Aleafia Health To Cut More Employees

Aleafia Health Inc. (TSX: AH, OTCQX: ALEAF) is going to be laying off employees as the company looks to save money and stick to its revenue goals. Aleafia said it can save $4.4 million by cutting more heads and becoming more efficient. The company said by implementing these efforts in this quarter, it can reach its previous guidance for revenue between $53 and $63 million for the current fiscal year. Aleafia also said that Adjusted EBITDA breakeven profitability is expected to occur in the second half of 2022.

“Aleafia Health continues to deliver on its forecast and strategy, experiencing record growth in sales, capturing additional adult-use cannabis market share, and now achieving important efficiencies and additional cost reductions,” said Aleafia Health CEO Tricia Symmes. “These organizational realignments helped create a leaner, more nimble workforce optimized to accelerate revenue velocity and maximize margin. It’s just the beginning of creating a new company whose products are focused on the highest revenue-generating branded dried flower, pre-roll, and vape product categories as consumers continue to express strong interest in our Sunday Market House of Brands adult-use cannabis products.”

In February, Aleafia began cutting employees, representing approximately 10% of the workforce and approximately $1.9 million in annualized savings.  The company also reviewed its inventory and fixed assets and identified certain slow-moving assets primarily related to the bulk wholesale sales channel. As a result of the company’s pivot towards focusing on branded cannabis products, the company recorded a $19.6 million inventory provision. The company also recorded a $28.8 million impairment of property, plant & equipment due to changes in market conditions for these assets.

As part of the organizational realignment, Aleafia noted that previously its clinics operated independently from one another. Now it operates a national virtual clinic and several physical clinics serving a base of over 20,000 active patients and receives referrals from third-party providers. Symmes said, “By rightsizing and integrating them, the clinics now form a comprehensive medical cannabis strategy, which is seeing strong, consistent market demand. There is also continued uptake in our newest markets: Quebec, Veterans and third-party patient-acquisition platforms. We are well-positioned to continue to outperform the market where in 2021 we delivered 33% medical cannabis net revenue growth.”

Aleafia Health CFO Matt Sale said, “In the quarter ending December 31, 2021, the company reported reducing its adjusted selling, general, and administrative (SG&A) expenses by 37% to $7.1 million, from $11.2 million in the period ending December 31, 2020. Management continues to build on that momentum with aggressive cost containment. In the quarter ended March 31, 2022, the company identified further headcount reductions, operational efficiencies, redundancies, and nonrecurring costs, which together with those already implemented, total $6.7 million on an annualized basis. This demonstrates the company’s unwavering commitment to drive profitability and achieve a sustainable business model. We foresee continued tailwinds to improve our margin profile and drive towards achieving our target of break-even Adjusted EBITDA profitability later this year.”

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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