Halo Collective Inc. (“Halo” or the “Company”) (NEO: HALO) (OTCQB: HCANF) (Germany: A9KN) today announced its financial and operational results for three months ended June 30, 2021 (“Q2 2021”).
Second Quarter 2021 Financial Highlights:
- Revenue of $9.1 million, up $3.9 million, or 74.3%, compared to $5.2 million in Q2 2020, including the sale of over 4.3 million grams of cannabis products principally to dispensaries in Oregon and California, a 302% year-over-year increase.
- Organic revenue growth was 36%.
- Gross profit of $2.2 million, or 24.1% gross margin, an increase from $1.0 million, or 19.6% gross margin, for Q2 2020. Adjusted gross profit1 was $2.5 million, or 27.8% gross margin, compared to $1.2 million, or 40.1% gross margin, in Q2 2020.
“Halo delivered its highest gross profit adjusted for fair value gains or losses in biological assets and impairments since 2019 due to continued strong revenue growth and revenue optimization efforts to drive higher-quality sales,” said CEO and Co-Founder Kiran Sidhu. “We continue to generate strong organic and inorganic growth due to the popularity of our premium products, improved brand recognition and enhanced operational efficiency. Our operating expenses are significantly elevated as we support both the Halo Tek and Akanda operations over the next few months, but we anticipate significant decreases in overheads by the end of the year, helping to position the Company to achieve positive EBITDA in Q4 2021.”
Mr. Sidhu continued, “The proposed spin-off of Halo Tek, and the reorganization of our international assets into Akanda, are key strategic actions we are taking to sharpen our strategic focus as a leading U.S. multi-state operator (MSO) focused on Oregon and California. We continue to execute our growth plan with a model centered around building out cultivation capacity in Oregon and California and our retail network with an aim to open or acquire up to 10 operational California dispensaries this year. Additionally, there are numerous emerging cannabis businesses within the Halo Collective portfolio that we intend to scale. We expect these additional emerging operations will become an incremental source of value creation for Halo stakeholders towards the end of 2021 with significant impact in 2022.”
Philip Van Den Berg, CFO and Co-Founder continued, “The Q2 results demonstrate that we are on track toward our goal of profitability. We are reducing our full year 2021 revenue guidance from $75 million to $65 million. Our dispensaries should be online over the next 120 days, contributing at a full run rate by year end. Meanwhile, we expect to improve overall profitability by the opening of our three Los Angeles dispensaries, significantly reducing core U.S. overheads, and executing on the strategic actions related to the Halo Tek and Akanda transactions.”
|1 See “Non-IFRS Financial Measures“.|
Second Quarter 2021 Financial Results
Revenues in Q2 2021 were $9.1 million compared to $5.2 million in Q2 2020, a 74.3% increase. Total sales were 4,349,317 grams (Q2 2020: 1,083,066 grams), a 302% increase. The average mix price was $2.10 per gram (Q2 2020: $4.84 per gram), a 56.6% decline, explained by a higher proportion of lower priced flower, pre-rolls, trim and fresh frozen in comparison with Q2 2020. Organic revenue growth was 36%.
Revenue growth was mixed across the Company’s subsidiaries which include ANM Inc. (“ANM”), the owner of the Company’s facility in Oregon, Mendo Distribution and Transportation LLC (“MDT”), the owner of the facility in Ukiah, Coastal Harvest LLC (“Coastal Harvest”), Halo’s extraction facility in California, and Halo Winberry Holdings, LLC (“Halo Winberry”), which operates a one-acre grow outside of Eugene, OR. ANM reported revenues of $3.9 million, a 3.9% decrease over Q2 2020. MDT reported revenues of $1.9 million, a 66.9% increase over Q2 2020. Coastal Harvest reported revenues of $0.3 million compared to nil for Q2 2020. Halo Winberry reported revenues of $3.5 million. Halo Winberry’s results were not included in the three months ended June 30, 2020.
The Company reported a gross profit of $2.2 million (Q2 2020: gross profit of $1.0 million), with a reported gross margin of 24.1% (Q2 2020: 19.6%). Adjusted for the loss on biological assets, gross profit was $2.5 million (Q2 2020: $1.2 million), with an adjusted gross margin of 27.8% (Q2 2020: 40.1%).
Liquidity and Cash Balance
As of June 30, 2021, Halo had available cash in the amount of $5.9 million and approximately $538,000 in restricted cash. During the quarter, a total of 80,665,090 shares were issued in connection to the at-the-market public offering for gross proceeds of $4.2 million (C$5.1 million).
In Q2 2021, ANM, the owner of the Company’s facility in Oregon, sold 1,104,474 grams of shatter, cartridge oil, live resin, tinctures and gummies, flower, and pre-rolls (Q2 2020: 963,091 grams), a 14.7% decrease. Sales of oil and extracts were 467,874 grams (Q2 2020: 571,389 grams), a 18.1% decrease. The wholesale price of oils, extracts and edibles increased by 3.0% to $6.57 per gram (Q2 2020: $6.38 per gram). Flower sales in Q2 2021 were 502,478 grams (Q2 2020: 270,357 grams), a 85.9% increase. The wholesale price of flower increased by 12.7% to $1.21 per gram (Q2 2020: $1.07 per gram). Pre-roll sales were 134,122 grams (Q2 2020: 121,345 grams), a 10.5% increase. The wholesale price of pre-rolls increased by 41.6% to $1.90 per gram (Q2 2020: $1.34 per gram). The average mix-price across all products was $3.56 per gram equivalent (Q2 2020: $4.25 per gram), a 16.2% decrease.
In Q2 2021, MDT, the owner of the facility in Ukiah, sold 1,603,369 grams of distillate, live resin, gummies and pre-rolls (Q2 2020: 119,464). The average price decreased 88.2% to $1.19 (Q2 2020: $10.09).
Halo Winberry sold 1,223,679 grams of oil and extracts, shatter, live resin, edibles, flower, pre-rolls and trim at an average mix-price of $2.90 per gram. Prices ranged from $14.26 per gram for oil, $13.02 for live resin, $0.36 for extracts (balm, lotions), $0.72 for edibles, $1.61 for flower, $14.83 for pre-rolls to $0.33 per gram for trim.
Updated Full Year Outlook
Due to unexpected permitting delays with the opening of the Company’s dispensaries in Westwood, Hollywood and the NOHO Art District due in part to delays at the Bureau of Cannabis Control in Los Angeles, Halo is adjusting its full-year 2021 revenue expectation to $65 million down from $75 million as previously guided2. Management continues to expect that the Company will be EBITDA positive in the fourth quarter. In addition, the Company expects its dispensaries to open before the end of the year and to contribute in full to 2022 revenue. Halo’s revised revenue guidance implies 200% year-over-year revenue growth compared to $21.6 million in 2020.
Earnings Conference Call
Halo will also host a conference call at 4:15 p.m. Eastern Time on Tuesday, August 17, 2021 to discuss its results. A live audio webcast will be available for registration. A replay of the call will be accessible by telephone until 11:59 p.m. Eastern Time on Tuesday, August 24, 2021.
Live audio webcast: http://www.directeventreg.com/registration/event/9444809
Dial-In Number: 1-800-585-8367 or 1-416-621-4642 (North America Toll Free)
Conference ID: 9444809
Replay Dial-in Number: 1-800-585-8367 (North America Toll Free)
Replay Password: 9444809
|2 See “Financial Outlook“.|
Complete results are reported in the Company’s consolidated financial statements for the three months ended June 30, 2021 (the “Consolidated Financial Statements”) and associated management’s discussion and analysis (the “Q2 2021 MD&A”).