Aleafia Health Reaffirms Guidance For 2023

Aleafia Health Inc. (OTCQX: ALEAF) reported its financial results for the quarter ended March 31, 2022, with total revenue of $10.7 million versus last year’s $7.5 million for the same time period. The net loss was trimmed to $4.1 million from last year’s $11.2 million for the same time period. Aleafia also reaffirmed guidance of delivering between $53 and $63 million in total net revenue in the fiscal year 2023.

Aleafia noted that due to it changing its year end to March 31, its fiscal year 2022 audited, consolidated financial statements, and management discussion and analysis for the fifth quarter and 15-month periods will be available in the Investors section of the company’s website.

Full-Year Revenue

Digging into the revenue figures, Aleafia Health’s branded cannabis net revenue increased 151% to $36.8 million in the fiscal year 2022, from $14.6 million in the prior year. Total branded cannabis revenue for the period was $47.5 million. Branded cannabis net revenue rose 55% to $8.0 million in the three months ended March 31, 2022, compared to $5.2 million in the three months ended March 31, 2021. Aleafia said it completed a dramatic shift to become a branded cannabis producer in the fiscal year 2022, from a largely wholesale business-to-business supplier in fiscal year 2020. The move resulted in an increase in the average net realized price per gram and an improvement in the branded cannabis gross profit margin.

Branded cannabis represented 85% of total net revenue in the fiscal year ending March 31, 2022, compared to only 40% in the prior fiscal year. The quality of the company’s revenue base increased significantly driven by the growth in sticky, highly recurring medical sales, adult-use market share capture which drives continued end-user demand for the company’s branded consumer products, and the continued build-out of its international sales platform.

“For the fiscal year ended March 31, 2022, the Aleafia Health team once again demonstrated its relentless drive toward steadily increasing market share in branded adult-use and medical cannabis along with strong international sales growth,” said Aleafia Health CEO Tricia Symmes. “We continued our decisive quarter over quarter upward sales trajectory from Q4 to Q5 with adult-use market share rankings rising an additional two positions from 15th to 13th. The company is now positioned to become a Top 10 Licensed Producer. Aleafia Health had exceptionally strong growth year over year in retail adult-use market share, as part of a successful end to a transformative fiscal year. The company delivered a top 3 market share rank increase among the 20 largest Canadian Licensed Producers, from 28th in Q1 2021 when the company launched the Sunday Market House of Brands, to 13th in the most recently completed quarter.”

Cutting Costs

“The Company underwent a complete top-to-bottom organizational realignment which saw a 30% reduction in the workforce, integrated the medical business to deliver a cohesive and consistent patient experience, turned around its Grimsby greenhouse to focus on high-potency usable flower, and wound down many of the legacy consultants, contracts and non-recurring costs related to the Sunday Market House of Brand build-out,” said Aleafia Health CFO, Matt Sale. “With significant cost rationalizations enacted over the fiscal year, and continued cost containment initiatives underway, the Company is on track towards Adjusted EBITDA profitability in the second half of fiscal year 2023.”

The company said it has aggressively contained and rationalized its Adjusted SG&A cost profile, resulting in a 26% decline to $7.3 million in the three months ended March 31, 2022, compared to $9.8 million in the prior year.

“Our current annual run-rate net revenue of approximately $43 million is primarily underpinned by $28 million in adult-use branded cannabis and $11 million in medical and international revenue. In the current quarter, I am pleased to announce that we have significantly increased our sales generation sequentially, as the company has $11.0 million in purchase orders from its four provincial authorities to which it supplies cannabis products, an increase of 22% or $2.0 million over the quarter ended March 31, 2022. In the year ahead one of our goals is to add to our provincial supply relationships and deepen our product lines within our existing store partners which are expected to increase overall net revenue and total gross profits. With our strategic growth projects underway we remain confident we can deliver on our previously issued guidance of between $53 and $63 million in total net revenue in fiscal year 2023.”

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


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