Generates 21.2% Sequential Revenue Growth, with Record Gross Revenues of
Reports Strong Combined Gross Margin of 54.7% (1) Driven by Improved Harvest Yields and Higher Wholesale Volumes
Expects Full Year Gross Revenues of Approximately
Management Commentary
"We've implemented strong operational improvements that have continued our progress towards long term profitability and sustained growth. Harborside continues to be one of the leaders in the
Q3 2020 Financial Results and Highlights (2)(3)
Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | |
Retail Revenues | ||||
Wholesale Revenues(a) | ||||
Total Gross Revenues(a) | ||||
Retail Gross Profit(e) | ||||
Wholesale Gross Profit(a)(e) | - | |||
Total Gross Profit(a)(e) | ||||
Retail Gross Margin(b)(e) | 50.10% | 51.20% | 51.30% | 51.60% |
Wholesale Gross Margin(a)(e) | 60.30% | 46.80% | 17.70% | -62.80% |
Total Gross Margin(e) | 54.70% | 49.80% | 41.00% | 30.20% |
G&A/Professional Fees(c)(d) | ||||
Adjusted EBITDA(e) | - |
NOTES: |
a. Not including excise taxes or biological asset adjustments. |
b. Retail gross margin in Q1 2020 and Q2 2020 are slightly affected by additional expenditures on personal protective equipment and other safety measures due to the COVID-19 pandemic. Retail gross margin in Q2 2020 and Q3 2020 include additional pay for the Company's front line workers and expenses relating to the impacts of the civil unrest in the |
c. Professional Fees for the fourth quarter of 2019 include approximately |
d. Professional Fees for Q2 2020 and Q3 2020 include approximately |
e. This is a non-IFRS reporting measure. For a reconciliation of this to the nearest IFRS measure, see "Use of Non-IFRS Measures" and "Non-IFRS Measures" in the Company's management discussion and analysis for |
Q3 2020 Financial Summary
During Q3 2020, Harborside generated total gross revenues of approximately
Harborside's wholesale operations reported gross wholesale revenues of approximately
The Company's retail operations generated revenues of approximately
Total operating expenses for Q3 2020 were approximately
During Q3 2020, the Company also recorded an income tax provision of
Operating Income for Q3 2020 was approximately
Adjusted EBITDA(1) for Q3 2020 was approximately
Q4 2020 and Full Year Expectations (2)(4)
The Company expects Q4 2020 gross revenues to follow a more historically typical seasonal pattern, with lower flower production and wholesale revenues, resulting in total combined gross revenues of
Liquidity and Cash Balance (2)(3)
As of
Recent Operational Highlights
Wholesale Operations: Harborside recently announced planned cultivation facility upgrades at the Salinas Facility. The planned upgrades include, among other things, the installation of blackout curtains and supplemental LED grow lights at the Salinas Facility. Following the successful completion of these upgrades, the Company expects an approximately 50% increase in production, an expected approximately 10% increase in bulk wholesale revenue capacity, and an approximately 7% increase in the total productive capacity, on an annualized basis(2)(4). The upgrades are expected to be completed within the first quarter of 2021(2).
In furtherance of its brand strategies, Harborside announced that two of its award-winning in-house brands,
Capital Markets: During Q3 2020, the Company commenced trading on the OTCQX under the ticker symbol of "HBORF" and, subsequent to the quarter end, Harborside received depository trade clearance (DTC) eligibility.
Acquisitions: Subsequent to Q3 2020, Harborside announced it had executed a definitive agreement with
Secured Indemnity
On
The Secured Indemnity constitutes a "related party transaction" under Multilateral Instrument 61-101 - Protection of Minority Securityholders in Special Transactions ("MI 61-101"). The Company is relying on the exemptions from the valuation and the minority approval requirements of MI 61-101 provided for in subsections 5.5(a) and 5.5 (b) and subsection 5.7(a) of MI 61-101, respectively, as the Company's shares are not listed on specified markets and neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the Secured Indemnity, in relation to the interested parties, will represent more than 25% of the Company's market capitalization, as determined in accordance with MI 61-101.
For the latest news, activities, and media coverage, please visit the Harborside corporate website at http://www.investharborside.com or connect with us on LinkedIn, Facebook, and Twitter.
About Harborside:
Non-IFRS Measures, Reconciliation and Discussion
This press release may contain references to "EBITDA", "Adjusted EBITDA", "Gross Profit", and "Gross Margin", which are non-IFRS financial measures.
EBITDA and Adjusted EBITDA are measures of the Company's overall financial performance and are used as an alternative to earnings or net income in some circumstances. EBITDA and/or Adjusted EBITDA are essentially net income (loss) with interest, taxes, depreciation and amortization, non-cash adjustments and other unusual items added back. This measure can be used to analyze and compare profitability among companies and industries, as it eliminates the effects of financing and capital expenditures. It is often used in valuation ratios and can be compared to enterprise value and revenue. This measure does not have any standardized meaning according to IFRS and therefore may not be comparable to similar measures presented by other companies.
Gross Profit is the difference between revenue and cost of goods sold. Gross Margin is the difference between revenue and cost of goods sold divided by revenue and is expressed as a percentage. Management believes that these measures provide useful information as it represents the value of incremental sales.
There are no comparable IFRS financial measures presented in Harborside's financial statements. Reconciliations of the supplemental non-IFRS measures are presented in the Company's management's discussion and analysis for
These non-IFRS financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the IFRS financial measures presented in the Company's financial statements. For more information, please see "Use of Non-IFRS Measures" and "Non-IFRS Measures" in the Company's management's discussion and analysis for
Notes:
- This is a non-IFRS reporting measure. For a reconciliation of this to the nearest IFRS measure, see "Use of Non-IFRS Measures" and "Non-IFRS Measures" in the Company's management discussion and analysis for
September 30, 2020 . - This is forward-looking information and based on a number of assumptions. See "Cautionary Note Regarding Forward-Looking Information".
- The financial information included in this press release is neither audited nor reviewed. Where possible, the information has been constructed by management from available audited or audit reviewed financial statements. Where no audited or audit reviewed information has been available, additional management accounting information has been utilized to construct financial information.
- These targets, and the related assumptions, involve known and unknown risks and uncertainties that may cause actual results to differ materially. While Harborside believes there is a reasonable basis for these targets, such targets may not be met. These targets represent forward-looking information. Actual results may vary and differ materially from the targets. See "Cautionary Note Regarding Forward-Looking Information" and "Assumptions" below.
Cautionary Note Regarding Forward-Looking Information
This news release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking statements") within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates, and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as "expects", or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "budget", "scheduled", "forecasts", "estimates", "believes" or "intends" or variations of such words and phrases or stating that certain actions, events or results "may" or "could", "would", "might" or "will" be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this news release, forward-looking statements include, among other things, statements with respect to future company performance, growth, profitability, production capacity and gain in market share, the Company's corporate strategy moving forward, and the information under the headings "Recent Operational Highlights", "Q3 2020 Financial Results and Highlights", "Q4 2020 and Full Year Expectations", and "Liquidity and Cash Balance".
These forward-looking statements are based on reasonable assumptions and estimates of management of the Company at the time such statements were made. Actual future results may differ materially as forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to materially differ from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors, among other things, include: implications of the COVID-19 pandemic on the Company's operations; fluctuations in general macroeconomic conditions; fluctuations in securities markets; expectations regarding the size of the cannabis markets where the Company operates; changing consumer habits; the ability of the Company to successfully achieve its business objectives; plans for expansion; political and social uncertainties; inability to obtain adequate insurance to cover risks and hazards; employee relations and the presence of laws and regulations that may impose restrictions on cultivation, production, distribution, and sale of cannabis and cannabis-related products in the markets where the Company operates. Although the forward-looking statements contained in this news release are based upon what management of the Company believes, or believed at the time, to be reasonable assumptions, the Company cannot assure shareholders that actual results will be consistent with such forward-looking statements, as there may be other factors that cause results not to be as anticipated, estimated or intended. Readers should not place undue reliance on the forward-looking statements and information contained in this news release. The Company assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law.
The Company, through several of its subsidiaries, is indirectly involved in the manufacture, possession, use, sale, and distribution of cannabis in the recreational and medicinal cannabis marketplace in
This news release does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in
Assumptions
In developing the financial guidance set forth above, Harborside made the following assumptions and relied on the following factors and considerations:
- The targets are based on Harborside's historical results including its year to date consolidated results of operations.
- The targets are subject to cultivation improvement plans anticipated to come online in the last quarter of 2020 and during 2021.
- Targeted revenue at our retail dispensaries through the end of the year is based on our YTD results.
- Both retail and wholesale revenue sustainability and growth depend on a variety of factors, including among other things, location, competition, legal and regulatory requirements. Prices are projected forward at recently realized wholesale and retail prices.
- Cost of goods sold, before taking into account the impact of value changes in biological assets (which are non-cash in nature, and, accordingly, are excluded from calculations of Adjusted EBITDA), have been projected based on estimated costs of production and capacity available from a vertically-integrated supply chain. Cost of goods sold relating to inventory purchased from third parties have been projected in line with historical levels.
- Selling, general and administrative expenses through the end of 2020 are assumed to remain consistent through the end of 2020, but to decrease as a percentage of revenues due to inherent scalability of selling, general and administrative expenses and our cost cutting initiatives outlined above. Additionally, total selling, general and administrative expenses include an allocation for corporate overhead and public company costs.
The CSE has neither approved nor disapproved the contents of this news release. Neither the CSE nor its Market Regulator (as that term is defined in the policies of the CSE) accepts responsibility for the adequacy or accuracy of this release.
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