Harvest is initiating a $24M cost-cutting strategy, laying off employees

https://business.financialpost.com/pmn/press-releases-pmn/business-wire-news-releases-pmn/harvest-health-recreation-inc-continues-to-grow-into-florida-opens-gainesville-store-a-total-of-six-in-state

Bethan Rose Jenkins, Cannabis News Writer/Editorial

In spite of the U.S. cannabis industry’s unexpected success amid the COVID-19 outbreak, some companies in the legal weed space are anticipating future financial woes. One of them is multistate cannabis operator (MSO) Harvest Health & Recreation.

Based in Arizona, cannabis MSO Harvest intends on slashing outgoing expenditure to the amount of $24 million. The cannabis company’s cost-cutting solution means that an undetermined number of workers will be dismissed from their roles. Additionally, various deals have been postponed to save on funding. 

Harvest’s employee layoffs were described as a “small amount” of the company’s existing staff count, which is believed to be around 1,000 employees; according to the Phoenix Business Journal.

Cannabis MSO Harvest: Who is Harvest Health & Recreation?

Headquartered in Tempe, Arizona, Harvest Health & Recreation specializes in four main areas of the cannabis industry: cultivation, production and retail. Harvest started off as a company that educated consumers with monthly support groups and patient orientations. The company has been praised for donating more than $500,000 to charitable organizations, seniors, patients and veterans since 2013. 

Currently, cannabis MSO Harvest has established itself in eight U.S. states. Although the vertically-integrated cannabis company MSO suffered some slight setbacks in 2019 – when net losses amounted to $88.9 million during the fourth quarter (Q4 2019) – recovery is strong. Recently-published sales figures revealed that net losses were below $20 million and revenues rested at around $45 million for Q1 2020. 

Pot stock traders can see Harvest trading on the U.S. over-the-counter markets under the ticker ‘HRVSF’. as well as the Canadian Securities Exchange under the ticker ‘HARV’.

Cannabis MSO Harvest will target four major markets 

With headquarters in Arizona, it’s not surprising that cannabis MSO Harvest will focus on the state’s budding market in regards to distributing its product. However, Harvest CEO Steve White told Business Journal reporters that the company is aiming to nourish four primary cannabis markets — Arizona (operating 14 dispensaries), Florida (six dispensaries), Pennsylvania (five dispensaries) and Maryland (three dispensaries).

Those four markets, White says, will constitute 80 percent of the company’s outgoing expenditure, which is somewhere in the range of $10 million-$30 million; that’s without even mentioning the additional $15 million that the company spent during Q1 2020.

During Q1 2020, total revenue topped $45.0 million. This figure tells us that Harvest saw a 134 percent increase from the $19.2 million during Q1 2019 and, when compared with the $37.8 million earned during Q4 2019, revenue growth of 19 percent. The company’s gross profit – not including biological adjustments – recorded during Q1 2019 was $7.9 million. This grew to $16.0 million during Q4 2019 and by Q1 2020, gross profit climbed to $18.3 million.

Further insights into Q1 2020 sales of cannabis MSO Harvest

Based on financial results published by the company, gross profit margin –excluding biological adjustments – was 40.6 percent for Q1 2020. Comparatively, reported sales of cannabis MSO Harvest for Q1 2019 revealed that GPM was 41.1 percent, whereas Q4 2019 sales were 42.3 percent. 

Something that remained the same for Q1 2019 and Q1 2020 was the net loss — $20.0 million for two consecutive years. Reported losses for Q4 2019 were significantly larger at $88.9 million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) – non-inclusive of biological adjustments – during Q1 2020 was $3.9 million. For Q1 2019, cannabis MSO Harvest reported an adjusted EBITDA of $4.7 million; climbing to $6.8 million in Q4 2019.