product represented 67% of total net revenue,” Symmes added. “This is just the beginning, and we are very excited about the future. A record-breaking outdoor harvest that produced average THC potency of 22% allows us to direct this flower into the adult-use market, delivering significantly higher net margin per gram than the bulk wholesale channel. With our highly competitive THC levels, the quality of the brand is the company’s competitive advantage in the value category, and by focusing on the top performing high margin products through portfolio optimization, we are poised to achieve breakeven adjusted EBITDA profitability in the second half of 2022.”
“Aleafia Health’s revenue is driven by three strong business lines: its CPG branded adult-use portfolio, where we aim to enjoy a Top 10 overall market share position, which currently generates $24 million annualized run-rate net revenue, with significant momentum in the first 6 weeks of 2022; leadership in medical cannabis with its highly recurring $10 million annualized run-rate net revenue, and a 17% increase year over year in script counts; and international sales, where we are well positioned in three countries, Germany, the UK and Australia, and have developed partnerships with key established European supply distributors.
Our Sunday Market House of Brands achieved 396% growth year over year and is anchored around our hugely successful everyday Divvy brand, we have moved strongly ahead into categories that consumers want and are providing the innovative products and a value proposition that they demand.”
OPERATIONAL HIGHLIGHTS
KEY DEVELOPMENTS
In 2021, the Company transformed its business to become a branded cannabis provider. It has produced high potency flower at its Port Perry outdoor growth facility, allowing it to direct that product to higher margin, adult-use products. It has engaged with the consumer and attracted a top executive sales and marketing team, with an internal sales force, that understands the CPG marketplace, what consumers want and is focused on the need to drive value to secure loyal customers and drive and maintain market share. Higher THC levels as well as the lower cost of input materials has allowed the Company to significantly increase its market share. Other developments include:
Note that the Company announced on February 8, 2022 that it changed its year-end to March 31. As a result, in this transition year, annual audited financial statements for the 15 months ended March 31, 2022 will be issued prior to June 29, 2022.
NET INCOME & ADJUSTED EBITDA
Three months ended | Twelve months ended | |||||||
($,000s) | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2021 | Dec 31, 2020 | ||||
Net loss | (71,509 | ) | (217,301 | ) | (165,715 | ) | (247,238 | ) |
Add back: | ||||||||
Depreciation and amortization(1) | 3,715 | 2,649 | 10,278 | 10,164 | ||||
Interest expense, net | 2,185 | 3,098 | 8,161 | 11,636 | ||||
Income tax expense (recovery) | - | 2,854 | (2,854 | ) | (2,540 | ) | ||
EBITDA | (65,609 | ) | (208,700 | ) | (150,130 | ) | (227.978 | ) |
Inventory provision | 17,266 | - | 19,648 | 16,973 | ||||
FV changes in biological assets and changes in inventory sold | 6,663 | 11,106 | 547 | 12,160 | ||||
Share-based payments | 663 | 582 | 2,831 | 2,690 | ||||
Bad debt expense | 12 | 988 | 9,956 | 1,892 | ||||
Business transaction costs | 951 | 824 | 4,330 | 4,146 | ||||
Gain on sale of assets | - | (1,181 | ) | (12,092 | ) | (1,181 | ) | |
Fair value through profit and loss adjustments | 8,785 | (877 | ) | 14,385 | (943 | ) | ||
Impairment of intangible assets | - | 22,116 | 53,093 | 22,116 | ||||
Impairment of goodwill | - | 177,476 | 11,314 | 177,476 | ||||
Impairment of property, plant & equipment | 28,800 | - | 28,800 | - | ||||
Non-operating expense (income) | 71 | (74 | ) | (281 | ) | (481 | ) | |
Adjusted EBITDA(2) | (2,398 | ) | 2,260 | (17,599 | ) | 6,870 | ||
1. Includes non-cash depreciation expensed to cost of sales. | ||||||||
2. See "Cautionary Statements Regarding Certain non-IFRS Measures" section for term definition. |
CONFERENCE CALL & WEBCAST
Date: February 15, 2022
Time: 9:30 a.m. ET
USA/Canada Toll-Free Participant Call-in: (866) 679-9046; Passcode: 6187986
International Toll-Free Participant Call-in: (409) 217-8323; Passcode: 6187986
WEBCAST LINK
This conference call will be webcast live over the internet and can be accessed through the link provided. Audio of the call will be available to participants through both the conference call line and webcast; however, the presentation may only be viewed via the webcast. Participants who miss the live call can view a replay at any time via the link provided.
For Investor & Media Relations:
Matt Sale, CFO
1-833-879-2533
This email address is being protected from spambots. You need JavaScript enabled to view it.
LEARN MORE: www.AleafiaHealth.com
About Aleafia Health
Aleafia Health, a vertically integrated and federally licensed Canadian cannabis company, owns three licensed cannabis production facilities, including the first large-scale, legal outdoor cultivation facility in Canadian history, and operates a strategically located distribution centre, all in the province of Ontario. The Company produces a diverse portfolio of cannabis derivative products including oils, capsules, edibles, sublingual strips, and vapes, for sale in Canada in the adult-use and medical markets and is pursuing opportunities in select international jurisdictions. The Company owns and operates a virtual network of medical cannabis clinics staffed by physicians and nurse practitioners.
FORWARD LOOKING INFORMATION
Certain statements herein relating to the Company constitute “forward-looking information”, within the meaning of applicable securities laws, including without limitation, statements regarding future estimates, business plans and/or objectives, sales programs, forecasts and projections, assumptions, expectations, and/or beliefs of future performance, are “forward-looking information”. Such forward-looking statements involve unknown risks and uncertainties that could cause actual and future events to differ materially from those anticipated in such statements. Forward-looking statements include, but are not limited to, statements with respect to our market share, net revenue, net branded revenue, gross profit, gross profit margin, Adjusted SG&A, Adjusted EBITDA, and other financial outlook projections for fiscal year 2022, our commercial operations, including production and / or sales of cannabis, quantities of future cannabis production, anticipated revenue in connection with such sales, and other Information that is based on forecasts of future results, estimates of production not yet determinable, and other key management assumptions. The following material factors or assumptions were used to develop the forward-looking information: market size and growth of the Canadian adult-use and medical cannabis markets, retail store penetration, script trends, cultivation and processing capacity, costs of production, gross and net revenue per gram.
Actual results may differ materially from those expressed or implied by such forward-looking statements and involve risk and uncertainties relating to: future cultivation yield and quality, actual operating performance of facilities, product launches, facility licenses and amendments, average selling prices, cost of goods sold, operating expenses, Adjusted EBITDA, regulatory changes in the Canadian and international markets, and other uninsured risks. The forward-looking information was approved by Management as of February 14, 2022. The Company assumes no responsibility to update or revise forward-looking information to reflect new events or circumstances unless required by law. The forward-looking information is provided for information purposes only and readers are cautioned that it may not be appropriate for other purposes. This presentation is provided for general information purposes only and does not constitute an offer to sell or solicitation of an offer to buy any security in any jurisdiction.
CAUTIONARY STATEMENT REGARDING NON-IFRS MEASURES
Branded Cannabis Net Revenue, Adjusted SG&A, and Adjusted EBITDA are not recognized financial measure under IFRS, does not have a standardized meaning and therefore may not be comparable to similar measures presented by other issuers. For additional information including the definition and purpose of the non-IFRS measure, see “Cautionary Statement re Non-IFRS measures” in the Company’s Management’s Discussion and Analysis for the period ended December 31, 2021 found on SEDAR at www.sedar.com.”
Last Trade: | US$0.02 |
Daily Volume: | 0 |
Market Cap: | US$6.090M |
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