Mr. George Scorsis reports

ENTOURAGE HEALTH REPORTS SECOND QUARTER 2023 FINANCIAL RESULTS

Entourage Health Corp. has released its financial results for the three and six months ended June 30, 2023. The company reported second quarter total revenue of $13.37-million and net revenue of $10.17-million, a total revenue increase of 1 per cent and net revenue increase of 5 per cent, showing consistent year-over-year performance. The company will host a conference call to discuss its financial and business highlights on Wednesday, Aug. 30, 2023, at 10 a.m. ET.

"Through the transition to a streamlined model and our strategic collaboration with our trusted supply partner, we've achieved strong results that are driving us toward a leaner and more operationally efficient framework. We're optimizing the value of every revenue dollar, magnifying our profit margins and bolstering our cash performance. These strides enhance our financial resilience and position us to capitalize on the surging demand for our products, charting a promising path for our business growth," confirmed George Scorsis, chief executive officer and executive chair.

"In Q2, we maintained a strong commitment to enhancing operational efficiency throughout our business," highlighted Vaani Maharaj, chief financial officer of Entourage. "Our efforts translated into tangible results -- they have effectively trimmed our expense base, balancing cost reduction while maintaining product quality. This marks a transition from the previous quarter, significantly strengthening our company as we continue to stay resolute amid the ebbs and flows of the industry, underscoring our commitment to generating substantial shareholder value."

Financial highlights:

• For the quarter that ended June 30, 2023, Entourage recorded total revenue of $13.37-million compared with $13.18-million for the same quarter ended June 30, 2022, representing a 1.37-per-cent increase year-over-year.
• Gross profit before changes in fair value was $2.15-million for Q2 2023, representing an increase of $1.68-million compared with Q2 2022. This growth can be attributed to a strategic focus on operational efficiencies supported by reduced inventory writedowns in Q2 2023.
• Gross margins were 21 per cent in Q2 2023, compared with 5 per cent in Q2 2022. The improvement in Q2 2023 over Q2 2022 arises from increased automation in the production process of finished and semi-finished goods, resulting in lower direct labour costs.
• Total cost of goods sold (COGS) decreased by $1.19-million for the three months ending June 30, 2023, compared with Q2 2022. This reduction was achieved by continued efforts to optimize the company's operational platform and further automation initiatives. Notably, 19 per cent of COGS accounted for provisions and writedowns.
• Selling, general and administrative (SG&A) expenses declined 13 per cent to $6.85-million. This change was primarily driven by strategic reductions in headcount, predominantly linked to the exit of cultivation activities in March, 2023. Importantly, 19 per cent of SG&A accounts for one-time restructuring charges of $1.32-million.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) improved by $670,000 to negative $1.75-million in Q2 2023, compared with negative $2.41-million in Q1 2023, primarily driven by strategic transformation initiatives to lower costs and partly due to generating higher-margin revenue due to the company's cost-savings initiatives.

Corporate highlights during and subsequent to second quarter 2023:

• In May, a pivotal financial milestone was reached as the company successfully finalized the sale of its Strathroy facility. By divesting this asset, the company strategically strengthened the balance sheet while aligning its production infrastructure to its updated strategy. The net proceeds from the sale of the Strathroy facility paid down a significant portion of the company's senior secured credit facility with BMO.
• In June, the remaining balance of the credit facility, approximately $14.6-million, was assumed by the company's other secured lender, an affiliate of LiUNA Pension Fund of Central and Eastern Canada, which repaid the remaining balance to BMO. This step simplifies the company's debt structure, enhances financial stability, reduces debt exposure and positions Entourage for future fiscal agility.
• Additionally, in June, Entourage held its annual general meeting. All director nominees, including Mr. Scorsis, Gail Paech, Bruce Croxon, Luciano Cacioppo and Jason Alexander, were resoundingly elected, garnering a combined average shareholder approval rating of 98 per cent. Furthermore, the company's shareholders approved the reappointment of MNP LLP as auditor.
• In June, the company entered into a two-year agreement with the University of Guelph to store its genetics in vitro and research its proprietary genetics. This collaboration allows the company to ensure that proprietary genetics' safeguard, maintenance and value remain a priority.
• June marked another milestone for the company with the seamless sale, execution and fulfilment of its first international order -- an impressive 100 kilograms (kg) of bulk medicinal cannabis dispatched to Australia through a partnership with Lyphe Australia Pty. Ltd., a fully owned subsidiary of Lyphe Group Ltd. Four of the company's premium strains will now be available to medicinal cannabis patients through Lyphe, cementing the company's global market presence and accelerating its strategic growth agenda.
• In the latter part of Q2, the company issued 1.6 million deferred share units to its board of directors in line with the provisions of its omnibus equity incentive compensation plan, and were granted in lieu of specific cash compensation for services provided during the second quarter of 2023.

Commercial and sales highlights:

• The company has a record 3-per-cent national preroll market share, with British Columbia showing the strongest growth at 8.3 per cent in the second quarter.
• Color Cannabis ranks among the top-five preroll brands in Canada.
• The company launched 18 new SKUs (stock keeping units) across the Canadian marketplace, under both the Color and Saturday portfolio, in various new cultivars and formats, including: Garlic and Gas ready-to-roll, Sour Berry one-gram vape, and Ghost Fuel-infused prerolls. The company's continuing commitment to crafting distinctive products infused with unique flavours and rare cannabinoids is poised to resonate strongly with consumers.
• In conjunction with The Boston Beer Company Inc., Teapot introduced two new flavours: Good Day Iced Tea Mango Green Tea; and Good Evening Iced Tea Blueberry Chamomile.
• Introduced new dynamic brands, Dime Bag and Syndicate. These additions complement beloved offerings within the Color and Saturday Cannabis brands, propelling the company's expanding product lineup.
• The company launched an innovative and comprehensive education program tailored to enhance budtender engagement and elevate product knowledge. This program reflects the company's commitment to customer satisfaction, and dedication to creating a well-informed and knowledgeable cannabis community.
• Starseed Medicinal experienced an over 75-per-cent renewal rate. These substantial increases highlight the company's ability to attract and retain a growing customer base.
• Starseed Medicinal has expanded its medical platform, continually adding to its product portfolio. In partnership with Remidose, Starseed will introduce a range of controlled-delivery inhaler products available in both a THC (tetrahydrocannabinol) and balanced profile, exclusively for medical patients.

Conference call details

A conference call will be hosted by Mr. Scorsis and Ms. Maharaj, with management available for questions following opening remarks.

Date:  Wednesday, Aug. 30, 2023

Time:  10 a.m. ET

Dial-in numbers

Canada/United States:  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/U.S.:  1-800-319-6413

International toll:  1-604-638-9010

Replay access code:  0350

Available after 12 p.m. ET, until Sept. 30, 2023.

About Entourage Health Corp.

Entourage Health is the publicly traded parent company of Entourage Brands Corp., a licence holder producing and distributing cannabis products for both the medical and adult-use markets. The company owns and operates a fully licensed 26,000-square-foot Aylmer, Ont., processing facility. With its Starseed Medicinal medical-centric brand, Entourage has expanded its multichannelled 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. Entourage's elite adult-use product portfolio includes Color Cannabis, Saturday Cannabis, and now Dime Bag and Syndicate, sold across eight provincial distribution agencies. It is 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. Under a collaboration with the Boston Beer Company, Entourage is also the exclusive distributor of cannabis-infused beverages TeaPot in Canada. In addition, Entourage also entered into an exclusive agreement with Irwin Naturals, a renowned nutraceutical and herbal supplement formulator of popular branded wellness products sold across North America.

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