Heritage Cannabis Holdings Corp. (CSE:CANN, OTCQX:HERTF) posted fiscal third-quarter results that saw gross revenue soar 114% year-over-year on the back of the successful expansion of its product portfolio and distribution across Canada.
For the period ended July 31, 2021, the Toronto-based cannabis company reported gross revenue of CA5.1 million, compared to CA$2.4 million in the fiscal third quarter of 2020.
The company reported a gross profit in 3Q 2021 of CA$1.2 million, with gross margins improving 217% from -CA$1.1 million in the same period a year earlier.
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Selling, general and administrative expenses as a percentage of revenue increased to 93% in the 3Q, compared to 55% in the 3Q of 2020. “The increase was attributed to a number of one-time costs related to product launches as well as repositioning pricing on products in highly competitive categories,” said the company.
Heritage has a strong balance sheet with net working capital of CA$21.5 million, and cash and equivalents of CA$4.6 million as of July 31, 2021.
For the nine-month period ended July 31, 2021, Heritage saw gross revenue hit CA$11,544,016 bolstered by a strong fiscal 3Q.
"Given the headwinds that many are facing in the industry, Heritage successfully expanded its product portfolio and distribution across Canada quarter-over-quarter which culminated with a second straight record quarter for gross revenues," Heritage Cannabis CEO David Schwede said in a statement.
"While the impact of the forest fires on the West Coast forced us to curtail production and shipments, our team worked extremely hard to produce a record top-line quarter. Also, we made a strategic decision in the quarter to invest in our platform - a combination of one-time product innovation costs and increasing our bench strength - to ensure we are positioned to sustain continued growth in the coming quarters. Our strategy shift, in less than one year, has been dramatic and successful.”
Schwede noted that the company now has seven brands in Canada that are “gaining strong followings” in both retail and online sales channels.
“Our expanded US strategy is continuing to advance with our partnerships in the near-term coupled with our US e-commerce launch for ArthroCBD,” added Schwede. “While we are continuing to make changes to strengthen the platform, we are very confident that the combination of our popular brands and product innovation expertise has formed the foundation for a platform that will continue to compete and capture more market share."
Along with recurring orders from provincial boards and online retailers, Heritage continued to grow its distribution capabilities across Canada, adding new SKUs in Ontario and both western and eastern Canada. The company said it also launched five brands on cannmart.ca and 61 SKUs on mendocannabis.ca, a medical platform in Quebec.
It entered the flower market with the successful shipments of its first orders of RAD Reefer (flower) and RAD Doobie (pre-rolls) to the province of British Columbia. Heritage said it expects to introduce both products to additional provinces in late 2021. This is the largest category in Canadian legal sales, representing 64% of total sales in the latest data from Health Canada.
The firm’s RAD Shatter products were the fastest-growing products in Ontario in the concentrates category. Additionally, in the oils category Heritage saw 40% growth in month-over-month sales, and vape sales grew 164% month-over-month.
Heritage is a top cannabis company offering products to both the medical and recreational legal cannabis markets in Canada and the US. It has an extensive portfolio of cannabis products under the brands Purefarma, Pura Vida, RAD, Premium 5, feelgood., CB4 and ArthroCBD.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
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