Mr. George Scorsis reports

ENTOURAGE HEALTH REPORTS THIRD QUARTER 2023 FINANCIAL RESULTS AND POSTS $12.2 MILLION IN TOTAL REVENUE

Entourage Health Corp. has released its financial results for the three and nine months ended Sept. 30, 2023. The company will host a conference call to discuss its financial and business highlights on Nov. 28, 2023, at 10 a.m. ET.

"I am proud to announce the strategic initiatives we've undertaken to drive cost-reduction, enhance profitability and strengthen our balance sheet over the past year," stated George Scorsis, chief executive officer and chair of Entourage. "Through the consolidation of operations and the integration of advanced automation, we have not only achieved heightened efficiency but also experienced improvement in our overall financial performance. In the face of challenges within the Canadian cannabis sector, our Q3 performance reinforces our strategy, marking a pivotal moment in the ongoing narrative of Entourage's success."

Sales and revenue highlights

"Throughout the year, we've been pro-active in our approach, implementing strategic measures such as the realignment of our product portfolio," stated Vaani Maharaj, chief financial officer of Entourage. "By consistently evaluating performance, market demand and product pricing, we are demonstrating agility in the industry. Although this quarter saw a revenue decline in adult-use, the measures we have implemented are instrumental in fortifying our financial resilience and positioning us for sustained growth."

Third quarter 2023 financial highlights:

• For the quarter that ended Sept. 30, 2023, Entourage recorded total revenue of $12.2-million compared with $13.4-million for the same quarter ended Sept. 30, 2022, representing an 8.8-per-cent decrease year-over-year.
• Gross profit before changes in fair value was $2.4-million for Q3 2023, representing an increase of $7.3-million compared with Q2 2022. This growth can be attributed to a strategic focus on operational efficiencies bolstered by reduced inventory write-downs in Q3 2023.
• In Q3 2023, gross margins rose to 27 per cent, a significant improvement from the negative 49 per cent recorded in Q3 2022. This enhancement is primarily due to increased automation in producing finished and semi-finished goods, which lowered direct labour costs and contributed to improved margins compared with the same period last year.
• Total cost of goods sold (COGS) decreased by $8.6-million, or 58 per cent, to $6.4-million for the three months ending Sept. 30, 2023, compared with Q3 2022. This reduction was achieved by continued efforts to optimize the company's operational platform and further automation initiatives.
• Selling, general and administrative (SG&A) expenses declined 11.6 per cent to $6.05-million. This change was primarily related to the company's focus on reducing departmental inefficiencies and reducing headcount.
• Adjusted EBITDA declined by $1.6-million to negative $4.5-million in Q3 2023, compared with negative $2.9-million in Q3 2022.

Corporate highlights during and subsequent to third quarter 2023

Business milestones:

• Entourage amended its supply agreement with Hexo Corp., which was assumed by Aphria Inc., Tilray Brands Inc.'s operating subsidiary, after Tilray acquired Hexo. This strategic move ensures a continuous and high-quality partnership for contract growth, addressing the escalating product demand.
• The company was in breach of certain financial covenants and obligations under its senior secured credit facilities with an affiliate of the LiUNA Pension Fund of Central and Eastern Canada. The company has received a forbearance letter from the senior lender noting the company is in default of the credit facilities and temporarily waiving the company's breaches until Dec. 8, 2023, subject to the satisfaction or waiver of certain conditions. The company is collaboratively working with its senior lender to reach an agreement on a new forbearance, emphasizing its commitment to open communication and a mutually beneficial resolution.
• The company also announced that at the end of Q3 2023, in accordance with the provisions of its omnibus equity incentive compensation plan, the company authorized the issuance of an aggregate of 1.6 million deferred share units (DSUs) to non-management members of the board of directors of the company as part of the quarterly compensation for their services. The DSUs will vest on Sept. 30, 2024, and are granted in lieu of certain cash compensation for services rendered during the third quarter of 2023. Further details regarding the omnibus plan are available in the company's management information circular dated May 8, 2022, available on SEDAR+.
• Entourage significantly enhanced its preroll manufacturing capabilities, producing over 1.5 million prerolls per month. This milestone reflects Entourage's commitment to meeting the growing demand for products in the popular category.

Commercial highlights:

• Color Cannabis achieved sales growth in the preroll segment, the industry's fastest-growing category. In Q3, it maintained a top 10 position, holding the No. 6 spot. The success can be directly linked to the proactive efforts of the sales team, which has expanded product distribution in retail outlets as well as the focus on larger-format preroll packs.
• Color and Saturday Cannabis brands have unveiled enticing new product cultivars to the market, driven by consumer insights, including the launch of a new Color cultivar, Phantom Sunset, available in two product formats: a 3.5-gram whole flower and two by 0.35 g preroll, across Ontario. Notably, Saturday infused prerolls entered the market in Night Mango Diesel, a three by 0.05 g recently launched in Alberta.
• Dimebag made a significant impact with the Ontario launch of the Pocket Puffs, a four by 0.5 g preroll, swiftly becoming a top seller within the company's portfolio. Dimebag's accessible premium cannabis is resonating with consumers, driving popularity and demand across over 250 retailers in Ontario.
• The company's retail distribution remains strong despite the influx of competitor SKUs (stock keeping units), especially in larger markets, including Ontario, Alberta and British Columbia, maintaining a sizable presence, covering over 80 per cent of the retail market.
• Starseed achieved a patient renewal rate of 87 per cent for Q3 2023, demonstrating customer loyalty and commitment to providing valuable patient health care solutions.
• Additionally, Starseed introduced Remidose Micro Inhalers, revolutionary heat-free products offering a classic inhaler format for rapid onset. Both 1:1 and THC (tetrahydrocannabinol)-dominant formulations were made available, providing diverse options for patients.

Company outlook through cost restructuring

Entourage is amid a successful and continuing financial turnaround, marked by strategic decision-making and adaptive measures. Building on a comprehensive analysis of the company's business operations throughout the past year, the company executed a progressive exit from cultivation. This pivotal move has streamlined operations and yielded significant annualized cost savings. A disciplined approach to inventory management and portfolio repositioning around select market segments have aligned the company with the distribution of quality products and strong brands.

Through these initiatives, Entourage anticipates realizing larger savings, improved cost structures and accretive margins, prioritizing improved profitability. These advancements are poised to positively impact the company's performance, signalling a promising outlook in 2024.

Entourage continues to work toward the achievement of the full-year plan. The company's success is driven by the dedication of its exceptional team members, combined with the ever-growing demand for its products, positioning Entourage Health as leaders in the cannabis industry.

Conference call details

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

Date:  Tuesday, Nov. 28, 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 numbers

Canada/U.S.:  1-800-319-6413

International (toll):  1-604-638-9010

Replay access code:  0532

Available after 12 p.m. ET, until Dec. 28, 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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