Longtime Canadian cannabis producer Aleafia Health Inc. (TSX: AH) (OTCQX: ALEAF) is still experiencing growing pains as it pivots toward adult-use sales, but says better fortunes are on the way this year.
In its earnings results for the fourth quarter and fiscal year ended Dec. 31, published Monday, annual topline revenue dropped 6 per cent to $43.1 million from $45.7 million the year before.
Noting its business transformation toward a “branded cannabis provider,” Aleafia said branded net revenue rose 96 per cent to $28.7 million (80 per cent of total) from $14.6 million (33 per cent of total).
Net loss for the year was $168.6 million, up from a net loss of $249.8 million.
In the fourth quarter, sales inched up almost 2 per cent to $12 million from $11.8 million in the previous three-month period.
The firm is continuing to report steep losses, with a net loss of $71.5 million this quarter compared to $85.8 million last quarter. A significant portion of those losses were due to impairment charges.
Aleafia ended the quarter with $11.2 million in cash.
The company reported adjusted earnings before interest, taxes, depreciation and amortization of negative $2.4 million, but says it will be EBITDA-positive by the second half of the year.
“The core strategic objectives that will drive Aleafia Health to sustained profitability reflect a pivot to focus on branded cannabis revenue,” CEO Tricia Symmes said in a statement.
“Branded revenue is comprised of ‘sticky,’ recurring medical revenue at attractive gross margins and robust growth in adult-use cannabis revenue where Aleafia continues to aggressively take market share. We are focused on achieving top 10 in total [licensed producer] market share in 2022, driven by leadership in the value cannabis category.”
On an earnings call Tuesday, Raymond James analyst Rahul Sarugaser said that on a dollar basis, the firm’s adult-use market share isn’t impressive. Aleafia sits at around 1.5 per cent now, but needs to be north of 3 per cent.
“How does your road map drive you towards that sort of relevant market share?” he asked.
Symmes replied by noting that her firm had only entered the adult-use market in the second half of 2021.
“Our projections this year will help to take us north of that 3 per cent market share that you shared on,” she said.
“And really, what’s that’s going to be driven by is obviously the superior and strong brands that we’re continuing in the value category, but also with us going into larger formats that we discussed in terms of the flower, the milled product and other segments, such as vapes, in which those products were not previously launched in the first part of this year.
Symmes also said Alefia had some supply challenges in the last part of 2021, which aren’t expected to continue.