Harvest Health & Recreation, Inc. (CSE: HARV, OTCQX: HRVSF), a vertically-integrated and highly diversified cannabis company with strong financial and growth profiles, today reported the company’s fourth quarter fiscal year 2018 financial results. Harvest has continued to be successful in winning licenses in non-competitive and competitive application processes throughout the country and has made a number of significant strategic acquisitions and mergers. Harvest’s ability to combine size, scale, capital, regulatory expertise and operational excellence are paramount to its success.
Management Commentary
“2018 continued to set records for Harvest’s growth and momentum across the United States,” said Chief Executive Officer Steve White. “Three key initiatives dictated our decisions throughout the year and will continue to be our focus in 2019: aggressively expanding our retail and wholesale footprint across the U.S., building, acquiring and expanding our suite of brands across our footprint and continuing to operate in a financially disciplined way, while also fueling the revenue growth of the company.”
Financial Highlights for the Fourth Quarter Ended December 31, 2018
Financial Highlights for the 12 Months Ended December 31, 2018
Year End Highlights
Capital Markets, Financing Activities and Growth Strategy
Acquisition Activity
Retail Footprint Expansion
Balance Sheet and Liquidity
Please see the supplemental information (unaudited) regarding Non-IFRS Financial Measures at the end of this press release.
Conference Call and Webcast
Harvest Health and Recreation, Inc. will host a conference call and audio webcast with Executive Chairman Jason Vedadi, Chief Executive Officer Steve White, President Steve Gutterman, and Chief Financial Officer Leo Jaschke, Tuesday April 23rd at 8:00am ET.
To participate in the conference call, please dial:
US toll free |
+1-866-777-2509 |
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Canada toll free |
+1-866-605-3852 |
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UK toll free |
+44-080-823-89064 |
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International dial in |
+1-412-317-5413 |
Registration is required; please dial in at least ten minutes prior to the scheduled start time.
Webcast: |
The conference call will be available for replay for 3 months at:
https://services.choruscall.com/links/harv190423.html
HARVEST HEALTH & RECREATION INC. |
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Consolidated Statements of Operations |
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For the Three and Twelve Months Ended December 31, 2018 and 2017 |
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(Amounts expressed in thousands of United States dollars) |
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Unaudited |
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Three Months Ended | Twelve Months Ended | ||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||
Revenue | $ | 16,943 | $ | 7,210 | $ | 46,955 | $ | 22,825 | |||||||||||
Cost of Goods Sold | (9,760 | ) | (5,586 | ) | (22,402 | ) | (12,360 | ) | |||||||||||
Gross Profit Before Biological Asset Adjustments | 7,183 | 1,624 | 24,553 | 10,465 | |||||||||||||||
Unrealized Gain on Changes in Fair Value of Biological Asset | 267 | 2,674 | 5,958 | 3,559 | |||||||||||||||
Cost of Goods Sold on Biological Asset Transformation | - | - | (3,559 | ) | (111 | ) | |||||||||||||
Gross Profit | 7,450 | 4,298 | 26,952 | 13,913 | |||||||||||||||
Expenses | |||||||||||||||||||
General and Administrative | 22,900 | 1,780 | 35,658 | 7,227 | |||||||||||||||
Sales and Marketing | 557 | 272 | 1,079 | 683 | |||||||||||||||
Share-based compensation expense | 1,545 | - | 1,545 | - | |||||||||||||||
Depreciation and Amortization | 466 | 623 | 1,544 | 850 | |||||||||||||||
Total Expenses | 25,468 | 2,675 | 39,826 | 8,760 | |||||||||||||||
Operating (loss) Income | (18,018 | ) | 1,623 | (12,874 | ) | 5,153 | |||||||||||||
Other Income (Expenses) | |||||||||||||||||||
Gain/(loss) on sale of assets | (995 | ) | 1,423 | 566 | 1,423 | ||||||||||||||
Other income/(loss) | (50,716 | ) | - | (50,716 | ) | - | |||||||||||||
Foreign currency gain/(loss) | 512 | - | 512 | - | |||||||||||||||
Interest income/(expense) | (885 | ) | (275 | ) | (1,677 | ) | (371 | ) | |||||||||||
(Loss) income Before Taxes and Non-Controlling Interest | (70,102 | ) | 2,771 | (64,189 | ) | 6,205 | |||||||||||||
Income Taxes | (1,423 | ) | (444 | ) | (3,877 | ) | (2,090 | ) | |||||||||||
(Loss) Income Before Non-Controlling Interest | (71,525 | ) | 2,327 | (68,066 | ) | 4,115 | |||||||||||||
Loss (income) Attributed to Non-Controlling Interest | 437 | (1,059 | ) | 601 | (524 | ) | |||||||||||||
Net Income (Loss) Attributed to Harvest Health and Recreation Inc. | $ | (71,088 | ) | $ | 1,268 | $ | (67,465 | ) | $ | 3,591 | |||||||||
HARVEST HEALTH & RECREATION INC. |
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Consolidated Statements of Financial Position |
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December 31, 2018 and 2017 |
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(Amounts expressed in thousands of United States dollars) |
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Unaudited |
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December 31, |
December 31, |
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ASSETS | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 191,883 | $ | 1,099 | |||||
Restricted cash | 8,000 | - | |||||||
Accounts receivable | 2,993 | 497 | |||||||
Notes receivable, current portion | 13,600 | - | |||||||
Biological assets | 6,788 | 4,442 | |||||||
Inventory | 23,177 | 1,341 | |||||||
Other current assets | 1,810 | 313 | |||||||
Total current assets | 248,251 | 7,692 | |||||||
Notes receivable, net of current portion | 3,076 | - | |||||||
Property, plant and equipment, net | 31,855 | 21,397 | |||||||
Intangibles assets, net | 112,830 | 30,870 | |||||||
Corporate investments | 5,000 | - | |||||||
Acquisition deposits | 1,350 | - | |||||||
Goodwill | 69,407 | 4,676 | |||||||
Other assets | 6,831 | 430 | |||||||
TOTAL ASSETS | $ | 478,600 | $ | 65,065 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
LIABILITIES | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 4,694 | $ | 1,345 | |||||
Other current liabilities | 6,715 | 499 | |||||||
Contingent consideration, current portion | 11,520 | - | |||||||
Income tax payable | 4,120 | 3,796 | |||||||
Notes payable, current portion | 11,806 | 2,910 | |||||||
Total current liabilities | 38,855 | 8,550 | |||||||
Notes payable, net of current portion | 19,098 | 13,795 | |||||||
Deferred tax liability | 18,173 | 552 | |||||||
Contingent consideration, net of current portion | 18,190 | - | |||||||
Other long-term liabilities | 4,486 | 1,196 | |||||||
TOTAL LIABILITIES | 98,802 | 24,093 | |||||||
Capital stock | 435,495 | 34,253 | |||||||
Accumulated (deficit) earnings | (61,269 | ) | 6,195 | ||||||
STOCKHOLDERS' EQUITY | 374,226 | 40,448 | |||||||
NON-CONTROLLING INTEREST | 5,572 | 524 | |||||||
TOTAL STOCKHOLDERS' EQUITY | 379,798 | 40,972 | |||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 478,600 | $ | 65,065 | |||||
Non-IFRS Financial and Performance Measures
The Company provides additional financial metrics that are not prepared in accordance with IFRS. Management uses non-IFRS financial measures, in addition to IFRS financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes and to evaluate the Company’s financial performance. This non-IFRS financial measure is Adjusted EBITDA.
Management believes that these non-IFRS financial measures reflect the Company’s ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business, as they facilitate comparing financial results across accounting periods and to those of peer companies. Management also believes that these non-IFRS financial measures enable investors to evaluate the Company’s operating results and future prospects in the same manner as management. These non-IFRS financial measures may also exclude expenses and gains that may be unusual in nature, infrequent or not reflective of the Company’s ongoing operating results.
As there are no standardized methods of calculating these non-IFRS measures, the Company’s methods may differ from those used by others, and accordingly, the use of these measures may not be directly comparable to similarly titled measures used by others. Accordingly, these non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
Reconciliations of Non-IFRS Financial and Performance Measures
The table below reconciles Net (Loss) Income to Adjusted EBITDA for the periods indicated.
Three Months Ended | Twelve Months Ended | ||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||
Net (loss) income (IFRS) before minority interest | $ | (71,525 | ) | $ | 2,327 | $ | (68,066 | ) | $ | 4,115 | |||||||||
Add (deduct) impact of: | |||||||||||||||||||
Net interest and other financing costs | 885 | 275 | 1,677 | 371 | |||||||||||||||
Income tax | 1,423 | 444 | 3,877 | 2,090 | |||||||||||||||
Amortization and depreciation | 466 | 623 | 1,544 | 850 | |||||||||||||||
(Gain)/Loss On Assets | 995 | (1,423 | ) | (566 | ) | (1,423 | ) | ||||||||||||
Fair Value Adjustment of Liability | 50,716 | - | 50,716 | - | |||||||||||||||
Foreign Currency Gain | (512 | ) | - | (512 | ) | - | |||||||||||||
Share-Based Compensation Expense | 1,545 | - | 1,545 | - | |||||||||||||||
Other Expansion Expenses (Pre-Opening) | 5,876 | - | 5,876 | - | |||||||||||||||
Transaction & Other Special Charges | 12,760 | - | 14,174 | - | |||||||||||||||
Adjusted EBITDA (non-IFRS) | $ | 2,629 | $ | 2,246 | $ | 10,265 | $ | 6,003 | |||||||||||
About Harvest Health and Recreation
Harvest Health & Recreation Inc. is one of the first consistently profitable, vertically integrated cannabis companies with one of the largest footprints in the U.S. Harvest’s complete vertical solution includes industry-leading cultivation, manufacturing, and retail facilities, construction, real estate, technology, operational, and brand building expertise — leveraging in-house legal, HR and marketing teams, along with proven experts in writing and winning state-based applications. The company has more than 750 employees with proven experience, expertise and knowledge of in-house best practices that are drawn upon whenever Harvest enters new markets. Harvest’s executive team is comprised of leaders in finance, compliance, real estate and operations. Since its founding in 2011, Harvest has grown its footprint every year, has been ranked as the third largest cultivator in the U.S. and, subject to completion of announced acquisitions, will have rights to operate up to 200 facilities, of which 123 are retail locations, across the U.S. Harvest shares timely updates and releases as part of its regular course of business with the media and the interested public. For more information, visit: https://www.harvestinc.com/.
Forward-Looking Information
Certain statements in this press release are forward-looking statements and are prospective in nature. Forward-looking statements are not based on historical facts, but rather on current expectations and projections about future events, many of which, by their nature, are inherently uncertain and outside of the Company's control and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements.
These statements generally can be identified by the use of forward-looking words such as "may", "should", "will", "could", "intend", "estimate", "plan", "anticipate", "expect", "believe" or "continue", or the negative thereof or similar variations. Forward-looking statements in this news release include, but are not limited to, information concerning the ability of the Company to successfully achieve business objectives, and expectations for other economic, business, and/or competitive factors. Those assumptions and factors are based on information currently available to the Company. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information and statements are the following: the ability of the Company to develop the Company's brand and meet its growth objectives, the ability of the Company to complete acquisitions that are accretive to the Company's revenue, the ability of the Company to obtain and/or maintain licenses to operate in the jurisdictions in which it operates or in which it expects or plans to operate. 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. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Readers should not place undue reliance on forward-looking statements and forward-looking information. The forward-looking information contained in this release is made as of the date hereof and the Company assumes no obligation to update or revise any forward-looking statements or forward-looking information that are incorporated by reference herein, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.
The foregoing statements expressly qualify any forward-looking information contained herein. All subsequent written and oral forward-looking information and statements attributable to the Company or persons acting on its behalf is expressly qualified in its entirety by this notice.
Additional Information
The financial information reported in this news release is based on unaudited management prepared financial statements for the year ended December 31, 2018. Accordingly, such financial information may be subject to change. The audit process is nearly complete and fully-audited financial statements for the period will be released and filed under the Company’s profiles on SEDAR at www.SEDAR.com by April 30, 2019. All financial information contained in this news release is qualified in its entirety with reference to such audited financial statements. While the Company does not expect there to be any material changes, to the extent that the financial information contained in this news release is inconsistent with the information contained in the Company’s audited financial statements, the financial information contained in this news release shall be deemed to be modified or superseded by the Company’s audited financial statements. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation for purposes of applicable securities laws.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190423005536/en/
Alex Howe, Head of Corporate Communications
(202) 271-7997
[email protected]