Harvest Health & Recreation, Inc. Reports Second Quarter 2019 Financial Results.

Total revenue for the second quarter was $26.6 million, up 39% from the first quarter 2019 (all dollars are U.S. dollars)

Adjusted EBITDA for the second quarter totaled ($2.2) million

PHOENIX, August 15, 2019–(BUSINESS WIRE)–Harvest Health & Recreation, Inc. (CSE: HARV, OTCQX: HRVSF), vertically-integrated cannabis company with one of the largest and deepest footprints in the U.S., today reported the company’s second quarter fiscal year 2019 financial results. Harvest has continued to be successful in winning licenses in non-competitive and competitive application processes throughout the country and has announced several significant strategic acquisitions and mergers. Harvest’s ability to combine size, scale, capital, regulatory expertise and operational excellence are paramount to its success.

During the second quarter, Harvest continued to execute on its strategy by adhering to our four core initiatives: building a world class team, expanding our retail and wholesale footprint across the U.S., building and acquiring brands and distributing them across our footprint and continuing on a path of profitable growth we believe that we can fulfill our objective of becoming the most valuable cannabis company in the world.

Chief Executive Officer Steve White.

Financial Highlights for the Second Quarter Ended June 30, 2019

Total revenue was $26.6 million, an increase of 39%, compared to $19.2 million in the first quarter of 2019.

On a pro forma basis, Harvest along with completed and pending disclosed acquisitions, generated $78 million of revenue in the second quarter, or over $310 million annualized. Second quarter pro forma revenue increased 53% over first quarter pro forma revenue of $51 million.

Gross profit was $16.9 million compared to $7.9 million in the first quarter of 2019.

Gross profit margin was 64% compared to 41% for the first quarter of 2019.

Adjusted EBITDA was ($2.2) million, compared to ($4.7) million in the first quarter of 2019.

Net loss was $20.6 million for the second quarter which is reflective of the planned investments in people and infrastructure to support the company’s growth initiatives and planned expansion.

Business Highlights

Footprint Expansion

As of June 30, 2019, the Company operated 16 retail locations compared to 13 retail locations at the end of March 31, 2019. During the quarter, the Company announced the pending acquisition of Cannapharmacy, the award of a retail dispensary license in Pasadena, CA, and opened three additional retail locations in Florida. Subsequent to quarter end, the Company added six retail locations in Arizona, California, Florida, and North Dakota and was one of eight companies selected to move forward to finalize a cultivation license in Utah. Significant expansion of cultivation, manufacturing and retail locations is expected to occur for the remainder of 2019.

Brand and Product Distribution

During the second quarter, the Company announced an agreement with the Asian American Trade Associations Council to distribute Colors, CBx Essentials, and Harvest branded CBD product lines to more than 10,000 retail locations within the AATAC retailer network.

Financing Activities

During the quarter Harvest closed on an initial $100 million tranche of an available $500 million of convertible debentures. The debentures are issuable, at Harvest’s sole discretion, in tranches of $100 million and have a 7% interest rate. The initial tranche of debentures will be convertible at the option of the holder to Subordinate Voting Shares of Harvest at a price of $11.42 per Subordinate Voting Share.

Subsequent to quarter end, the Company announced the signing of a term sheet for a secured term loan for up to $225 million from an investment fund managed by Torian Capital. The expected loan will be made available to Harvest in three tranches of $75 million, each with substantially identical terms. The loan will be secured by certain current and future assets of Harvest, including cannabis related licenses.

As of June 30, 2019, the Company had $89.9 million of cash and cash equivalents.

As of June 30, 2019, the Company had $105.1 million of debt outstanding.

Team Growth

During the second quarter, Harvest significantly added to its management team, including the hiring of: Nicole Stanton, General Counsel; Allyson Wilcox, Assistant General Counsel, Alex Howe, Head of Corporate Communications and Christine Hersey as Director of Investor Relations. Nicole Stanton has over 20 years’ experience and was the first female to lead a national law firm in Phoenix with leadership roles in the community as founder of Stop Bullying AZ and First Lady of Phoenix. Allyson Wilcox has over 15 years’ experience as an attorney and has taken a leadership role at Harvest leading the Regulatory Compliance and Licensing Departments. Alex Howe has nearly two decades experience in corporate communications with Fortune 50, corporate, tech, consumer, and cannabis companies and leads the company’s external and internal communications. Christine Hersey has over 15 years’ experience as a buy side and sell side analyst covering high growth and complex sectors.

Subsequent to quarter end, Harvest welcomed Michael Aguirre as Assistant General Counsel. Michael Aguirre has 14 years’ experience serving companies across a wide range of industries and adds M&A and financing capabilities to the growing legal team.

Harvest continues to build out its team, ending Q2 with 782 FTEs, up from 476 FTEs at the end of Q1 2019.

Please see the supplemental information (unaudited) regarding Non-IFRS Financial Measures at the end of this press release.

Conference Call & Webcast

Harvest Health and Recreation, Inc. will host a conference call and audio webcast with Chief Executive Officer Steve White, President Steve Gutterman and Chief Financial Officer Leo Jaschke, Thursday August 15th at 8:00am ET.

To participate in the conference call, please dial:

US toll free: + 1-844-695-5522

Canada toll free: + 1-866-605-3852

UK toll free: + 08082389064

International dial in: + 1-412-317-5448

Registration is required; please plan to dial in at least ten minutes prior to the scheduled start time.

Second quarter results will be available at:

https://www.harvestinc.com/investors/investors/#financial-information

The conference call will be available for replay for three months at:

https://services.choruscall.com/links/harv190815.html

Non-IFRS Financial and Performance Measures

The Company provides additional financial metrics that are not prepared in accordance with IFRS. Management uses non-IFRS financial measures, in addition to IFRS financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes and to evaluate the Company’s financial performance. This non-IFRS financial measure is Adjusted EBITDA.

Management believes that these non-IFRS financial measures reflect the Company’s ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business, as they facilitate comparing financial results across accounting periods and to those of peer companies. Management also believes that these non-IFRS financial measures enable investors to evaluate the Company’s operating results and future prospects in the same manner as management. These non-IFRS financial measures may also exclude expenses and gains that may be unusual in nature, infrequent or not reflective of the Company’s ongoing operating results.

As there are no standardized methods of calculating these non-IFRS measures, the Company’s methods may differ from those used by others, and accordingly, the use of these measures may not be directly comparable to similarly titled measures used by others. Accordingly, these non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Reconciliations of Non-IFRS Financial and Performance Measures

The table below reconciles Net (Loss) Income to Adjusted EBITDA for the periods indicated.

About Harvest Health & Recreation, Inc.

Headquartered in Tempe, Arizona, Harvest Health & Recreation, Inc. is a multi-state cannabis operator (MSO) and vertically-integrated cannabis company. Subject to completion of announced acquisitions, Harvest will have one of the largest footprints in the U.S., with rights to more than 210 facilities, of which approximately 135 are retail locations, and more than 1,700 employees across 18 states and territories. Since 2011, the company has been committed to expanding its Harvest House of Cannabis retail and wholesale presence throughout the U.S., acquiring, creating and growing leading brands for patients and consumers nationally and continuing on a path of profitable growth. Harvest’s mission is to improve lives through the goodness of cannabis and is focused on its vision to become the most valuable cannabis company in the world. We hope you’ll join us on our journey: https://harvestinc.com.

Facebook: @HarvestHOC

Instagram: @HarvestHOC

Twitter: @HarvestHOC

Original Press Release

Get ahead of the crowd by signing up for 420 Investor, the largest & most comprehensive premium subscription service for cannabis traders and investors since 2013.

Published by NCV Newswire The NCV Newswire by New Cannabis Ventures aims to curate high quality content and information about leading cannabis companies to help our readers filter out the noise and to stay on top of the most important cannabis business news. The NCV Newswire is hand-curated by an editor and not automated in anyway. Have a confidential news tip? Get in touch