Aleafia Health Inc. reported its audited financial results for the three and twelve months ended March 31, 2023 (“FY2023”). During the fourth quarter of the 2023 fiscal year, ending March 31, 2023, there was a total revenue increase of 9% to $11.7 million from $10.7 in the quarter ending March 31, 2022 while net revenue in Q4 FY2023 increased by 33%, to $9.4 million from $7.0 million in the comparable quarter last year.
Canadian Adult-Use Performance
In the 12 months ended March 31, 2023, adult-use revenue increased 24% to $36.0 million, as compared to $29.1 million in the 12 months ended March 31, 2022. And adult-use net revenue increased 13% to $22.4 million, as compared to $19.8 million in the 12 months ended March 31, 2022. This performance was anchored around Divvy, the everyday brand, and complemented by product launches under the Company’s Sunday Market House of Brands. The Company reached a peak #12 market share ranking in its core markets in Q1 FY2023.4 Within the 2023 fiscal year the Company’s pre-rolls, operating in the fastest growing market segment, peaked at #2 in Ontario market share rankings, while milled flower products gained a #4 Ontario market share ranking.5 Divvy’s new rotating SKU, Divvy Buyer’s Club, entered the Alberta and Ontario markets, capturing a #7 flower SKU ranking in Ontario’s flow-through sales model in Q4 FY 2023.6 Based on Divvy’s strong acceptance in Ontario, the Company anticipates many opportunities for expanding Divvy’s brand portfolio, along with strategic growth in new adult-use markets.
In the three months ended March 31, 2023, adult-use net revenue of $3.7 million represented a decline of 32% as compared to the three months ended March 31, 2022, primarily due to overall seasonality in the marketplace, the Company’s liquidity constraints, challenges in making timely payments to high priority vendors, and the Company’s product mix, focused on pre-rolls, which tend to experience higher sales velocity in the spring and summer seasons.
Continued Strong Canadian Medical Performance
Aleafia’s Q4 FY2023 medical results were strong, showing 19% net revenue growth to $3.0 million from $2.5 million in the period ended March 31, 2022. The medical market continues to show steady improvements for the Company, by consistently driving growth in new high value patient groups and entering new geographic regions. Growth in the product portfolio and outreach for patient groups offset medical industry tailwinds as the Company experienced 7% growth year-over-year in net revenue to $12.1 million in the year ended March 31, 2023 compared with $11.3 million in the 12 month period ended March 31, 2022.
International Market Growth
Aleafia posted another quarter of international sales with $0.4 million in Q4 FY2023 net revenue, contributing to a total of $2.1 million in the year ended March 31, 2023, representing 318% growth over $0.5 million in the 12 months ended March 31, 2022. In international markets, Aleafia continues to build a pipeline of opportunities in medical cannabis regions that have the potential to legalize recreational use in the near-term. International net revenue diversifies sales mix, enhances margins, and unlocks new, growing sales channels.
Other Fiscal Year 2023 Highlights included:
- To facilitate growth of sales in international markets, agreed to a total of an estimated $5.6 million7 in sales commitments with two European partnerships
- Aleafia’s whole flower product is selling through at European based pharmacies
- Completed 20% indoor grow expansion at the Company’s Paris, Ontario cultivation and processing facility
- Entered a partnership with RWB to serve as the manufacturing and distribution partner for Platinum Vapes’ first international brand expansion.
- Executed a Binding Letter Agreement with RWB to enter into a proposed transaction, whereby the combined company would generate $138 million in net revenue8
“The Aleafia team is thrilled about the proposed business transaction with RWB,” Symmes said. “The Canadian cannabis market is a rapidly changing industry, and we believe we will be well positioned with our new partner RWB to capitalize on value-added synergies. RWB has award-winning brands and IP and with Aleafia’s Divvy brand and proven cultivation, manufacturing, and distribution capabilities, we expect to create one of the most dynamic cross border companies in the industry.”
“This last fiscal year was a year of focused execution to drive profitable top-line growth, expand our margin profile by tightening up our supply chain, and cost rationalization to right size our fixed cost profile to fit our size and scale,” said Aleafia CFO, Matt Sale. “We are very proud to have achieved this while continuing to allocate capital expenditures prudently and achieving Adjusted EBITDA profitability for three consecutive quarters. The improved financial flexibility and capacity of the Combined Company will enhance the ability to execute on organic and acquisitive growth strategies.”
Adjusted EBITDA Profitability
For the year ended March 31, 2023, the Company generated a loss of $0.2 million Adjusted EBITDA, representing a $18.7 million improvement over 12 months ended March 31, 2022. This increase was primarily driven by the Company’s strategic shift to a branded product portfolio anchored in the adult-use, medical and international sales channels; gross profit margin before fair value margin expansion; and aggressive cost containment and rationalization across all the Company’s facilities, operations and functions.
- Branded cannabis net revenue9 increased 16% to $36.6 million in the twelve months ended March 31, 2023, as compared to $31.6 million in the 12 months ended March 31, 2022;
- Gross profit before fair value adjustments10 expanded to $14.2 million in the 12 months ended March 31, 2023, as compared to $4.3 million in the 12 months ended March 31, 2022; this represented an increase in gross profit before fair value adjustments margin from 12% to 33%; and
- 46% decline in Adjusted SG&A11 to $17.6 million for FY2023 versus $32.3 million in the 12 months ended March 31, 2022.
In the three months ended March 31, 2023, the Company generated Adjusted EBITDA of $0.2 million, representing the third consecutive quarter of Adjusted EBITDA profitability, as compared to an Adjusted EBITDA loss of -$4.4 million in the three months ended March 31, 2022. The profitability in Q4 FY2023 was primarily due to the $1.3 million bulk wholesale12 gross profit before fair value adjustments which represents two bulk wholesale customers. These input materials exceeded the Company’s near-term supply requirements for its own branded cannabis products and accordingly had previously taken a $1.1 million inventory provision.
About Aleafia Health
The Company is a federally licensed Canadian cannabis company offering cannabis products in Canada and destined for international markets, including Australia and Germany. The Company operates a virtual medical cannabis clinic staffed by physicians and nurse practitioners which provide health and wellness services across Canada. The Company operates three licensed cannabis production facilities all in the province of Ontario, including the largest, outdoor cannabis cultivation facility in Canada. The Company produces a diverse portfolio of cannabis and cannabis derivative products including pre-roll, milled, dried flower, vapes, oils, capsules, edibles, sublingual strips, and topicals, for sale in Canada in the medical and adult-use markets, and in select international jurisdictions.
