Entourage Health Reports Q2 Financial Results with $13.8 Million Record Revenue Representing 92% YOY Increase and Third Consecutive Quarter of Growth
Continued record sales of higher-margin products in all channels drives 29% gross margin
Fulfilled record purchase orders from every province, focusing on top-performing products resulting in a 159% increase in adult-use sales YOY and a 55% increase in Q2 market share
Management to host conference call today at 10:00 a.m. Eastern Time
Toronto, Canada, August 10, 2021 – Entourage Health Corp. (formerly WeedMD Inc.) (TSX-V:ENTG) (OTCQX:WDDMF) (FSE:4WE) (“Entourage” or the “Company”), a Canadian producer and distributor of award-winning cannabis products and brands, announced today its financial results for the three and six months ended June 30, 2021. The Company recorded second quarter 2021 total revenue of $13.8 million and net revenue of $10.6 million, a total revenue increase of 92% and net revenue increase of 81% year-over-year representing higher direct-to-consumer and patient record sales from Q1 2020. The Company will host a conference call to discuss the financial highlights for the period today at 10:00 a.m. Eastern Time.
“Our third consecutive quarter of sequential revenue growth is indicative of our strong sales momentum and is a direct result of our strategic business transformation initiatives leveraged to increase market share and improved gross margin performance,” said George Scorsis, Interim CEO and Executive Chair, Entourage. “Our products and brands continued to stand out across Canada, with a combined year-over-year 92% record total revenue increase in adult-use and medical sales. In response to growing market demand for our Color Cannabis, Saturday Cannabis and Starseed brands, we now have over 1,300 SKUs listed nationwide, and our market share increased 55% over the quarter as we captured share from larger producers, demonstrating the value of our products. With our transformation initiatives fully implemented, Entourage has evolved into a performance-driven, quality-obsessed organization. We’re thrilled with our turnaround over the past six months – all of which we expect will contribute to a stand-out year for our shareholders.”
Summary of Results
| For the Quarter-Ended | June 30, 2021 ($000’s) | June. 30, 2020 ($000’s) |
|---|---|---|
| Total revenue | 13,812 | 7,182 |
| Net revenue | 10,604 | 5,859 |
| Gross (loss) profit before changes in fair value | 3,112 | (898) |
| Gross margin % before changes in fair value | 29.4% | (15.3%) |
| Income (loss) and comprehensive (loss) | (9,951) | (8,895) |
| Adjusted EBITDA* | (3,296) | (2,106) |
| As at | June 30, 2021 ($000's) | Dec. 31, 2020 ($000’s) |
|---|---|---|
| Cash and cash equivalents | 15,542 | 22,322 |
| Inventory | 33,703 | 30,665 |
| Biological assets | 1,704 | 1,956 |
| Working Capital | 18,132 | 45,060 |
*Adjusted EBITDA is not a recognized measurement under International Financial Reporting Standards (“IFRS”) and this data may not be comparable to data presented by other companies. Management defines Adjusted EBITDA as EBITDA adjusted to exclude interest, tax, and depreciation, stock compensation, fair value changes and other non-cash items, and non-recurring items. This data is furnished to provide additional information and does not have any standardized meaning prescribed by IFRS. The Company uses this non-IFRS measure to provide shareholders and others with supplemental measures of its operating performance. The Company also believes that securities analysts, investors and other interested parties, frequently use this non-IFRS measure in the evaluation of companies, many of which present similar metrics when reporting their results. As other companies may calculate Adjusted EBITDA differently than the Company, this metric may not be comparable to similarly titled measures reported by other companies. We caution readers that Adjusted EBITDA should not be substituted for determining net loss as an indicator of operating results, or as a substitute for cash flows from operating and investing activities. See the Company’s management’s discussion and analysis for the three months ended June 30, 2021 (the “Q2 MD&A”) for a detailed reconciliation of Adjusted EBITDA to Net Income / (Loss). The Company’s financial statements for the three months ended June 30, 2021 and the Q2 MD&A are available on SEDAR at www.sedar.com.
“In Q2, our sales and production teams fulfilled record purchase orders from every province, focusing on top-performing products to drive sales resulting in a 148% increase in adult-use revenue and 21% increase in medical sales over previous year with improved gross margin of 29%,” said Beth Carreon, CFO, Entourage. “Going forward – we continue to focus on expanding our product margins and brand footprint into new markets with in-demand dried flower, pre-rolls and vapes – all of which made up 75% of our Q2 total revenue. We expect this will be a key growth segment for the rest of the year which together with our cost management initiatives, and established performance drivers will continue to keep us on the path of profitable growth.”
Revenue Highlights
| Q2 2021 ($000’s) | Q2 2020 ($000’s) | Change % | |
|---|---|---|---|
| Net Revenue by Channel | |||
| Medical | 3,495 | 2,895 | 21% |
| Adult-Use | 6,922 | 2,788 | 148% |
| Bulk | 187 | 176 | 6% |
| Total Net Revenue | 10,604 | 5,859 | 81% |
Key Financial Highlights
For the second quarter ended June 30, 2021, Entourage recorded net revenue of $10.6 million, compared to $10.3 million in Q1 2021 and $5.8 million in Q2 2020.
Gross profit before changes in fair value was $3.1 million for Q2 2021, compared to $0.25 million for Q1 2021 and $(0.9) million in Q2 2020. Gross profit improved in Q2 2021 versus Q1 2021 and Q2 2020, reflecting management’s continued focus on optimization.
Average yield per plant was 158 grams during Q2 2021, compared to 103 grams in Q2 2020.
Total dried cannabis sold in Q2 2021 was 4,551 kgs, compared to 977 kgs in Q2 2020. The increase was driven by record growth in adult-use and medical channels.
Weighted average cost per gram of inventory on hand was $0.50 for the three months ending June 30, 2021, compared to $2.52 for the same period in 2020.
As at June 30, 2021, Entourage held $35.4 million in inventory and biological assets with total assets of $166.8 million.
Selling, General & Administrative Expenses for Q2 2021 was $10.4 million, compared to $6.0 million in Q1 2021 and $4.8 million in Q2 2020, partly due to increased sales and marketing to support record sales, partly due to timing of spend, and partly due to mostly non-repeat professional and consulting fees.
Adjusted EBITDA was $(3.3) million for Q2 2021, compared to $(0.4) million in Q1 2021 and $(2.1) million in Q2 2020, mainly due to timing of expenses.
Corporate Highlights During Second Quarter 2021 and Subsequent Events
Appointed Beth Carreon as Chief Financial Officer in May 2021. Formerly of Tilray Canada and Nestlé Canada, Ms. Carreon is a seasoned financial executive with broad experience in corporate finance, mergers and acquisitions, banking and consumer-packaged goods.
May 2021, the Company entered into an exclusive licensing and supply agreement with Ontario craft cannabis producer CannTx Life Sciences Inc. (“CannTx”) to release celebrated cultivars to its Starseed medicinal patients.
Later in May 2021, the Company signed a Letter of Intent to acquire all the issued and outstanding shares of CannTx in an all-stock transaction. A definitive agreement was executed in July 2021, and renowned craft brand Royal City Cannabis Co. will be added to the Company’s portfolio upon closing of the transaction.
In June 2021, the Company announced the sale of its fully licensed Bowmanville, Ontario leasehold and operating assets to a third-party buyer. The Company retained its high-value Starseed Medicinal brand, patient base and certain contracts and confirmed all packaging and distribution is now optimized at its Aylmer, Ontario facility which also houses the Company’s extraction hub for greater operational efficiencies.
Also in June 2021, the Company announced the expansion of Color Cannabis products into the Province of New Brunswick with products available as of July 2021, making it accessible to over 95 per cent of Canada’s retail market and available coast-to-coast.
Subsequent to quarter end, the Company announced a corporate name change and rebranding from “WeedMD Inc.” to “Entourage Health Corp.” The Company’s common shares continue to be publicly traded on the TSX Venture Exchange under the new ticker symbol “ENTG”.
Entourage confirmed the expansion of its Saturday Cannabis brand into the Province of Quebec, expanding Color and Saturday product SKUs.
Quebec market now the second largest sales market for Color Cannabis, with #3 for top-selling large format in June.
Sales through expanded Provincial boards and additional retail outlets resulted in the capture of key product milestones during the period with a 55% sequential increase in retail market share from first quarter. (Ref: Buddi Data).
Ontario added Color dried flower products to its “core strains” for its consistent availability.
Introduction of Saturday Cannabis 28 gram, large format in Quebec and British Columbia resulted in 500% sales increase of the format over first quarter; and Ghost Train Haze landed as #4 top-selling pre-roll in British Columbia.
Nine new SKUs added in Q2 with large format flower and pre-rolls for both Color and Saturday products in Alberta, BC, Ontario and Quebec.
Conference Call Details:
A conference call will be hosted by Mr. Scorsis and Ms. Carreon with management available for questions following opening remarks as follows:
Date:
Tuesday, August 10, 2021
Time:
10 a.m. Eastern Time
Dial-in Number:
Canada/USA: 1-800-319-4610. International Toll: 1-604-638-5340
Participants, please dial in and ask to join the Entourage call
Replay Dial-in:
Canada/USA: 1-800-319-6413. International Toll: 1-604-638-9010
Replay Access Code: 7459
Available after 12:00 p.m. Eastern Time, until September 10, 2021
To access our corporate video, visit us here and to access our latest investor presentation and corporate deck here.
About Entourage Health Corp.
Entourage Health Corp. (formerly WeedMD Inc.) is the publicly traded parent company of WeedMD RX Inc. a licence holder producing and distributing cannabis products for both the medical and adult-use markets. The Company owns and operates a 158-acre state-of-the-art greenhouse, outdoor and processing facility located in Strathroy, ON as well as a fully-licensed 26,000 sq. ft. Aylmer, ON processing facility, specializing in cannabis extraction. With the addition of Starseed Medicinal, a medical-centric brand, Entourage has expanded its multi-channeled distribution strategy. Starseed’s industry-first, exclusive partnership with LiUNA, the largest construction union in Canada, along with employers and union groups complements Entourage’s direct sales to medical patients. In July 2021, Entourage signed a definitive agreement to acquire craft cultivator CannTx Life Sciences Inc. which operates out of its state-of-the-art micropropagation and specialty extraction facility in Guelph, Ontario. Upon the expected closing in late August 2021, craft brand Royal City Cannabis will be added to Entourage’s elite product portfolio. The Company maintains strategic relationships in the seniors’ market and supply agreements with Shoppers Drug Mart as well as eight provincial distribution agencies where adult-use brands Color Cannabis and Saturday Cannabis are sold. Entourage is also the exclusive Canadian producer and distributor of award-winning U.S.-based wellness brand Mary’s Medicinals sold in both medical and adult-use channels.
Follow Entourage and its brands on LinkedIn
Twitter: Entourage, Color Cannabis, Saturday Cannabis & Starseed
Instagram: Entourage, Color Cannabis, Saturday Cannabis & Starseed
For further information, please contact:
For Investor Enquiries:
Valter Pinto
Managing Director
KCSA Strategic Communications
1-212-896-1254
entourage@kcsa.com
For Media Enquiries:
Marianella delaBarrera
SVP, Communications & Corporate Affairs
416-897-6644
marianella@weedmd.com
Forward Looking Information
This press release contains "forward-looking information" within the meaning of applicable Canadian securities legislation which are based upon Entourage's current internal expectations, estimates, projections, assumptions and beliefs and views of future events. Forward-looking information can be identified by the use of forward-looking terminology such as "expect", "likely", "may", "will", "should", "intend", "anticipate", "potential", "proposed", "estimate" and other similar words, including negative and grammatical variations thereof, or statements that certain events or conditions "may", "would" or "will" happen, or by discussions of strategy. The forward-looking information in this news release includes, but is not limited to, statements in respect of the Company’s projected revenue for the three months ended June 30, 2021
The forward-looking information in this news release is based upon the expectations, estimates, projections, assumptions and views of future events which management believes to be reasonable in the circumstances. Forward-looking information includes estimates, plans, expectations, opinions, forecasts, projections, targets, guidance or other statements that are not statements of fact. Forward-looking information necessarily involve known and unknown risks, including, without limitation, risks associated with general economic conditions; adverse industry events; loss of markets; future legislative and regulatory developments; inability to access sufficient capital from internal and external sources, and/or inability to access sufficient capital on favourable terms; the cannabis industry in Canada generally; the ability of Entourage to implement its business strategies; the COVID-19 pandemic; competition; crop failure; and other risks.
Any forward-looking information speaks only as of the date on which it is made, and, except as required by law, Entourage does not undertake any obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for Entourage to predict all such factors. When considering this forward-looking information, readers should keep in mind the risk factors and other cautionary statements in Entourage’s disclosure documents filed with the applicable Canadian securities regulatory authorities on SEDAR at www.sedar.com. The risk factors and other factors noted in the disclosure documents could cause actual events or results to differ materially from those described in any forward-looking information.
Financial Outlook
This news release contains a financial outlook within the meaning of applicable Canadian securities laws. The financial outlook has been prepared by management of the Company to provide an outlook for the revenue generated in the three months ended June 30, 2021 and may not be appropriate for any other purpose. The financial outlook has been prepared based on a number of assumptions including the assumptions discussed under the heading “Forward Looking Information” above. The actual results of the Company’s operations for any period will likely vary from the amounts set forth in these projections and such variations may be material. The Company and its management believe that the financial outlook has been prepared on a reasonable basis. However, because this information is highly subjective and subject to numerous risks, including the risks discussed under the heading "Forward Looking Information" above, it should not be relied on as necessarily indicative of future results.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE