Aleafia Health Implements $6.7M Annualized Cost
- $4.4 million in annualized cost reductions implemented in addition to the $2.3 million announced in February 2022
- Growing organization in Grimsby, Ontario reorganized to support anticipated growth in product throughput
- Organizational realignment in the medical sector to fully integrate sales channels
- Core enterprise shared services consolidated and operated across all sales channels
- The company’s operating leverage in the first quartile among its peers(1)
- Reaffirms goal of breaking even Adjusted EBITDA in 2022 and generating net revenue of $53-63 million in that fiscal year(2)(3)
TORONTO, April 05, 2022 (GLOBE NEWSWIRE) — Aleafia Health Inc. (TSX: AH, OTCQX: ALEAF) (“Aleafia Health“or the”Company”) is pleased to provide a company update on its ongoing cost containment initiatives. The incremental cost savings identified represent an additional $4.4 million in annualized cost savings to be realized during this quarter and will help increase operational efficiencies, improve operating leverage and accelerate the path to break-even Adjusted EBITDA profitability which is expected to occur in the second half of 2022. The company also reaffirmed its guidance that it expects to achieve net revenue of dollars in the current fiscal year.
“Aleafia Health continues to deliver on its guidance and strategy, delivering record sales growth, capturing additional adult cannabis market share and now realizing significant efficiencies and additional cost reductions,” said Tricia. Symmes, CEO of Aleafia Health. “These organizational realignments have helped create a leaner, more agile workforce optimized to accelerate revenue velocity and maximize margin. This is just the beginning of building a new company whose products are focused on the most revenue-generating dried flower, pre-roll and vape branded product categories as consumers continue to express a strong interest in our Sunday Market House of Brands adult cannabis products. ”
“In 2021, the company launched a transformational organizational change that successfully identified and implemented many savings,” said Matt Sale, CFO of Aleafia Health. “During the quarter ending December 31, 2021, the Company announced a reduction in its adjusted selling, general and administrative expenses (“Adjusted SG&A”)(1) 37% to $7.1 million, compared to $11.2 million for the period ending December 31, 2020. Management continues to capitalize on this momentum with aggressive cost containment. During the quarter ended March 31, 2022, the Company identified further workforce reductions, operational efficiencies, layoffs and non-recurring costs, which together with those already implemented, total $6.7 million dollars on an annualized basis. This demonstrates the Company’s unwavering commitment to driving profitability and building a sustainable business model. We anticipate continued tailwinds to improve our margin profile and strive to achieve our adjusted EBITDA breakeven profitability target later this year. »
Organizational realignment of the medical enterprise
In the company’s fast-growing medical business, an integration initiative also identified $1.25 million in annual cost savings through operational process efficiencies and organizational realignment. These cost savings are reflected in projected annualized cost savings of $4.4 million.
“The company operates a national virtual clinic and several physical clinics serving a base of more than 20,000 active patients, and receives referrals from third-party providers. Previously, clinics operated in silos, independent of each other,” Symmes said. “By scaling and integrating them, clinics now form a comprehensive medical cannabis strategy, which is seeing strong and consistent market demand. Adoption also continues in our new markets: Quebec, veterans and third-party patient acquisition platforms. We are well positioned to continue to outperform the market where, in 2021, we saw 33% net growth in medical cannabis revenue. »
“At the 160,000 square foot hybrid greenhouse in Grimsby, Ontario, the company has improved operational efficiencies and redesigned its processes to enable its growing organization to meet our expected increasing throughput,” Sale said. “We also assessed sourcing practices, which resulted in consolidation of some vendors, which helped reduce costs.”
“Our cost structure is highly scalable and with ongoing international purchase orders exceeding overseas sales in the second half of 2021. Most recently, in March 2022, we made a new shipment of products to the German market and continue to see robust demand for our products through the end of this year,” Sale said.
“Aleafia Health has transformed from a wholesaler to a supplier of branded cannabis products,” Symmes said. “Our achievements in cost containment, organizational realignment and operational process efficiencies will enable the company to execute its strategy, generating greater market share and revenue from its branded cannabis businesses, medical and international.”
- Operating leverage is a non-GAAP measure. Non-GAAP measures are not standardized and may not be comparable to similar financial measures disclosed by other issuers. Operating leverage is calculated as follows General and administrative expenses adjusted (salaries and benefits and administrative costs excluding the Canada Emergency Wage Subsidy, accrued bonuses, vacation payouts and severance pay) as a % of net income.
- Adjusted EBITDA is a non-GAAP measure. Non-GAAP measures are not standardized and may not be comparable to similar financial measures disclosed by other issuers. Adjusted EBITDA is defined, explained and reconciled to GAAP financial measures on pages 13 and 25 of the Company’s MD&A filed on SEDAR on February 14, 2022. Net revenuea non-GAAP measure, is cannabis revenue less excise taxes.
- Please see guidance on forward-looking information below.
For Investor and Media Relations:
Matthew Sale, Chief Financial Officer
LEARN MORE: www.AleafiaHealth.com
About Aleafia Health:
Aleafia Health, a vertically integrated, federally licensed Canadian cannabis company, owns three licensed cannabis production facilities, including the first legal large-scale outdoor cultivation facility in Canadian history, and operates a strategically located distribution center, all in the province of Ontario. The Company produces a diverse portfolio of cannabis-derivative products, including oils, capsules, edibles, sublingual strips and vapes, for sale in Canada in the adult and medical markets, and seeks opportunities in some international jurisdictions. The Company owns and operates a virtual network of medical cannabis clinics staffed by physicians and nurse practitioners.
This press release contains forward-looking information within the meaning of applicable Canadian and United States securities laws. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “estimates”, “intends”, “anticipates”, or “believes”. or variations of these words and phrases or state that certain actions, events or results “could”, “could”, “would”, “might” or “will” be undertaken, occur or be achieved. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied. -understood by forward-looking information. information contained in this press release. The risks, uncertainties and other factors involved in forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information, including the risks contained in the notice. annual report of the Company filed with the Canadian securities authorities available on the Company’s SEDAR profile at www.sedar.com. Although the Company believes that the assumptions and factors used in preparing the forward-looking information contained in this press release are reasonable, undue reliance should not be placed on such information and no assurance can be given that such events will occur. within the disclosed time frame or at all. The forward-looking information included in this press release is made as of the date of this press release, and the Company undertakes no obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise, unless the applicable securities so require. legislation.