Entourage Health Corp.
(
TSX-V:ENTG) (
OTCQX:ETRGF)
(
FSE:4WE) (“
Entourage” or the
“
Company”), a Canadian producer and distributor of
award-winning cannabis products, announced today its financial
results for the three and six months ended June 30, 2022. The
Company reported second quarter 2022 total revenue of $13.2 million
and net revenue of $9.7 million, a slight total revenue decrease of
5.0% and net revenue decrease of 9.0% year over year from Q2 2021.
The Company will host a conference call to discuss its financial
and business highlights for the period on August 30, 2022 at 10
a.m. Eastern Time.
“Over the second quarter we noted steady 12%
retail sales growth(1) over prior year, consistent with growing
demand as we launched new premium cultivar Space Cake, as well as
increased pre-roll sales which attributed to Entourage garnering
6.0% and about 5.0% of the respective market share in the
premium(1) and pre-rolls(2) segments, even as we contended with a
temporary product shortfall of some of our prized cultivars,” said
George Scorsis, CEO and Executive Chair, Entourage. “In the
quarter, we undertook key upgrades to our greenhouse facility to
bring more premium products to market over the coming months. We
also made significant strides to improve our capital structure,
debt and liquidity position during the period. Additionally, with
the recent $8.9 million in additional funding capacity from a LiUNA
Pension Fund affiliate, we settled the repayment of our unsecured
convertible debentures and obtained extensions to our secured
credit facilities’ maturity dates for increased financial
flexibility.”
Summary of
Results
For the Quarter-Ended |
June 30, 2022 |
|
June 30, 2021 |
|
|
($000’s) |
|
($000’s) |
|
Total revenue |
13,185 |
|
13,812 |
|
Net revenue (less Excise
Tax) |
9,691 |
|
10,604 |
|
Gross margin % before changes
in fair value |
5% |
|
29.4% |
|
Loss and comprehensive
loss |
(9,027 |
) |
(9,951 |
) |
Adjusted EBITDA* |
(2,419 |
) |
(3,296 |
) |
|
|
|
As at |
June 30, 2022 |
|
Dec. 31, 2021 |
|
|
($000’s) |
|
($000’s) |
|
Cash and cash equivalents |
14,154 |
|
21,416 |
|
Inventory & Biological
assets |
28,853 |
|
30,248 |
|
Working
Capital |
38,355 |
|
(54,967 |
) |
*Adjusted EBITDA is not a recognized measurement
under International Financial Reporting Standards (“IFRS”) and this
data may not be comparable to data presented by other companies.
Management defines Adjusted EBITDA as EBITDA adjusted to exclude
interest, tax, and depreciation, stock compensation, fair value
changes and other non-cash items, and non-recurring items. This
data is furnished to provide additional information and does not
have any standardized meaning prescribed by IFRS. The Company uses
this non-IFRS measure to provide shareholders and others with
supplemental measures of its operating performance. The Company
also believes that securities analysts, investors and other
interested parties, frequently use this non-IFRS measure in the
evaluation of companies, many of which present similar metrics when
reporting their results. As other companies may calculate Adjusted
EBITDA differently than the Company, this metric 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. See the Company’s management’s discussion and
analysis for the three and six months ended June 30, 2022 (the “Q2
2022 MD&A”) for a detailed reconciliation of Adjusted EBITDA to
Net Income / (Loss). The Company’s financial statements for the
three and six months ended June 30, 2022 and the Q2 2022 MD&A
are available on SEDAR at www.sedar.com
“In Q2, we noted a 24% increase in sales revenue
of our higher-margin medical products over the previous year, due
in part to our customer-patient acquisition initiatives and digital
marketing efforts - all while continuing to focus on operational
improvements to reduce our long-term costs,” said Vaani Maharaj,
CFO, Entourage. “While our cultivation underwent a recalibration
and remediation in the quarter as we upgraded our operations while
transitioning into premium flower offerings, we fully expect to
realize the full benefits of our transformation and continuous
improvement initiatives as we implement further drivers to ensure
disciplined cash and inventory management.”
Revenue Highlights
|
Q2 2022 |
|
Q1 2022 |
|
Q2 2021 |
|
Change YOY |
|
($000’s) |
|
($000’s) |
|
($000’s) |
|
% |
Net Revenue by
Channel |
|
|
|
|
|
|
|
Medical |
4,339 |
|
6,223 |
|
3,495 |
|
24% |
Adult-Use |
5,352 |
|
5,982 |
|
6,922 |
|
(23%) |
Bulk |
-- |
|
218 |
|
187 |
|
(100%) |
Total Net Revenue |
9,691 |
|
12,424 |
|
10,604 |
|
(9)% |
Second Quarter 2022 Financial
Highlights
- For the quarter ended June 30,
2022, Entourage recorded total revenue of $13.2 million, and net
revenue of $9.7 million compared to $13.8 million and $10.6 million
for the quarter ended June 30, 2021, a 5.0% and 9.0% year-over-year
decline. The decrease was driven by a decline in adult use net
revenue, mainly due to the temporary unavailability of the
company’s proprietary cultivars which reduced the case fill rate
for adult use products, slightly offset by growth in medical
revenue of $0.8 million or 24% over prior year.
- Gross profit (loss) before changes
in fair value decreased by $2.6 million, or -85% in Q2 2022, over
Q2, 2021 and gross margin before changes in fair value of 5.0% in
Q2 2022 compared to 22% for Q1 2022 and 29.4% in Q2 2021. The
decrease over the prior periods was a result of higher costs to
produce while cultivation remediation and operational upgrades were
finalized in the period.
- The weighted average cost per gram
from clone to harvest of plants on hand was $0.56 in Q2 2022
compared to $0.52 in Q1 2022 and $0.46 in Q2 2021. Weighted average
cost per gram of inventory on hand increased to $0.79 in Q2 2022
compared to $0.51 in Q1, 2022, and $0.50 in Q2, 2021 mainly due to
increased cost of operations while cultivation remediation and
operational upgrades were finalized in the period.
- Selling, General &
Administrative expenses for Q2 2022 was $7.8 million, compared to
$6.7 million in Q1 2022 and $10.4 million in Q2 2021. The decrease
over prior year was partly driven by decreased consulting fees,
office & administrative expenses, salaries and benefits,
research and development and partially offset by increase in
selling marketing and promotional expenses and professional
fees.
- Adjusted EBITDA
increased by 27% to ($2.4) million in Q2 2022, compared with ($3.3
million) in Q2 2021, an improvement of $876,139, also primarily
driven by strategic transformation initiatives mainly due to
reduction in expenses due to operational efficiencies.
Corporate Highlights During and Subsequent to Second
Quarter 2022
- The Company announced the following
appointments: Vaani Maharaj as CFO in April 2022; and Vincent Doré
to Chief Legal Officer and Corporate Secretary in August 2022.
- In April 2022, Entourage announced
the further upsizing of its existing credit facility with an
affiliate of LiUNA Pension Fund of Central and Eastern Canada with
an additional $15 million in funding availability and further
upsized with an additional $8.9 million in June, 2022. This
non-dilutive funding will be used for general working purposes to
drive further commercial growth, and for repayment of the Company’s
unsecured convertible debentures which matured on June 30,
2022.
- In May 2022, Entourage announced it
had entered into an agreement with Pineapple Express – a wholly
owned subsidiary of Fire & Flower Holdings Corp. – to launch
same-day/next-day medical cannabis delivery services to the
Company’s Starseed Medicinal patients.
- Also in May 2022, the Company
entered into voting support agreements with certain holders of its
8.5% unsecured convertible debentures, and following
debentureholders’ approval in June 2022, announced the subsequent
implementation of the proposed amendments.
- Later in May, Entourage announced
the Canadian debut of The Boston Beer Company’s (BBC) new
cannabis-infused iced tea beverages ‘TeaPot’. Entourage is the
exclusive distributor of TeaPot to local retailers in Canada.
Launched in select provinces as of July 2022, TeaPot is the first
non-alcoholic, infused beverage crafted in partnership with Boston
Beer’s cannabis subsidiary BBCCC Inc., and Peak Processing, its
bottling partner.
- At its annual general and special
meeting of shareholders held in June 2022, shareholders
overwhelmingly approved all proposed resolutions and director
nominees including: George Scorsis, Gail Paech, Lu Cacioppo, Bruce
Croxon and Jason Alexander with a combined 99.18% approval
rating.
- In June 2022, the Company announced
amendments to its senior secured and second secured credit
facilities’ maturity dates, extending the terms respectively to
June 30, 2024 and December 31, 2024.
- In July 2022, Entourage announced
debentureholders approved certain amendments to the outstanding
9.0% unsecured convertible debentures of the Company’s subsidiary
CannTx Life Sciences Inc.
- Later in July, Entourage announced
the expansion of its medical offerings with the launch of new
services, signing with HelloMD, a telehealth network to support
high volume of patient consultations. The Company also debuted its
customized, first-of-its-kind digital Patient Treatment Plan for
registered patients looking for tailored products along with dosing
guidelines.
- In August 2022, Entourage announced
it entered into an exclusive licensing agreement with U.S.-based
Irwin Naturals, a renowned nutraceuticals and herbal supplement
formulator. Under the agreement, Entourage will produce and
distribute Irwin Naturals Cannabis products in Canada. The first
line of products are expected to be available to Starseed Medicinal
patients in Q4 2022 with eventual expansion into adult-use retail
stores. The strategic partnership follows recent release of
recommendations for easing access to over-the-counter CBD products
in Canadian pharmacies.
Conference Call Details:
A conference call will be hosted by Mr. Scorsis and Ms. Maharaj,
with management available for questions following opening remarks
as follows:
Date: |
Tuesday August 30, 2022 |
Time: |
10 a.m. Eastern Time |
Dial-in Number: |
Canada/USA: 1-800-319-4610. International Toll:
1-604-638-5340Participants, please dial in and ask to join the
Entourage call |
Replay Dial-in: |
Canada/USA: 1-800-319-6413. International Toll:
1-604-638-9010Replay Access Code: 9333Available after 12:00 p.m.
Eastern Time, until September 30, 2022 |
Visit Entourage’s website here to access the
latest Company updates.
About Entourage Health
Corp.
Entourage Health Corp. is the publicly traded
parent Company of Entourage Brands Corp. (formerly WeedMD RX Inc.)
and CannTx Life Sciences Inc., licence holders producing and
distributing cannabis products for both the medical and adult-use
markets. The Company owns and operates a state-of-the-art hybrid
greenhouse and processing facility located on 158-acres in
Strathroy, ON; a fully licensed 26,000 sq. ft. Aylmer, ON
processing facility, specializing in cannabis extraction; and a
micropropagation, tissue culture and genetics centre-of-excellence
in Guelph, Ontario. With its Starseed Medicinal medical-centric
brand, Entourage has expanded its multi-channeled distribution
strategy. Starseed’s industry-first, exclusive partnership with
LiUNA, the largest construction union in Canada, along with
employers and union groups complements Entourage’s direct sales to
medical patients. Entourage’s elite adult-use product portfolio
includes Color Cannabis, Saturday Cannabis and Royal City Cannabis
Co.– sold across eight provincial distribution agencies. The
Company also maintains strategic relationships in the seniors’
market and supply agreements with Shoppers Drug Mart. It is the
exclusive Canadian producer and distributor of award-winning
U.S.-based wellness brand Mary’s Medicinals sold in both medical
and adult-use channels. Under a collaboration with The Boston Beer
Company subsidiary, Entourage is also the exclusive distributor of
cannabis-infused beverages ‘TeaPot’ in Canada, which launched in
summer 2022, starting in select provinces.
For more information, please visit us at
www.entouragehealthcorp.com
Follow Entourage and its brands on LinkedIn
Twitter: Entourage, Color Cannabis, Saturday
Cannabis, Starseed & Royal City Cannabis Co.
Instagram: Entourage, Color Cannabis, Saturday
Cannabis, Starseed & Royal City Cannabis Co.
For further information, investor or
media inquiries, please contact:
Marianella delaBarreraSVP, Communications &
Corporate
Affairs416-897-6644marianella@entouragecorp.com investor@entouragecorp.commedia@entouragecorp.com
(1) Source data: HiFyre Retail Data, three and six
months ending June 30, 2022(2) Source data: Buddi
Retail Data, three and six months ending June 30, 2022
Forward Looking Information
This press release contains "forward-looking information" within
the meaning of applicable Canadian securities legislation which are
based upon Entourage's current internal expectations, estimates,
projections, assumptions and beliefs and views of future events.
Forward-looking information can be identified by the use of
forward-looking terminology such as "expect", "likely", "may",
"will", "should", "intend", "anticipate", "potential", "proposed",
"estimate" and other similar words, including negative and
grammatical variations thereof, or statements that certain events
or conditions "may", "would" or "will" happen, or by discussions of
strategy.
The forward-looking information in this news
release is based upon the expectations, estimates, projections,
assumptions and views of future events which management believes to
be reasonable in the circumstances. Forward-looking information
includes estimates, plans, expectations, opinions, forecasts,
projections, targets, guidance or other statements that are not
statements of fact. Forward-looking information necessarily involve
known and unknown risks, including, without limitation, risks
associated with general economic conditions; adverse industry
events; loss of markets; future legislative and regulatory
developments; inability to access sufficient capital from internal
and external sources, and/or inability to access sufficient capital
on favourable terms; the cannabis industry
in Canada generally; the ability of Entourage to
implement its business strategies; the COVID-19 pandemic;
competition; crop failure; and other risks.
Any forward-looking information speaks only as
of the date on which it is made, and, except as required by law,
Entourage does not undertake any obligation to update or revise any
forward-looking information, whether as a result of new
information, future events or otherwise. New factors emerge from
time to time, and it is not possible for Entourage to predict all
such factors. When considering this forward-looking information,
readers should keep in mind the risk factors and other cautionary
statements in Entourage’s disclosure documents filed with the
applicable Canadian securities regulatory authorities on SEDAR at
www.sedar.com. The risk factors and other factors noted in the
disclosure documents could cause actual events or results to differ
materially from those described in any forward-looking
information.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS
REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE
POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR
THE ADEQUACY OR ACCURACY OF THIS RELEASE
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