Aleafia Health Inc.

For the quarter ended December 31, 2022, total revenue increased 23% year over year to $14.8 million from $12 million, and total net revenue increased 23% to $10.8 million from $8.8 million. Branded cannabis net revenue increased 20% to $10 million from $8.3 million, and adjusted EBITDA was $0.4 million versus a loss of $2.4 million in the prior-year period, an improvement of $2.8 million. Gross profit margin was 37% compared with 27% a year ago. Adjusted SG&A fell 51% to $3.8 million from $7.8 million. For fiscal 2023, management updated net revenue guidance to $44 million-$46 million, gross profit margin guidance to 32%-38%, and adjusted EBITDA guidance to a range of a $0.5 million loss to a $0.5 million gain. Year to date, total net revenue was $33.5 million and gross profit margin was 31%.

CEO Tricia Symmes framed the quarter as evidence of a broad turnaround, repeatedly describing the business as having undergone "financial outperformance" and "monumental transformation." She emphasized that Aleafia has moved faster than prior expectations, delivered a second straight quarter of adjusted EBITDA profitability, and is building toward sustainable profitability through branded products, international expansion, and cost discipline. Her tone was confident and proud, with a strong focus on execution and the idea that the company has made difficult structural changes that are now showing up in results.

CFO Matt Sale highlighted the financial progress with specific figures: revenue up 23% to $14.8 million, net revenue up 23% to $10.8 million, gross margin at 37% versus 27%, adjusted EBITDA at $0.4 million, and adjusted SG&A down 51% to $3.8 million. He said over the last four quarters the company identified more than $16 million in annualized cost savings, including a 20% headcount reduction and $2.5 million in annualized savings from that reduction. On liquidity, he said the Grimsby sale process is ongoing and that the undrawn revolving receivables facility had a $6.8 million balance as of last Friday; those are expected to be the main sources of near-term funding. He also said the company is aiming to keep adjusted SG&A roughly flat in absolute dollars while revenue grows, and that the next profitability step is positive operating cash flow, which management hopes to work toward in the next fiscal year.

Analysts asked about the implied sequential revenue growth in Q4 despite typical seasonality, and Matt Sale said the expected Q4 net revenue growth would be 10.5% to 12.5%, with most of the contribution still coming from adult-use, medical, and international channels. When asked whether SG&A could decline further, he said the company’s goal is mainly to keep it roughly flat in absolute dollars, while letting it fall as a percentage of revenue, with any additional savings partly offset by targeted sales and marketing investment behind Divvy. On operating cash flow, he said management views that as the next level of profitability, but did not give a specific date, only saying the goal is to work toward positive operating cash flow in the next fiscal year.