Aleafia's Revenue Increases 21% in Fiscal Second Quarter

Company achieves profitability.

Aleafia Health Inc. (TSX: AH)(OTCQB: ALEAF) reported its financial results for the fiscal second quarter ending September 30, 2022, as revenue increased 21% to $14.4 million versus $11.9 million in the prior year. Aleafia said that branded cannabis net revenue grew 23% over the prior year to $9.4 million, up from $7.6 million for the same calendar period in 2021, primarily driven by the success of Divvy. The stock was rising by 6% to lately sell at six cents.

Aleafia also reported a net profit of $.7 million in the quarter versus a net loss of $8.0 million.

“We have worked diligently over the past 12 months to achieve this major milestone, and to be among the first publicly traded Canadian Licensed Producers to reach Adjusted EBITDA profitability is an enormous accomplishment,” said Tricia Symmes, CEO. “It is the result of a relentlessly profit-focused management team putting into place the discipline and high-growth mindset instrumental in achieving this meaningful and substantial objective. The fact that this occurred during a period of market volatility with the OCS cybersecurity attack, the BC lockout, and our whole flower supply constraints all impacting adult-use sales, is an even stronger testament to the power of our growing brands, led by Divvy.”

Grimsby Closure

In November 2022, Aleafia said it was making further cost savings initiatives around its flower supply, by initiating the winddown of its Grimsby greenhouse which represents an annualized net cost savings of approximately $4.1 million which will further improve go-forward profitability. The company said it will begin the process of ceasing operations,
effective November 2022, and that this would impact 41 employees. The company said it will be assessing alternatives and may potentially pursue selling the asset.

“Over the last four quarters the Company has experienced consistent whole flower stock outs as the scale of the Grimsby greenhouse was outstripped by consumer demand for our products. We have mitigated this issue by onboarding strategic partners to supply our ongoing requirements,” said Symmes. “We want to sincerely thank our valued employees at the Grimsby greenhouse for their many contributions over the years, particularly in the launch of Divvy and transformation of our business to a branded cannabis provider.”

EBITDA

Aleafia noted that it achieved adjusted EBITDA profitability in the quarter, which was ahead of plan. In the second quarter, the company grew its Adjusted EBITDA by $8.9 million relative to the prior year, thereby achieving $0.1 million Adjusted EBITDA in fiscal second quarter, well in advance of its previous estimate, having extracted over $11 million in cost reductions over the last four quarters. The company said it believes it is the first Canadian LP of similar size, scale, and operational footprint to attain Adjusted EBITDA profitability on a sustainable basis.

“The company has achieved Adjusted EBITDA profitability by transforming to a branded cannabis producer from a high-volume bulk wholesale producer, and we are incredibly proud of achieving $0.1 million in Adjusted EBITDA in the quarter ending September 30, 2022, compared with -$8.8 million in the same period last year.” said Matt Sale, CFO. “In focusing on products in large format categories with strong margin profiles and enacting an aggressive cost rationalization and containment culture throughout the organization, this quarter is only the beginning of the company’s long-term sustainable profitability.”

 

 

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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