Harvest Health Q1 In Review: Heavy M&A Action Leading Up To Earnings Call

Vertically-integrated cannabis MSO Harvest Health & Recreation Inc. HARV HRVSF announced this week it will hold an earnings call on May 20 to discuss the results of the first quarter of 2020.

The company showed significant M&A action throughout the first three months of 2020 and stated that it expects first quarter results to remain in line with the revenue growth shown in 2019.

2019: A Good Harvest

According to the Arizona-based company, total year-over-year revenue for 2019 increased 149% from $47 million in 2018 to $116.8 million.

The fourth quarter of 2019 also showed a major improvement from the previous year. Revenue for that quarter was $37.8 million, up 123% from the same period in 2018.

The company awards this growth in revenue to new and acquired retail locations and organic growth from existing retail and wholesale businesses. Gross profit for the fourth quarter of 2019 (excluding biological adjustments) was $16 million, and $42.2 million for all of 2019. Close to double from the $24.6 million of gross profit made in 2018.

Adjusted EBITDA excluding biological adjustments for 2019 was ($34.8) million, compared to $7.9 million in 2018. Net loss for the full year was $173.5 million compared to net loss of $67.5 million in 2018.

“Moving forward we believe Harvest has the assets and capital required to succeed long-term in the cannabis industry," said CEO Steve White.

Q1 2020 in Review: A Period of Consolidation and Expansion

Harvest Health didn’t waste any time after the holidays, and started 2020 with an acquisition announcement. On Jan. 2 the company announced the signing of a definitive agreement to acquire a 32,000 square foot cultivation facility in Cheyenne, Nevada, a Las Vegas suburb, for $35 million. Of the amount spent in the acquisition $30 million came was funded on December 31 2019.

On Jan. 6, the company announced the inclusion of Ron Goodson as Chief Operating Officer. 

Goodson came from serving as President and COO of Verano Holdings. The two companies were in M&A talks during 2019 but deal eventually fell through. Harvest had announced in March 2019 the intention to buy out Verano for $850 million. However, on March 26, 2020, the companies announced the merger would be suspended indefinitely.

On Jan. 7, Harvest announced it had filed a lawsuit against the R&D and brand development company Falcon International seeking to terminate the merger between the two. The company said it has fulfilled its obligations in the merger agreement, but Falcon had not produced auditable financial information.

On Feb. 14, financial firm Cantor Fitzgerald initiated coverage on Harvest Health with a Neutral rating and a $4 price target.

On March 11, Harvest announced it finalized the initial tranche of a non-brokered private placement offering of up to $100 million. The company said it had obtained proceeds from a group of investors in the total amount of about $56 million, issuing 397,162.42 multiple voting shares.

On March 16, Harvest completed the purchase of Interurban Capital Group Inc. for around $85.8 million. Once the merger is completed, the company will obtain three open retail locations and seven potential retail licenses across California, five open retail locations in Washington and two in Iowa.

Ending the quarter on a high note, Harvest announced on March 27 the acquisition of Pennsylvannya’s Franklin Labs for approximately $25.5 million. The purchase includes a 46,800 square feet cultivation and manufacturing/processing facility in Reading, Pennsylvania.

Within the same first quarter, Harvest also announced the opening of a new dispensary in Little Rock, Arkansas and the acquisition of Arizona Natural Selections, including its four vertical medical licenses in Arizona.

Moving over to Q2 2020, Harvest and Hightimes Holding Corp. announced in late April a significant new agreement, under which Hightimes Holding Corp. is expected to purchase from Harvest up to 13 California dispensaries for $80 million in a cash and stock deal.

Follow this link to access a webcast of the earnings call on May 20.

Lead image by Ilona Szentivanyi. Copyright: Benzinga.