Harvest One Cannabis Inc has reported a continued improvement in second-quarter adjusted underlying earnings (EBITDA) due to margin improvements and reductions in a number of expenses and overheads at its LivRelief and Dream Water brands.
The cannabis company delivered an adjusted EBITDA loss from continuing operations of $950,000 for the three months ending December 31, 2021, compared to a loss of $1.27 million in fiscal 2Q 2021, representing a 25% quarter-over-quarter improvement.
“Our strategic transition to a global leading health and wellness company that is uniquely positioned in the cannabis space has been beneficial,” Harvest One president and CEO Gord Davey said in a statement.
READ: Harvest One launches another LivRelief Infused product 'milestone' as it continues to expand portfolio of infused licensed products
The company reported total net revenue from continued operations of $1.74 million for the quarter, approximately a 10% decrease from the $1.93 million reported in the same period a year earlier. It attributed the decrease to lower sales of Dream Water in the US and lower LivRelief sales in Canada as a result of supply chain disruptions and labour shortages stemming from the Omicron wave of the coronavirus (COVID-19) pandemic.
“Our structure and commitment to financial growth is evident in our results, notwithstanding and similar to other companies in our sector, our top-line revenue being affected by the COVID-19 pandemic and the Omicron variant due to delays in product deliveries to customers and receipt of supply chain materials for production of Dream Water products,” Davey explained.
"These sales orders are not lost, but only deferred to our next quarters, as we have sustained our operations through these challenging times,” he added.
Harvest One reported 2Q gross profit of $640,000 and a gross profit margin of 37% from continued operations, compared to $1 million or 52% in 2Q 2021, which it attributed to the reduction in net sales, an inventory write-down of $160,000 and the reversal of a write-down of $280,000 in 2Q 2021. Excluding the inventory write-down and reversal, it said gross profit would have reached $800,000, while the comparative year-earlier period would reduce to $710,000.
Expenses from continuing operations for the quarter declined by 12% to $1.75 million, driven by management's actions to reduce costs and overheads to improve profitability, it added.
The company said it expects sales volumes, net revenues, and adjusted EBITDA to improve throughout fiscal 3Q 2022 due to continued infused topical sales, expanded distribution coverage, product launch initiatives, branding initiatives, improvements in gross profit, and a continued focus on reducing overhead costs.
Its continued entry into the US market, the normalization of the supply chain, and a reduction in pricing pressures through market rationalization are also expected to support its performance.
“We are pleased to see the positive results of our strategic repositioning and are equally excited with our prospects moving forward,” Davey concluded.
Harvest One owns and operates two subsidiaries which are Dream Water, which offers consumer sleep aids and LivRelief, which offers a range of CBD skin creams.
Contact the author at stephen.gunnion@proactiveinvestors.com