“As the legal cannabis market in North America continues to mature, Humble remains agile and focused on providing a leading solution for brands to scale quickly and retailers to focus on their customers. We are encouraged by the strong revenue growth we saw this quarter from our Canadian operations, which was driven by our expanding cannabis brands partnerships and higher margin sales from our accessory portfolio. We have made huge strides towards our expansion into cannabis distribution in the United States. Last week’s announcement of Johnson Brothers investment, through Green Acre, is transformative for the legal cannabis distribution market in North America. Together with our acquisition of Cabo Connection, Humble is executing upon our business strategy and readying for its launch in California.”
Mr. Toguri continued, “This past quarter was transitional for us following our public listing on the Canadian Securities Exchange. While we saw an increase in Canadian revenue, the U.S. operations saw a decrease as a result of our decision to focus the business on healthier margin sales, reducing the mix of high volume, low margin products. Aligned with our strategy to expand into cannabis distribution in the U.S., we implemented a new operating structure in October, which included headcount reductions. Our new structure reprioritizes our customers, identified redundancies and redirects resources to this opportunity. As part of these changes, in October we began the closure of our Florida warehouse, which will result in cost structure savings while consolidating shipping from our two remaining warehouses and improving customer experience. We are aggressively focused on becoming the leading cannabis distributor in North America, which we believe will ultimately deliver revenue growth and profitability.”
The Company announces that on December 3, 2021, President of Canadian Distribution and Founder of BobHQ Robert Ritchot, will be retiring and stepping away from his position with Humble. Mr. Ritchot will continue his role on the Board of Directors. The Company wishes to thank Mr. Ritchot for his years of leadership and his dedication to building a strong cannabis accessories distribution company. As a passionate advocate for cannabis legalization, Mr. Ritchot’s legacy will remain strong as Humble enters its next phase of growth.
Mr. Toguri concluded, “We would like to thank Bob as he heads into retirement from Humble for his years of dedication and leadership. We wish him all the best in his future endeavors. As we head into 2022, I am confident that Humble is well positioned to continue to bridge the gap between cannabis brands, accessory producers, and the growing retail market in North America. We remain focused on increasing sales, driving margin growth, and maximizing financial performance for our shareholders.”
Revenue for Q1 2022 was $18.1 million, compared to $19.4 million in Q1 2021. The decrease in revenue was due to a decline in sales as management in the U.S. continues to focus on selling high margin products with competitive pricing and discounting tactics. Humble’s Canadian operations experienced revenue growth of $8.6 million, a 27% increase year-over-year as a result of the expansion of sales agency partnerships, along with higher margin sales from its core accessories business.
Gross profit for Q1 2022 was $4.2 million, which resulted in a gross margin of 23%, compared to $3.2 million, or a gross margin of 17%, year-over-year. The $1.0 million improvement in gross margin from the prior quarter was offset by $1.5 million pressure in operating expenses.
Adjusted EBITDA for Q1 2022 was $(1.3) million, compared to $(0.8) million for Q1 2021. Changes in year-over-year adjusted EBITDA were driven primarily by one-time adjustments in the fair value of the derivative liability for the convertible debenture and fluctuations in the foreign exchange gain/loss for each period.
Net loss for Q1 2022 was $1.7 million, or $0.02 per diluted share, compared to a net loss of $4 million, or $0.07 per share, for Q1 2021. The improvement in net losses year-over-year for the quarter is due to the settlement of the convertible debenture on June 14, 2021 resulting in nil accretion and fair value adjustment.
Humble & Fume Inc. is a leading North American distributor of cannabis and cannabis accessories, supported by a customer-centric sales team and strong fulfillment infrastructure. As the only fully-integrated cannabis distribution solution, Humble bridges the gap for retailers, licensed cannabis producers, multi-state operators, and cannabis consumers to maximize sales penetration, and increase financial performance. With over 20 years of North American operating experience, Humble has cultivated extensive vendor and customer relationships, distributing premium cannabis consumables and consumption devices. The Company is comprised of four subsidiaries that represents its vertical integration across North America: B.O.B. Headquarters Inc. / Humble+Fume, Windship Trading LLC, Humble+ Cannabis Solutions and Fume Labs Inc.
EBITDA and Adjusted EBITDA are financial measures that are not defined under IFRS. We define EBITDA as net income (loss), or “earnings”, before interest, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA before: (i) finance expenses (ii) fair value adjustments; (iii) share-based compensation expense; and (iv) foreign exchange (gain) loss. We believe Adjusted EBITDA is a useful measure to assess the performance of the Company as it provides more meaningful operating results by excluding the effects of expenses that are not reflective of our operating business performance and other one-time or non- recurring expenses, and also provide additional perspective and insights when analyzing the core operating performance of the business. These supplemental non-IFRS financial measures should not be considered superior to, as a substitute for or as an alternative to, and should only be considered in conjunction with, the IFRS financial measures presented herein.
This news release contains "forward-looking information" within the meaning of applicable securities laws relating to the Company’s growth and strategic plans for each of its business segments, including distribution of cannabis in the United States and the strategic focus in the United States, as well as expected future results. Any such forward-looking statements may be identified by words such as "expects", "anticipates", "intends", "contemplates", "believes", "projects", "plans" and similar expressions. Readers are cautioned not to place undue reliance on forward-looking statements. Statements about, among other things, Humble & Fume Inc.'s strategic plans including future growth opportunities and strategies in the United States are all forward-looking information. These statements should not be read as guarantees of future performance or results. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance, or achievements to be materially different from those implied by such statements. Although such statements are based on management's reasonable assumptions, there can be no assurance that such forward-looking statements will occur as described herein. The Company assumes no responsibility to update or revise forward-looking information to reflect new events or circumstances or actual results unless required by applicable law. Readers are encouraged to refer to the Company’s disclosure available on its SEDAR profile (at www.sedar.com) for information as to the risks and other factors which may effect the Company’s business objectives and strategic plans.