Aleafia Revenue Increases Slightly Ahead of RWB Acquisition

The company has seen success with its Divvy products.

Aleafia Health Inc. (TSX: AH)(OTCQB: ALEAF) delivered its audited financial results for the quarter and fiscal year ending March 31, 2023 in Canadian dollars. During the fourth quarter, total revenue increased 9% to $11.7 million from $10.7 in the 2022 fourth quarter.

For the full fiscal year, revenue rose to $57 million from last year’s $46 million. The net loss for 2023 was $34 million versus 2022’s net loss of $169 million.

Aleafia has experienced recurring losses and has a cumulative deficit of $527,810 (March 31, 2022 – $493,203) and net working capital deficit of $5,418 (March 31, 2022 – deficiency of $36,160). The company is listed as a going concern. However, the proposed business combination transaction with Red White & Bloom Brands Inc. (RWB) is likely to address the going concern issues. RWB is set to acquire Aleafia in a deal that is expected to close in the third quarter of 2023.

“The Aleafia team is thrilled about the proposed business transaction with RWB,” Symmes said. “The Canadian cannabis market is a rapidly changing industry, and we believe we will be well positioned with our new partner RWB to capitalize on value-added synergies. RWB has award-winning brands and IP and with Aleafia’s Divvy brand and proven cultivation, manufacturing, and distribution capabilities, we expect to create one of the most dynamic cross border companies in the industry.”

Divvy

Aleafia reported that its adult-use revenue increased 24% to $36.0 million in 2023 versus $29.1 million in 2022. The company attributed the gain to Divvy, the everyday brand, and complemented by product launches under the company’s Sunday Market House of Brands. Aleafia said that it reached a peak #12 market share ranking in its core markets in first fiscal quarter of 2023. The statement said, “Within the 2023 fiscal year the Company’s pre-rolls, operating in the fastest growing market segment, peaked at #2 in Ontario market share rankings, while milled flower products gained a #4 Ontario market share ranking.” Based on Divvy’s strong acceptance in Ontario, the company said it plans to expand Divvy’s brand portfolio, along with strategic growth in new adult-use markets.

However, on a quarterly basis, adult-use net revenue fell 32% to  $3.7 million which the company blamed on overall seasonality in the marketplace, its liquidity constraints, challenges in making timely payments to high priority vendors, and the company’s product mix, focused on pre-rolls, which tend to experience higher sales velocity in the spring and summer seasons.

“This last fiscal year was a year of focused execution to drive profitable top-line growth, expand our margin profile by tightening up our supply chain, and cost rationalization to right size our fixed cost profile to fit our size and scale,” said Aleafia CFO, Matt Sale. “We are very proud to have achieved this while continuing to allocate capital expenditures prudently and achieving Adjusted EBITDA profitability for three consecutive quarters. The improved financial flexibility and capacity of the Combined Company will enhance the ability to execute on organic and acquisitive growth strategies.”

 

 

 

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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