Harvest Health & Recreation Inc. Reports Second Quarter 2021 Financial Results

 
 
  •   Second quarter revenue was $102.5 million , up 84% from the second quarter 2020 and 15% sequentially  
  •  
  •   Second quarter net loss before non-controlling interest was $19.2 million , compared to $23.0 million in the first quarter 2021  
  •  
  •   Adjusted EBITDA was $28.0 million in the second quarter, compared to $26.9 million in the first quarter 2021  
  •  
  •   2021 revenue target of at least $400 million maintained  
  •  

Harvest Health & Recreation Inc. ("Harvest" or the "Company") ( CSE: HARV OTCQX: HRVSF ), a vertically integrated cannabis company and multi-state operator in the U.S., today reported its financial and operating results for the second quarter 2021. All financial information is provided in U.S. dollars unless otherwise indicated.

 

  Second Quarter 2021 Financial Results  

 
  • Total revenue in the second quarter was $102.5 million , an increase of 84% from $55.7 million in the second quarter of 2020, and up 15% compared to $88.8 million in the first quarter of 2021.
  •  
  • Gross profit in the second quarter was $52.3 million , compared to $23.4 million in the second quarter of 2020, and $47.9 million in the first quarter of 2021.
  •  
  • Gross profit margin in the second quarter was 51.0%, compared to 42.1% in the second quarter of 2020 and 53.9% in the first quarter of 2021.
  •  
  • Net loss before non-controlling interest was $19.2 million for the second quarter, compared to $23.0 million in the first quarter of 2021.
  •  
  • Adjusted EBITDA in the second quarter was $28.0 million , compared to $26.9 million in the first quarter of 2021.
  •  

  Please see the supplemental information regarding the use of Non-GAAP Financial Measures, and a reconciliation of Non-GAAP Financial Measures.  

 

  Second Quarter 2021 Business Highlights  

 
  • On May 10, 2021 , Trulieve announced its planned acquisition of Harvest. Each Harvest shareholder is expected to receive 0.1170 shares of Trulieve for each Harvest share, representing total consideration of approximately $2.1 billion and a 34% premium to the May 7, 2021 closing price of the Harvest shares.
  •  
  • On May 7, 2021 , Harvest announced that a settlement was reached regarding the grower/processor permittee AGRiMED Industries of PA, LLC.
  •  
  • Harvest opened four new medical retail dispensaries in Florida in Lehigh Acres , North Miami Beach , Olympia Heights, and West Palm Beach and one new medical retail dispensary in York , Pennsylvania .
  •  
  • As of June 30, 2021 , Harvest owned, operated, or managed 42 retail locations in five states, including 15 open dispensaries in Arizona .
  •  

  Recent Developments  

 
  • In July, Harvest announced the conversion of the exercise price of select warrants to U.S. dollars and the acceleration of the expiry date of warrants issued in October 2020 .
  •  
  • On July 12, 2021 , Harvest filed a definitive proxy statement with the Securities and Exchange Commission and SEDAR for its annual and special shareholder meeting to be held on August 11, 2021 .
  •  
  • On July 15, 2021 , Harvest announced the divestiture of cultivation and processing assets in Utah for an immaterial amount of cash.
  •  
  • Harvest opened one new medical retail dispensary on July 15   th in South Miami Beach, Florida .
  •  
  • Harvest opened one new dispensary serving medical patients and adult use customers on August 6   th in Mesa, Arizona .
  •  
  • As of August 10, 2021 , Harvest owned, operated, or managed 44 retail locations in five states, including 16 open dispensaries in Arizona .
  •  

  Outlook
Harvest is maintaining its full year 2021 revenue target of at least $400 million . Reported gross margins are expected to be at or above 50% and will likely continue to fluctuate from quarter to quarter.

 

  Management Commentary
"Our second quarter results demonstrate continued momentum as Harvest builds scale and expands in its core markets" said Chief Executive Officer Steve White . "We are focused on our key operational and financial priorities in 2021 as we work toward closing the pending acquisition by Trulieve."

 

  Conference Call & Webcast
Harvest Health and Recreation Inc. will host a conference call and audio webcast with Chief Executive Officer Steve White , Tuesday August 10, 2021 at 5:00 PM Eastern Time .

 

  Registration for this event is required. Please use this link to register:
https://www.directeventreg.com/registration/event/5996545

 

Following registration, an email confirmation will be sent including dial in details and unique conference call codes. Registration will remain open during the call however we recommend advance registration to access the event.

 

Second quarter results will be available at:
https://investor.harvesthoc.com/financials/default.aspx  

 

The live conference call webcast and replay will be available at:  
https://investor.harvesthoc.com/financials/default.aspx
 

 
 
                                                                                                                                                                                                                                                                                                  
 

   HARVEST HEALTH & RECREATION INC.   

 
 

   Consolidated Balance Sheets   

 
 

    (Amounts expressed in thousands of United States dollars, except share data)    

 
 
 
 

   June 30,   

 

   2021   

 
 
 

   December 31,   

 

   2020   

 
 

   ASSETS   

 
 
 
 
 
 
 

  Current assets:  

 
 
 
 
 
 
 

  Cash and cash equivalents  

 
 

  $  

 
 

  71,064  

 
 
 

  $  

 
 

  78,055  

 
 

  Restricted cash  

 
 
 

  3,000  

 
 
 
 

  4,542  

 
 

  Accounts receivable, net  

 
 
 

  8,788  

 
 
 
 

  5,051  

 
 

  Notes receivable, current portion  

 
 
 

  9,593  

 
 
 
 

  21,556  

 
 

  Related party notes receivable, current portion  

 
 
 

  10,276  

 
 
 
 

  10,052  

 
 

  Inventory, net  

 
 
 

  44,608  

 
 
 
 

  36,862  

 
 

  Other current assets  

 
 
 

  8,125  

 
 
 
 

  5,280  

 
 

  Total current assets  

 
 
 

  155,454  

 
 
 
 

  161,398  

 
 

  Notes receivable, net of current portion  

 
 
 

  10,516  

 
 
 
 

  18,211  

 
 

  Property, plant and equipment, net  

 
 
 

  179,182  

 
 
 
 

  176,827  

 
 

  Right-of-use assets for operating leases, net  

 
 
 

  113,395  

 
 
 
 

  60,843  

 
 

  Related party right-of-use assets for operating leases, net  

 
 
 

  5,541  

 
 
 
 

  5,621  

 
 

  Intangible assets, net  

 
 
 

  272,083  

 
 
 
 

  272,118  

 
 

  Corporate investments  

 
 
 

  40,924  

 
 
 
 

  19,091  

 
 

  Acquisition deposits  

 
 
 

  50  

 
 
 
 

  50  

 
 

  Goodwill  

 
 
 

  115,541  

 
 
 
 

  116,041  

 
 

  Assets held for sale  

 
 
 

  3,689  

 
 
 
 

  6,585  

 
 

  Other assets  

 
 
 

  19,672  

 
 
 
 

  19,850  

 
 

   TOTAL ASSETS   

 
 

  $  

 
 

  916,047  

 
 
 

  $  

 
 

  856,635  

 
 

   LIABILITIES AND STOCKHOLDERS' EQUITY   

 
 
 
 
 
 
 

   LIABILITIES   

 
 
 
 
 
 
 

  Current liabilities:  

 
 
 
 
 
 
 

  Accounts payable  

 
 

  $  

 
 

  7,988  

 
 
 

  $  

 
 

  10,755  

 
 

  Other current liabilities  

 
 
 

  30,434  

 
 
 
 

  28,896  

 
 

  Contingent consideration, current portion  

 
 
 

  10,398  

 
 
 
 

  17,985  

 
 

  Income tax payable  

 
 
 

  10,642  

 
 
 
 

  17,504  

 
 

  Operating lease liability, current portion  

 
 
 

  1,910  

 
 
 
 

  2,906  

 
 

  Related party operating lease liability, current portion  

 
 
 

  150  

 
 
 
 

  135  

 
 

  Notes payable, current portion  

 
 
 

  134,394  

 
 
 
 

  20,910  

 
 

  Total current liabilities  

 
 
 

  195,916  

 
 
 
 

  99,091  

 
 

  Notes payable, net of current portion  

 
 
 

  144,248  

 
 
 
 

  244,066  

 
 

  Warrant liability  

 
 
 

  3,438  

 
 
 
 

  20,908  

 
 

  Operating lease liability, net of current portion  

 
 
 

  112,731  

 
 
 
 

  58,637  

 
 

  Related party operating lease liability, net of current portion  

 
 
 

  5,518  

 
 
 
 

  5,595  

 
 

  Deferred tax liability  

 
 
 

  53,082  

 
 
 
 

  53,082  

 
 

  Total liabilities associated with assets held for sale  

 
 
 

  28  

 
 
 
 

  718  

 
 

  Other long-term liabilities  

 
 
 

  11  

 
 
 
 

  63  

 
 

   TOTAL LIABILITIES   

 
 
 

  514,972  

 
 
 
 

  482,160  

 
 

   STOCKHOLDERS' EQUITY   

 
 
 
 
 
 
 

  Capital stock  

 
 
 

  736,901  

 
 
 
 

  667,248  

 
 

  Accumulated deficit  

 
 
 

  (336,234)  

 
 
 
 

  (293,607)  

 
 

  Stockholders' equity attributed to Harvest Health & Recreation Inc.  

 
 
 

  400,667  

 
 
 
 

  373,641  

 
 

  Non-controlling interest  

 
 
 

  408  

 
 
 
 

  834  

 
 

   TOTAL STOCKHOLDERS' EQUITY   

 
 
 

  401,075  

 
 
 
 

  374,475  

 
 

   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   

 
 

  $  

 
 

  916,047  

 
 
 

  $  

 
 

  856,635  

 
 
 

 

 
 
                                                                                                                                                                                              
 

   HARVEST HEALTH & RECREATION INC.   

 
 

   Consolidated Statements of Operations   

 
 

    (Amounts expressed in thousands of United States dollars, except share and per share data)    

 
 
 
 

   For the three months ended June 30,   

 
 
 

   2021   

 
 
 

   2020   

 
 

  Revenue, net of discounts  

 
 

  $  

 
 

  102,463  

 
 
 

  $  

 
 

  55,661  

 
 

  Cost of goods sold  

 
 
 

  (50,201)  

 
 
 
 

  (32,246)  

 
 

  Gross profit  

 
 
 

  52,262  

 
 
 
 

  23,415  

 
 

   Expenses   

 
 
 
 
 
 
 

  General and administrative  

 
 
 

  33,126  

 
 
 
 

  26,940  

 
 

  General and administrative, related party operating lease expense  

 
 
 

  201  

 
 
 
 

  200  

 
 

  Sales and marketing  

 
 
 

  1,224  

 
 
 
 

  1,248  

 
 

  Share-based compensation  

 
 
 

  3,741  

 
 
 
 

  3,276  

 
 

  Depreciation and amortization  

 
 
 

  2,641  

 
 
 
 

  725  

 
 

   Total expenses   

 
 
 

  40,933  

 
 
 
 

  32,389  

 
 

   Operating income (loss)   

 
 
 

  11,329  

 
 
 
 

  (8,974)  

 
 

   Other (expense) income   

 
 
 
 
 
 
 

  Loss on sale of assets  

 
 
 

  (21)  

 
 
 
 

  (2,783)  

 
 

  Other income  

 
 
 

  269  

 
 
 
 

  1,205  

 
 

  Fair value of liability adjustment  

 
 
 

  (8,353)  

 
 
 
 

  (1,497)  

 
 

  Fair value of contingent consideration  

 
 
 

  (4,500)  

 
 
 
 

  

 
 

  Foreign currency gain  

 
 
 

  17  

 
 
 
 

  30  

 
 

  Interest expense  

 
 
 

  (9,182)  

 
 
 
 

  (9,169)  

 
 

  Contract asset impairment  

 
 
 

  

 
 
 
 

  (2,420)  

 
 

   Loss before taxes and non-controlling interest   

 
 
 

  (10,441)  

 
 
 
 

  (23,608)  

 
 

  Income taxes  

 
 
 

  (6,834)  

 
 
 
 

  (1,132)  

 
 

   Net loss from continuing operations before non-controlling interest   

 
 
 

  (17,275)  

 
 
 
 

  (24,740)  

 
 

  Net loss from discontinued operations, net of tax  

 
 
 

  (1,954)  

 
 
 
 

  (905)  

 
 

   Net loss before non-controlling interest   

 
 
 

  (19,229)  

 
 
 
 

  (25,645)  

 
 

   Net income attributed to non-controlling interest   

 
 
 

  (276)  

 
 
 
 

  (1,929)  

 
 

   Net loss attributed to Harvest Health & Recreation Inc.   

 
 

  $  

 
 

  (19,505)  

 
 
 

  $  

 
 

  (27,574)  

 
 

   Net loss per share – basic and diluted   

 
 

  $  

 
 

  (0.04)  

 
 
 

  $  

 
 

  (0.07)  

 
 

  Attributable to Harvest Health and Recreation Inc.  

 
 

  $  

 
 

  (0.05)  

 
 
 

  $  

 
 

  (0.07)  

 
 

  Attributable to discontinued operations, net of tax  

 
 

  $  

 
 

  (0.00)  

 
 
 

  $  

 
 

  (0.00)  

 
 

   Weighted-average shares outstanding - basic and diluted   

 
 
 

  413,103,779  

 
 
 
 

  364,580,737  

 
 
 

  Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures as defined by the SEC. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP are included below. This information should be considered as supplemental in nature and not as a substitute for, or superior to, any measure of performance prepared in accordance with GAAP. Our management uses adjusted EBITDA to evaluate our operating performance and trends and make planning decisions. Our management believes adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the items that we exclude. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by our management in its financial and operational decision-making.

 

  Reconciliation of Non-GAAP Financial Measures
The table below reconciles Net loss to Adjusted EBITDA for the periods indicated.

 
 
                                                                                                      
 
 

   For the three months ended June 30,   

 
 

    (Amounts expressed in thousands of United States dollars)    

 
 

   2021   

 
 
 

   2020   

 
 

  Net loss (GAAP) before non-controlling interest  

 
 

  $  

 
 

  (19,229)  

 
 
 

  $  

 
 

  (25,645)  

 
 

  Add (deduct) impact of:  

 
 
 
 
 
 
 

  Net interest and other financing costs (1)  

 
 
 

  9,184  

 
 
 
 

  9,390  

 
 

  Income tax  

 
 
 

  6,834  

 
 
 
 

  1,132  

 
 

  Amortization and depreciation (2)  

 
 
 

  3,532  

 
 
 
 

  1,803  

 
 

  Loss on sale of assets  

 
 
 

  21  

 
 
 
 

  2,783  

 
 

  Fair value of liability adjustment  

 
 
 

  8,353  

 
 
 
 

  1,497  

 
 

  Fair value of contingent consideration  

 
 
 

  4,500  

 
 
 
 

  

 
 

  Other income  

 
 
 

  (269)  

 
 
 
 

  (1,205)  

 
 

  Foreign currency gain  

 
 
 

  (17)  

 
 
 
 

  (30)  

 
 

  Share-based compensation expense  

 
 
 

  3,741  

 
 
 
 

  3,276  

 
 

  Contract asset impairment  

 
 
 

  

 
 
 
 

  2,420  

 
 

  Discontinued operations, net of tax  

 
 
 

  1,954  

 
 
 
 

  905  

 
 

  Other expansion expenses (pre-open)  

 
 
 

  3,371  

 
 
 
 

  2,323  

 
 

  Transaction & other special charges  

 
 
 

  6,047  

 
 
 
 

  956  

 
 

   Adjusted EBITDA (non-GAAP)   

 
 

   $   

 
 

   28,022   

 
 
 

   $   

 
 

   (395)   

 
 
 
 
   
 
 

   (1) Includes less than $0.1 million and $0.2 million of interest reported in cost of sales for the three months ended June 30, 2021 and 2020, respectively  

 
 

   (2) Includes $1.1 million and $0.9 million of depreciation reported in cost of sales for the three months ended June 30, 2021 and 2020, respectively  

 
 
 

  Forward-looking Statements
This press release contains "forward-looking statements," within the meaning of United States and Canadian securities laws. Such statements reflect current estimates, expectations and projections about future events and involve risks and uncertainties relating to future events and Harvest's performance, and actual events may differ materially from these forward looking statements, which may be identified by the use of words such as, "may", "would", "could", "will", "likely", "expect", "anticipate", "believe, "intend", "plan", "forecast", "project", "estimate", "outlook" and other similar expressions. These forward looking statements include, without limitation, including statements regarding Trulieve Cannabis Corp.'s ("Trulieve") and Harvest's strategic business combination and the expected terms, timing and closing of the combination, estimates of pro-forma financial information of the combined company, Trulieve's and Harvest's expected financial performance for fiscal 2021, the combined operations and prospects of Trulieve and Harvest, the current and projected market and growth opportunities for the combined company and value for shareholders; current and anticipated shareholder demands and litigation in connection with the proposed transaction; our expectations for 2021 financial performance and targeted revenue and gross margin; prospects for revenue growth and profitability in our core markets and in the U.S. cannabis industry generally; our continued growth in retail dispensary openings, same store sales growth, recreational sales in Arizona , and expanded cultivation and manufacturing operations; the development of federal and state cannabis regulatory framework in the United States applicable to multi-state operators, including a delay in, or a failure to, federally decriminalize cannabis in the United States , as well as such frameworks in Harvest's core markets; adverse changes in the application or enforcement of current laws, including those related to taxation; adverse changes in the public perception of cannabis; the effects of the weather, natural disasters, and health pandemics, including recent renewed resurgence of the novel coronavirus (COVID-19) on customer demand, Harvest's supply chain as well as its consolidated results of operation, financial position and cash flows; the ability of Harvest to develop Harvest's brand and meet its growth, revenue and profitability projections and objectives; its ability to generate sufficient cash flow to repay debt obligations and to fund operating expenses and future investment; the ability of Harvest to complete planned acquisitions that are accretive to its revenue; the ability of Harvest to obtain and/or maintain licenses to operate in the jurisdictions in which it operates or in which it expects or plans to operate; changes in general economic, business and political conditions, including changes in the financial markets, and, in particular, the ability of Harvest to raise debt and equity capital in the amounts and at the costs that it expects; the ability to locate and acquire suitable companies, properties or assets necessary to execute on Harvest's business plans; the ability of Harvest to execute planned store openings and secure cannabis supply at appropriate amounts and cost; fluctuations in the prevailing prices for cannabis and cannabis products in the markets that Harvest operates in and sources supply; its ability to resolve existing and future litigation and arbitrations on acceptable terms; and increasing costs of compliance with extensive government regulation. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. In addition, even if the outcome and financial effects of the plans and events described herein are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods.

 

Forward-looking statements involve significant risks, assumptions, uncertainties and other factors that may cause actual future results or anticipated events to differ materially from those expressed or implied in any forward-looking statements. Please see the heading "Risk Factors" in Harvest's Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission and in Harvest's Annual Information Circular, which was filed on SEDAR, both of which were filed on March 30, 2021 , and in our Form 10-Q for the quarter ended March 31, 2021 , which was filed with the SEC and SEDAR on May 13, 2021 , and in all subsequent filings that Harvest makes with the Securities and Exchange Commission and SEDAR, for a discussion of the material risk factors that could cause actual results to differ materially from the forward-looking information. Harvest does not undertake to update any forward-looking statements that are included herein, except in accordance with applicable securities laws.

 

   About Harvest Health & Recreation Inc.
 
  Headquartered in Tempe, Arizona , Harvest Health & Recreation Inc. is a vertically integrated cannabis company and multi-state operator. Since 2011, Harvest has been committed to expanding its retail and wholesale presence throughout the U.S., acquiring, manufacturing, and selling cannabis products for patients and consumers in addition to providing services to retail dispensaries. Through organic license wins, service agreements, and targeted acquisitions, Harvest has assembled an operational footprint spanning multiple states in the U.S. Harvest's mission is to improve lives through the goodness of cannabis. We hope you'll join us on our journey:     https://harvesthoc.com      

 

  Facebook:   @HarvestHOC  
Instagram:   @HarvestHOC  
Twitter:   @HarvestHOC  

 

 Cision View original content: https://www.prnewswire.com/news-releases/harvest-health--recreation-inc-reports-second-quarter-2021-financial-results-301352511.html  

 

SOURCE Harvest Health & Recreation Inc.

 

 

 

 Cision View original content: https://www.newswire.ca/en/releases/archive/August2021/10/c4620.html  

 
 

News Provided by Canada Newswire via QuoteMedia

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Various bills and amendments were proposed in 2024 as part of the Farm Bill discussions, each with different approaches to regulating hemp. Separate regulatory frameworks for industrial hemp and hemp grown for cannabinoids were suggested, and many states took their own action, leading to a patchwork of regulations and even outright bans.

Despite challenges, data from the US Department of Agriculture suggests signs of recovery.

The department's annual National Hemp Report from 2024 points to an 18 percent increase in industrial hemp production value between 2022 and 2023, with output growth seen in specific sectors like floral (18 percent), fiber (133 percent) and seed hemp (414 percent). The 2025 report from the Department of Agriculture indicates further expansion, with notable increases observed in both acreage (up 64 percent from 2023) and value (46 percent).

The 2024 Farm Bill ultimately did not pass, and right now the hemp industry is operating under a temporary extension of the 2018 Farm Bill under the American Relief Act of 2025, signed into law on December 21, 2024.

The 2018 Farm Bill is now set to expire on September 30, 2025.

While analysts for Markets and Markets project that the North American hemp industry will grow at a CAGR of 22.4 percent and ultimately reach a valuation of US$30.24 billion by 2029, the future of the industry will be heavily influenced by the outcome of the ongoing Farm Bill discussions.

US cannabis legalization remains stalled

Although there is clear demand for cannabis products, the now-defunct rescheduling process in the US is likely to continue casting a shadow of uncertainty over the industry's long-term trajectory.

Legal and procedural delays, including allegations of improper conduct and bias within the US Drug Enforcement Administration (DEA), led to hearing cancellations, and the new administration of US President Donald Trump has brought leadership changes to key agencies like the DEA and the Department of Justice.

Terry Cole, who Trump nominated to be DEA administrator on February 11, has a history of opposing cannabis legalization in the country. Similarly, Pam Bondi, Trump’s pick to lead the justice department, staunchly opposed a movement to legalize medical cannabis during her tenure as Florida’s attorney general.

While there have been bipartisan efforts in Congress to end federal cannabis prohibition and establish regulations for eventual legalization, the DEA’s actions and statements indicate a potential stall or reversal of progress.

In addition to that, new research is adding complexity to the debate.

A study published in the American Journal of Psychiatry this past March highlights an association between the use of high-potency cannabis strains and increased risks of psychosis, a factor that may not have been fully considered by the Department of Health and Human Services. As stronger cannabis strains become more widely available, a reassessment of their potential health risks may be required.

Investor takeaway

While the cannabis industry holds promise for growth and innovation, investors must remain acutely aware of the regulatory uncertainties and market volatility that will undoubtedly shape its trajectory in the years to come.

Don’t forget to follow us @INN_Cannabis for real-time news updates!

Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.

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