Heritage Cannabis Holdings Corp (CSE:CANN) (OTCQX:HERTF) has posted fiscal second-quarter results that delivered strong profits and revenue growth fired by the growing popularity of the company’s portfolio of six brands.
For the quarter ended April 30, 2021, the Toronto-based cannabis products company reported revenue that was up 251% to $4.6 million, compared to $1.8 million in the fiscal first quarter of 2021. The firm also saw its fiscal 2Q revenue jump by 338% year-over-year.
The company said the revenue expansion had been propelled by Heritage’s enlarged product portfolio which now includes concentrates, vapes, topicals, edibles and dried flower. “Provincial re-order rates and market penetration continue to see positive trends,” it noted.
Meanwhile, Heritage's gross profit increased to a record $1.5 million, with gross margins improving to 32% from 28% in the first quarter of 2021. The company said selling, general and administrative expense (SG&A) as a percentage of revenue dropped to 66% in the quarter, compared to 142% in the first quarter of 2021.
Heritage has a strong balance sheet with net working capital of $25.3 million and cash increasing to $11 million as of April 30, 2021, bolstered by a successful equity offering which closed during the quarter.
“We are excited about the results generated this quarter and the prospects for the company moving forward,” said Heritage Cannabis CEO Clint Sharples in the results statement. “We have transitioned away from strictly providing contract manufacturing services to a company with a portfolio of six internal brands in Canada and an e-commerce medical site in the US. The results in the current quarter are displaying the progression of this shift which began less than one year ago, and we continue to build through the third quarter of this fiscal year.”
In April, Heritage announced plans to enter the US cannabis market through an expanded relationship with Merida Capital Holdings. Later in May this year, Heritage announced the launch of its premium ArthroCBD softgel capsules in the US market to help people seeking “symptomatic relief.”
“While we experience accelerated product distribution across the country, we still have underserved markets to expand and have yet to launch into the multibillion-dollar US recreational market in a meaningful way,” added Sharples.
Heritage also struck a five-year partnership in the period with Como Health LLC, doing business as 3Fifteen Primo Cannabis, which will see Heritage produce branded products for medical cannabis consumers in the US state of Missouri.
Sharples noted that from a financial perspective, the firm extended its debt repayment window to late 2022 and improved its working capital position. “With continued strong sales growth along with managing costs, we will ensure we remain in a solid financial position to fund growth and increase shareholder value,” he added.
“Although this is the first quarter that Premium 5 has been under the Heritage banner, we are extremely happy with the performance of the organization,” said David Schwede, president of Heritage's Recreational division.
New provincial markets
In a separate statement, Heritage also revealed that it continues to expand into new provincial markets with an initial order from the Newfoundland and Labrador Liquor Corporation (NLC), the local recreational cannabis retailer, to sell its brands Purefarma, Pura Vida, RAD, Premium 5 and feelgood.
“With this order, Heritage will see all five of its popular recreational brands available in Newfoundland and Labrador, comprised of 27 individual SKUs,” said the company.
Starting in July, customers in Newfoundland and Labrador will initially be able to purchase Heritage products in Tweed locations across the province.
“We have seen Heritage brands performing well in the concentrates category in every province we enter, it is no surprise we are seeing strong orders, not only from the NLC, but across the country,” said Schwede. “We are very pleased to be entering the Newfoundland and Labrador market with the NLC’s order and initial availability in Tweed stores.”
Heritage is a seed-to-sale, vertically integrated cannabis business with five operating subsidiaries. Based in Toronto, the company currently has two Health Canada approved licenced producers, through its subsidiaries Voyage Cannabis and CannaCure Corp.
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