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Adastra Holdings Ltd
Symbol XTRX
Shares Issued 55,970,547
Close 2023-08-17 C$ 0.27
Market Cap C$ 15,112,048
Recent Sedar Documents

Adastra omits net Q2 P&L in NR, talks revenue

2023-08-17 15:21 ET - News Release

Mr. Michael Forbes reports

ADASTRA HOLDINGS REPORTS SECOND QUARTER RESULTS; DEMONSTRATING RECORD QUARTERLY REVENUE OF $10.9M

Adastra Holdings Ltd. has released its financial results for the three and six months ended June 30, 2023:

  • Record Q2 2023 revenue of $10.9-million, an increase of 205 per cent from Q2 2022;
  • Record Q2 2023 income from operations of $235,000, compared with a loss of $394,000 in Q2 2022;
  • Q2 2023 gross profit of $2.6-million, compared with $1.1-million in Q2 2022, an increase of 135 per cent.

"The initial half of this year marked a significant milestone for Adastra, as we achieved a 248-per-cent increase in revenue compared to the first six months of 2022. This impressive growth is a testament to the resilience and adaptability of our hardworking team," said Michael Forbes, chief executive officer of Adastra. "In Q2 2023, our focus was directed towards enhancing the efficiency and scope of operations at our centralized processing facility in Langley, B.C. Simultaneously, our team diligently undertook initiatives to amplify the recognition of our two brands, Endgame and Phyto Extractions, across Canada. Adastra's premium product range has continued to maintain its leadership position within the market, with top-selling SKUs in Alberta and British Columbia, and now includes a top-selling SKU in Ontario. Heading into the next quarter, we remain focused to set new records, maintain our market leadership across Canada and continue to generate revenue from our four primary verticals."

Key Q2 2023 financial highlights:

  • Revenue of $10.9-million in Q2 2023, compared with $3.6-million in Q2 2022, representing an increase of 205 per cent, due to a significant increase in the throughput of the Langley facility;
  • Revenue experienced a 15-per-cent increase from Q1 2023 to Q2 2023;
  • Gross profit of $2.6-million in Q2 2023, compared with $1.1-million in Q2 2022, representing an increase of 135 per cent. This was achieved by increasing the economies of scale of production as well as managing the costs of inputs of production;
  • Operating expenses as a percentage of revenue decreased from 42 per cent in Q2 2022 to 21 per cent in Q2 2023;
  • Cash position as at June 30, 2023, increased to $2-million, an increase of $103,000 from March 31, 2023. The company continues to closely monitor and manage cash;
  • Inventory levels decreased to $3.3-million at June 30, 2023, due to the company clearing out the Phyto Extractions inventory that was bought back during 2022 in connection with the termination of a legacy licence agreement. This resulted in a one-time impairment of inventory totalling $482,000;
  • Operating expenses increased 57 per cent from $1.5-million during Q2 2022 to $2.3-million during Q2 2023, which was the result of the company's expansion during the period, especially from an increase in advertising and promotion. The company raised awareness of its operational successes and incurred costs by the sales team as it expanded its reach to more provincial distributors. The company also worked to build brand awareness of the Endgame and Phyto Extractions product lines by hosting events. These investments in the brand are expected to result in higher sales for future periods.

Key Q2 2023 future-looking corporate and business highlights:

  • In-house brand Endgame ranked No. 1, No. 3, No. 4 and No. 5 of the best-selling concentrates in Alberta, according to Headset (1).
  • In-house brand Endgame ranked No. 2 and No. 3 of the best-selling concentrates in British Columbia, according to Headset (2).
  • In-house brand Endgame ranked the third-best-selling vapour pens in Ontario, according to Headset (3).
  • In Q2 2023, new SKUs (stock-keeping units) for in-house brands were accepted for listing in: Ontario, nine; Alberta, 15; and Newfoundland, two.
  • On Aug. 1, 2023, Health Canada issued a renewal of the company's controlled drugs and substances dealer's licence No. 6-1360, which remains valid for the period from Aug. 1, 2023, to July 31, 2026.

"The Adastra team continues to work on growing the company's brands by investing in promotional events, which we expect to pay off in the long term," said Lachlan McLeod, chief financial officer. "In addition, we continue to work on implementing a new inventory management system, which is anticipated to increase company-wide efficiencies in ordering, producing and shipping inventory."

Financial statements and management's discussion and analysis

This earnings news release should be read in conjunction with Adastra's interim financial statements for the three and six months ended June 30, 2023, which can be found on Adastra's issuer profile on SEDAR+.

About Adastra Holdings Ltd.

Adastra has become one of Canada's leaders in the supply and manufacturing of ethnobotanical and cannabis products for lawful adult use. It serves medical markets and engages in forward-looking therapeutic applications. With cannabis concentrate products sold through retailers at more than 1,600 locations across Canada, Adastra's Phyto Extractions and Endgame Extracts brands are now well established with a solid distribution presence. As a Health Canada-licensed facility, it specializes in extraction, distillation and manufacturing of a range of cannabis-derived products. Adastra partners with health care professionals and practitioners within the regulated environment to create products suitable for the medical cannabis market, with the ultimate aim of addressing the needs of patients.

(1) Source: Headset data, Aug. 17, 2023.

(2) Source: Headset data, Aug. 17, 2023.

(3) Source: Headset data, Aug. 17, 2023.

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