Kiaro Holdings Corp. announced its fourth quarter and year-end financial results for fiscal year 2022 ended January 31, 2022. Significantly expanded retail channel, from 7 to 17 stores, and the addition of experienced results-driven leaders to drive new and expanding revenue channels has delivered record results.
“I am exceedingly proud of the performance of the Kiaro team who navigated the challenges of the pandemic, skillfully integrated the Ontario based Hemisphere retail stores and operationalised the new eCommerce channel. FY 2022’s exceptional revenue growth of 58% was driven by all three business units (Retail, Wholesale and eCommerce). Fiscal Year 2023 will again likely see double digit revenue growth following a full 12 months of trading from all three channels.” stated Eleanor Lynch, Interim Chief Executive Officer of Kiaro.
Summary of Fiscal Year 2022 Financial Results
Strong organic growth and acquisitions delivered record revenue of $26.9 million with revenue contributions from Retail of 65%, Wholesale 30% and eCommerce 5%. The Company’s Gross Profit of $7.7 million was year on year growth of 51% up from $5.1 million. The Company reported that Q4 retail revenues were affected by COVID-19 restrictions (primarily in Ontario), three new store openings in Q4, and the one-time acquisition integration costs. As a result, adjusted EBITDA reduced as a percentage of revenue by 1.3%, from –$0.7 million in FY2021 to –$1.5 million in FY2022.
Segment Results & Recent Developments
Retail Operations
Following the Hemisphere acquisition, Kiaro’s retail portfolio transformed from 8 retail stores as of July 2021, to 17 open and operating stores, across 3 provinces as of January 2022. Total retail revenue increased 45% to $17.4 million and due to the operating discipline, same store sales increased 8% over the prior year, which compared favourably to same store growth within key competitors.
Margins held steady at 37% throughout the year and brick and mortar margins are the highest amongst the top publicly traded Canadian cannabis retailers on recent disclosed financial results. The successful management of retail margins reflects Kiaro’s skillful buying strategies that encompass category management, well received consumer engagement, promotional cadence and market pricing research.
Additional marketing initiatives including Reserve Online Pick Up In Store (“ROPIS”), MyKiaro and My Hemisphere membership programs, gift card launch, an overhaul to the Company’s website and social media platforms, and community initiatives have all contributed to the increase in same-store sales year over year while maintaining its gross margin. This integrated marketing program has resulted in 60% of retail transactions from repeat customers.
Recently, Kiaro recruited an experienced sales leader as Director of Retail to continue to drive an exceptional in-store, curated experience, where customer care and service is paramount. This focus on operational excellence across the expanded portfolio of stores will underpin FY23 expected sales growth.
Wholesale Operations
Acquired in March 2019, National Cannabis Distribution (“NCD”) performance has excelled, with wholesale revenue of $8.1 million up 62% over the prior year, and gross profit growth of 73% to $922,772.
NCD’s growth accelerated following the recruitment of a highly experienced General Manager, engaged to propel the business and expand the team. Improved supply of premium products and exceptional customer service has doubled the number of exclusive Licensed Producer agreements. Kiaro’s market reach extends to 70% of licensed retailers and a share in sales volume of only 10%-15% presents a significant growth opportunity to increase penetration with retail partners.
The NCD growth outlook remains strong as vault capacity and the product assortment will be expanded to include higher margin accessories and beverages to service increasing demand for broader categories.
eCommerce
By acquiring the Vaped global eCommerce platform that sells vaporizers and accessories (Vaped.ca, Vaped.com, VaporizersDirect.com.au), Kiaro is well positioned for growth in the online space. The transaction expands business operations in Canada and adds new business and revenue streams in Australia and the United States, collectively providing positive EBITDA contributions.
In FY2022 and for the approximate half year of Kiaro-controlled operations, Vaped contributed $1.3 million in revenue and 20% gross profit (net of freight). This represents a 42% growth over the same period from the prior operator. Leading the team is a recently recruited highly talented Director of eCommerce, who is driving organizational focus on the eCommerce business and will enhance the digital capability across the organization to continue Kiaro’s expansion as a leader in omni-channel retail and distribution.
Customer response times have greatly improved from an elapsed time of over 48 hours to less than 2 hours with “human” interaction retained. Additionally, service and content offerings continue to be expanded in response to customer demands. This ensures that Kiaro’s customers can access information services, and cannabis and non-cannabis products in ways that are convenient, safe, and accessible. Based on a full year trading and with initiatives that have already been operationalized Kiaro anticipates eCommerce triple digit revenue growth for FY 2023.
Summary & Outlook
Interim Chief Executive Officer Eleanor Lynch stated that “Kiaro is well positioned to achieve double digit organic growth as the business fundamentals and a highly talented team of people are in place to drive performance and execute key initiatives. High growth is always exciting, but the most pleasing aspect of our diversified business is the common thread in all our operations – a careful dedication to delivering a service experience far superior to our competitors. This is recognised and appreciated by our customers, business partners and the communities in which we operate.”
“Kiaro’s transformation and growth is entirely due to the skill and hard work of the Kiaro team. The business has flourished as they have worked tirelessly through a period of significant expansion with external challenges. Thank you to the Kiaro family and to our business partners who have contributed to Kiaro’s growth.”
About Kiaro
Kiaro Holdings Corp is a trusted, diversified, omni-channel public cannabis company headquartered in Vancouver, British Columbia. Kiaro is a licensed cannabis retailer, a wholesale distributor, and an eCommerce retailer of vaporizers and accessories. Kiaro is dedicated to introducing new and experienced consumers to a lifelong exploration of cannabis. With more than 80 years of collective retail, wholesale and eCommerce experience, Kiaro’s leadership team has a proven track record of growing brands across North America and executing on acquisitions and financings. The Company plans to continue its growth trajectory through consumer-centric retail, eCommerce, and wholesale distribution segments.
