Halo Collective Reports 63% Revenue Growth and 345% Cannabis Sales Volume Growth in the Fourth Quarter of 2021
All figures in USD unless stated otherwise
TORONTO, April 1, 2022 /CNW/ - Halo Collective Inc. ("Halo" or the "Company") (NEO: HALO) (OTCQB: HCANF) (Germany: A9KN) today announced its financial and operational results for the fourth quarter ("Q4 2021") and full year ended December 31, 2021 ("FYE 2021").
- Revenue of $8.4 million, up $3.2 million, or 63%, compared to $5.1 million in Q4 2020.
- Sales of nearly 13 million grams of cannabis products principally to dispensaries in Oregon and California, a 345% year-over-year increase compared to Q4 2020.
- Adjusted gross margin1 was $0.8 million, or 9.6% gross margin, compared to $0.5 million, or 10.5% gross margin, in Q4 2020.
- Adjusted EBITDA1 loss of $7.1 million compared to a loss of $3.7 million in Q4 2020.
- Revenue of $36.2 million, up $14.5 million, or 67%, compared to $21.6 million in 2020.
- Sales of over 32 million grams of cannabis products principally to dispensaries in Oregon and California, a 381% year-over-year increase compared to 2020.
- Adjusted gross profit1 was $7.3 million, or 20.1% gross margin, compared to gross profit of $5.2 million, or 24.0% gross margin, in 2020.
- Adjusted EBITDA1 loss of $23.6 million compared to a loss of $6.9 million in 2020.
"Halo's team is actively building significant shareholder value, even while the operating conditions remain difficult in the California and Oregon markets and pressuring our near-term financial performance," said CEO Kiran Sidhu. "In our growing wholesale businesses, volumes are trending upward due to higher sales velocity and expanded market penetration, offsetting much of the downward pressure on prices and positioning us well for when pricing stabilizes. In our retail business, we've opened our first Budega™ dispensary in North Hollywood, California, and are seeing solid preliminary results in the first weeks of operation. Meanwhile, we have taken the necessary steps to rationalize the business to accelerate our path to profitability."
Added Sidhu, "What's less apparent in the financials is the significant value that we are creating through our incubation efforts within our collective of assets. Take Akanda Corp. as an example. In 2020 we purchased two disparate international cannabis assets, Bophelo Bioscience & Wellness and CanMart and, after completing a reorganization of these assets and putting in place a team, strategy and structure, Halo is now the largest shareholder in this rapidly scaling international medical cannabis company with a stake worth over $100 million based on Akanda's current market capitalization. We are now assessing other opportunities with respect to Halo's investments in cannabis businesses ancillary to our West Coast operations, including our investments in CBD and functional beverages, two of the fastest-growing categories in the consumer space that can be widely distributed."
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1 See "Non-IFRS Financial Matters" below for more information regarding the non-IFRS financial measures referred to herein.
In fiscal 2022, Halo is planning to execute a strategy of incubating promising companies within the cannabis industry and the broader wellness space. Akanda Corp. ("Akanda") is the most advanced in its execution but there are other initiatives at earlier stages underway with the Company's interests in software, California cultivation, and CBD and functional beverages, that collectively the Company expects will enhance its financial strength.
- International Cannabis: On November 4, 2021, Halo sold its stake in Bophelo Bioscience & Wellness Pty. Ltd. ("Bophelo"), a Lesotho-based cultivation and processing campus located in the world's first Special Economic Zone (SEZ) containing a cannabis cultivation operation, and CanMart Ltd. ("CanMart"), a UK-based fully approved pharmaceutical importer, and distributor that supplies pharmacies and clinics within the UK, to Akanda for 13,123,212 common shares of Akanda and a secured convertible debenture in favor of Halo in the principal amount of $6.6 million. As of December 31, 2021, Halo's financial statements recorded a long-term investment of $10.5 million for its investment in Akanda. Akanda subsequently went public on The Nasdaq Capital Market on March 14, 2022, through an underwritten public offering of four million common shares at a public offering price of $4.00 per share. Halo currently holds 12,674,957 shares of Akanda, which, based on a closing price for Akanda shares of $7.94 on March 31, 2022, values Halo's stake in Akanda at approximately $101 million.
- Software: Halo has acquired a range of software development assets, including CannPOS, Cannalift, CannaFeels, and a discrete sublingual dosing technology, Accudab. The Company intends to reorganize these entities (including their intellectual property and patent applications) into a subsidiary called Halo Tek Inc. ("Halo Tek") and to complete the distribution of the shares of Halo Tek Inc. to shareholders on record at a date to be determined.
- California Cultivation: Halo maintains a 44% equity stake in Triangle Canna Corp. ("Triangle Canna"), the holder of 271 provisional licenses from the California Department of Cannabis Control, the state regulator, and which has plans to develop up to 63 acres of cultivation in California in partnership with Halo's investment partner Green Matter. On November 10, 2021, Halo announced the planned $75 million Regulation A+ financing by Triangle Canna, which is being valued at $165 million prior to the completion of the financing. The financing has been qualified by the U.S. Securities Exchange Commission and is expected to launch in 2022. There can be no certainty as to the timing or success of Triangle Canna's proposed Regulation A+ financing.
- CBD and Functional Beverages: Halo is also expanding into other consumer health and wellness categories expected to experience rapid growth in consumer demand, including functional supplements such as nootropic nutraceuticals and CBD gummies. Through the recent acquisition of Simply Sweet, a health-conscious, low-sugar cannabis infused alternative confectionery, the Company has a portfolio of proprietary recipes and formulas to leverage for infused gummy and candy production. The recent acquisition of H2C Beverages, a company focused on cannabinoids and non-psychotropic mushroom functional beverages, and the national distribution and manufacturing agreement with SWAY Energy Corporation ("SWAY")(formerly Elegance Brands Inc.), provides the Company with brands and a route to market to propel the national distribution of beverages, capsules, and topical supplements under H2C and Halo's functional mushroom brand, Hushrooms™.
Halo's "Seed to Sale" strategy in California accelerated as the Company delivered on its Los Angeles retail rollout in early 2022. On March 18, 2022, Halo announced that the first Budega dispensary officially opened in the Arts District of North Hollywood, California. This is the first of three Budega stores planned to open in Los Angeles. Located at the northwest corner of Lankershim Boulevard and Hesby Avenue, the store offers a vast product assortment of nearly 1,000 SKUs, including many top-tier California brands. In addition, the Company plans to launch retail delivery, which is expected to increase top-line sales and help capture overall market share.
Management anticipates opening stores in Westwood and Hollywood during in the spring and summer of 2022. Opening under the Company's new retail brand, Budega, these stores are expected to meaningfully contribute to net revenue and gross profit.
Revenue
Revenues in Q4 2021 were $8.4 million compared to $5.1 million in Q4 2020, a 63% increase. Total sales were 13.0 million grams (Q4 2020: 2.9 grams), a 345% increase.
Revenue growth was mixed across the Company's subsidiaries which include ANM Inc. ("ANM"), the owner of the Company's facility in Oregon; Mendo Distribution and Transportation LLC ("MDT"), the owner of the facility in Ukiah; Coastal Harvest LLC ("Coastal Harvest"), Halo's extraction facility in California; Halo Winberry Holdings, LLC ("Halo Winberry"), which operates a one-acre grow outside of Eugene, Oregon; and Halo Kushbar Retail Inc., the operator of three retail cannabis stores in the Canadian province of Alberta. ANM reported revenues of $2.4 million, a 40.8% decrease over Q4 2020. MDT reported revenues of $3.0 million, a 104.4% increase over Q4 2020. Coastal Harvest reported revenues of $1.0 million, compared to a reversal of $0.1 million in Q4 2020. Halo Winberry and Halo Kushbar Retail, whose results were not included in Q4 2020, reported revenues of $2.5 million and $0.7 million, respectively.
Gross Profit
The Company reported a gross loss of $1.3 million (Q4 2020: gross loss of $1.2 million). Adjusted for the loss on biological assets and impairments, gross profit was $0.8 million (Q4 2020: $0.5 million), with an adjusted gross margin of 9.6% (Q4 2020: 10.5%).1
Adjusted EBITDA
The Company reported an Adjusted EBITDA loss of $7.1 million compared to a loss of $3.7 million in Q4 2020. 1
Liquidity and Cash Balance
As of December 31, 2021, Halo had available cash in the amount of $1.7 million and approximately $0.1 million in restricted cash.
ANM
In Q4 2021, ANM, the owner of the Company's facility in Oregon, sold 922,767 grams of shatter, cartridge oil, live resin, tinctures and gummies, flower, and pre-rolls (Q4 2020: 1,438,342 grams), a 35.8% decrease. Sales of oil and extracts were 280,674 grams (Q4 2020: 322,127 grams), a 12.9% decrease. The wholesale price of oils and extracts decreased by 11.4% to $6.45 per gram (Q4 2020: $7.29 per gram). Flower sales in Q4 2021 were 504,233 grams (Q4 2020: 831,986 grams), a 39.4% decrease. The wholesale price of flower decreased by 45.7% to $0.72 per gram (Q4 2020: $1.32 per gram). Pre-roll sales were 96,451 grams (Q4 2020: 161,187 grams), a 40.2% decrease. The wholesale price of pre-rolls increased by 4.0% to $1.85 per gram (Q4 2020: $1.78 per gram).
Halo Winberry
In Q4 2021, Halo Winberry sold 4,429,555 grams of flower, pre-rolls, oil and extracts, and edibles. Halo Winberry sold 995,118 grams of flower at a price of $0.76 per gram, 67,486 grams of pre-rolls at a price of $7.74 per gram, 582,268 grams of oils & extracts at a price of $2.29 per gram, and 60,683 grams of edibles at a price of $0.51 per gram.
MDT
In Q4 2021, the facility owner in Ukiah, MDT, sold 7,278,852 grams of distillate, live resin, gummies, and pre-rolls (Q4 2020: 1,474,621), a 394% increase. MDT sold 26,413 grams of flower at $9.77 per gram (Q4 2020: nil). Pre-roll sales were 7,819 grams (Q4 2020: 4,834 grams), a 61.7% increase, at a wholesale price of $5.16 per gram (Q4 2020 $8.44), a 22.4% increase. Sales of trim & fresh frozen were 6,930,106 grams (Q4 2020: 1,207,871), a 473.7% increase, at a wholesale price of $0.05 per gram (Q4 2020: $0.11), a 51.9% decrease. Sales of oil and extracts were 301,755 grams (Q4 2020: 190,874 grams), a 58.1% increase, at a wholesale price of $6.76 per gram (Q4 2020: $9.49), a 22.6% decrease. Sales of edibles were 12,759 grams (Q4 2020: 71,042), a 82.0% decrease, at a wholesale price per gram of $3.81 (Q4 2020: $0.91), a 319.7% increase.
Revenue
Revenues in FYE 2021 were $36.2 million compared to $21.6 million in Q4 2020, a 67% increase.
The Company sold 32.5 million grams of flower, pre-rolls, oils and extracts, trim and edibles, a 381.6% increase compared with 2020. ANM sold 5.0 million grams of flower, pre-rolls, trim and fresh frozen, oils and extracts and edibles during 2021, a 6.6% increase compared with 2020. Winberry sold 11.0 million grams of flower, pre-rolls, oils and extracts and edibles during 2021. Winberry was first consolidated into the Company's financial reporting in the year 2021. MDT sold 14.3 million grams of flower, pre-rolls, trim, fresh frozen, oils and extracts and edibles, compared with 1.8 million grams sold during 2020.
Gross Profit
Reported gross profits were $4.5 million, representing 12.4% gross margin in 2021, compared to $4.3 million, or 19.7% gross margin, in 2020. Adjusted for the gain or loss in the value of biological assets and impairments, gross profit was $7.3 million, or 20.1% gross margin, compared with adjusted gross profit of $5.2 million, or 24.0% gross margin in 2020.
Operating Expenses
Operating expenses were $43.1 million in 2021 compared to $23.5 million in 2020. Acquisitions added $12.5 million in operating expenses during 2021. For FYE 2021, total operating expenses for Bophelo and Canmart were $3.6 million compared to $0.6 million last year. Bophelo and CanMart were sold to Akanda in November of 2021 and going forward those costs are no longer incurred by Halo.
Adjusted EBITDA
The Company reported an Adjusted EBITDA loss of $23.6 million compared to a loss of $6.9 million in 2020. 1
Net Loss
Net loss was $93.0 million for 2021, or $10.48 per share, compared with a net loss of $41.2 million, or $7.27 per share, in 2020.
Halo will host a live webinar at 4:15 p.m. Eastern Time on Monday, April 4, 2022, to discuss its results. To access the webinar, visit https://conferencingportals.com/event/qzlwFzzt. The webinar will also be available on a telephonic replay after the event until April 11, 2022. To access the replay, dial 1-(800) 770-2030 (toll free) or (647) 362-9199 (international) and enter conference ID: 45805. At this time we are not providing financial guidance given the uncertainty within the Oregon and California markets and the early stage of the Company's incubation strategy.
Complete results are reported in the Company's consolidated financial statements for the three and 12 months ended December 31, 2021, and associated management's discussion and analysis (the "Q4 2021 MD&A") which are available on the Company's profile on www.sedar.com.
Halo is a leading, vertically integrated cannabis company focused on the West Coast of the United States and operates other emerging businesses in CBD and non-psychotropic mushroom functional beverages. In its cannabis operations, the Company cultivates, extracts, manufactures, and distributes quality cannabis flower, oils, and concentrates and has sold hundreds of millions of grams of cannabis in the form of flower, pre-rolls, vape carts, edibles, and concentrates since inception. The Company sells a portfolio of branded cannabis products including its proprietary Hush™, Winberry Farms™, Williams Wonder Farms, and Budega™ brands, and under license agreements with Papa's Herb®, DNA Genetics, Terphogz, and FlowerShop*.
In Oregon, Halo has a combined 14 acres of owned and contracted outdoor and greenhouse cultivation. The Company also operates Food Concepts LLC, a master tenant of a 55,000 square foot indoor cannabis cultivation, processing, and wholesaling facility in Portland.
In California, Halo maintains licenses for extraction, manufacturing, and distribution. The Company has partnered with Green Matter to purchase the Bar X Farm in Lake County and plans to develop up to 63 acres of cultivation, comprising one of the largest licensed single-site grows in California. Halo has opened a dispensary in Los Angeles under the Budega™ brand in North Hollywood and plans to open two more in Hollywood, and Westwood by the 2nd quarter of 2022.
Halo is also expanding into other consumer health and wellness categories expected to experience rapid growth in consumer demand, including functional supplements such as nootropic nutraceuticals. The Company has recently acquired H2C Beverages, a company focused on cannabinoids and non-psychotropic mushroom functional beverages, and entered into a distribution and manufacturing agreement with SWAY Energy Corporation (formerly Elegance Brands Inc.), to propel the national distribution of beverages, capsules, and topical supplements under H2C and Halo's functional mushroom brand, Hushrooms.
Halo has acquired a range of software development assets, including CannPOS, Cannalift, CannaFeels, and a discrete sublingual dosing technology, Accudab. The Company intends to reorganize these entities (including their intellectual property and patent applications) into a subsidiary called Halo Tek Inc., and to complete a distribution of the shares of Halo Tek Inc. to shareholders on record, at a date to be determined.
Halo also operates three Kushbar retail cannabis stores located in Alberta, Canada.
Outside of North America, Halo is the largest shareholder of Akanda Corp. (NASDAQ: AKAN) currently owning 44% of the common shares. Akanda is an international medical cannabis and wellness platform company seeking to help people lead better lives through improved access to high quality and affordable products. Akanda is building a seed-to-patient supply chain, connecting patients in the UK and Europe with diverse products, including cannabis products cultivated at its competitively advantaged grow operation in the Kingdom of Lesotho and with other trusted third-party brands. Akanda's initial portfolio includes Bophelo Bioscience & Wellness, a GACP qualified cultivation campus in the Kingdom of Lesotho in Southern Africa, and CanMart, a UK-based fully licensed pharmaceutical importer and distributor which supplies pharmacies and clinics within the UK.
For further information regarding Halo, see Halo's disclosure documents on SEDAR at www.sedar.com
Connect with Halo Collective: Email | Website | LinkedIn | Twitter | Instagram
Adjusted EBITDA and Adjusted Gross Profit are non-IFRS financial measures that the Company uses to assess its operating performance and does not have any standardized meaning prescribed by IFRS. Management defines Adjusted EBITDA as earnings (loss) before interest, tax, depreciation and amortization, as adjusted for non-cash items. Management defines Adjusted Gross Profit and Margin as Gross Profit adjusted for fair value gains or losses on biological assets, and impairments included in cost of goods sold. These non-IFRS measures are provided to assist management and investors in determining the Company's operating performance. The Company also believes that securities analysts, investors and other interested parties frequently use these non-IFRS measures in the evaluation of companies, many of which present similar metrics when reporting their results. As other companies may calculate these non-IFRS measures differently than the Company, these metrics may not be comparable to similarly titled measures reported by other companies. We caution readers that Adjusted EBITDA should not be substituted for determining net loss as an indicator of operating results, or as a substitute for cash flows from operating and investing activities. For a reconciliation of Adjusted EBITDA please refer to "Non-GAAP Measures" in the Q4 2021 MD&A, which is available on the Company's SEDAR profile at www.sedar.com.
This press release contains certain "forward-looking information" within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only Halo's beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of Halo's control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or may contain statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "will continue", "will occur" or "will be achieved". Forward-looking information may relate to anticipated events or results including, but not limited to the management's plans regarding its portfolio of cannabis businesses, the expected contribution from the Company's California dispensaries and the expected opening date thereof, the time and place for the Company's earnings call, the expected size and capabilities of the final facility planned at Ukiah Ventures, the size of Halo's planned cultivation facility in Northern California and the proposed spin-off by Halo Tek Inc.
By identifying such information and statements in this manner, Halo is alerting the reader that such information and statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from those expressed or implied by such information and statements. In addition, in connection with the forward-looking information and forward-looking statements contained in this press release, Halo has made certain assumptions. Although Halo believes that the assumptions and factors used in preparing, and the expectations contained in, the forward-looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements. Among others, the key factors that could cause actual results to differ materially from those projected in the forward-looking information and statements are the following: inability of management to successfully integrate the operations of acquired businesses, changes in the consumer market for cannabis products, changes in the expected outcomes of the proposed changes to Halo's operations, delays in obtaining required licenses or approvals necessary for the build-out of the Company's cannabis operations, dispensaries or Canadian operations, the proposed spin-out with Halo Tek Inc., delays or unforeseen costs incurred in connection with construction, the ability of competitors to scale operations in Northern California, delays or unforeseen difficulties in connection with the cultivation and harvest of Halo's raw material, changes in general economic, business and political conditions, including changes in the financial markets; and the other risks disclosed in the Company's annual information form dated March 31, 2022 and other disclosure documents available on the Company's profile at www.sedar.com. Should one or more of these risks, uncertainties or other factors materialize, or should assumptions underlying the forward-looking information or statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected.
The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and Halo does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws. All subsequent written and oral forward-looking information and statements attributable to Halo or persons acting on its behalf is expressly qualified in its entirety by this notice.
Third Party Information
This press release includes market and industry data that has been obtained from third party sources, including industry publications. The Company believes that the industry data is accurate and that its estimates and assumptions are reasonable, but there is no assurance as to the accuracy or completeness of this data. Third party sources generally state that the information contained therein has been obtained from sources believed to be reliable, but there is no assurance as to the accuracy or completeness of included information. Although the data is believed to be reliable, the Company has not independently verified any of the data from third party sources referred to in this press release or ascertained the underlying economic assumptions relied upon by such sources
Non-Solicitation
This press release shall not constitute an offer to sell or the solicitation of an offer to buy any of the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
SOURCE Halo Collective Inc.
Halo Collective Inc., Investor Relations, [email protected], www.haloco.com/investors
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