“I want to acknowledge the effort made by our prior leadership team,” said CEO Jakob Ripshtein. “The past twelve months was a challenging adjustment period for our business.”
In Q2, the company saw a quarter-over-quarter revenue increase of 177% in its California cannabis distribution business. Operating expenses decreased by $2 million or 30% year over year in the North American accessories and Canada cannabis business and decreased by $3.5 million or 27% for the six months year over year. However, increased costs of $4.4 million and $8.5 million relating to expanding the California cannabis distribution business for three and six months, respectively, offset these savings.
“The progress we have made in addressing our inventory concerns is encouraging, but we are confident there is more we can do in this area,” said Mr. Ripshtein.
Gross margin improved to 17.1% compared to 11.9% in Q1 2022, thanks to driving efficiencies in the North American accessories business that reduced overall inventory by 14% or $1.5 million.
Mr. Ripshtein continued, “Our focus on margin-enhancing products and opportunities includes the introduction of a proactive, rigorous approach to address inventory levels further. We will concentrate on high-velocity, margin-enhancing SKUs, which are expected to provide working capital and gross profit benefits.”
The company’s new leadership team is focused on accelerating the growth of the cannabis business, driving change management to develop effective and efficient operations, margin enhancement within the North American accessories business, and prioritizing white-label offerings to deliver a differentiated service to customers that generate accretive margins.
Mr. Ripshtein concluded, "Our commitment to providing the best possible service to our customers goes hand in hand with ensuring that we are disciplined in addressing the task at hand inside our business. We must accelerate growth opportunities, drive efficiencies at every touchpoint, and deliver long-term shareholder value.”
The financial statements, notes to the financial statements, and Management’s Discussion and Analysis for the six and three months ended December 31, 2022, are available on the SEDAR website at www.sedar.com.
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 subsidiaries that represents its vertical integration across North America: Humble+Fume, B.O.B. Headquarters Inc., 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) fair value adjustments on biological assets and fair value adjustments on sale of inventory; (ii) share-based compensation expense; (iii) RTO listing expense; and (iv) goodwill impairment losses. 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 proposed listing on the CSE, the focus of the Company’s business, and intentions of those subject to early warning disclosure requirements. 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.
Matthew McKay, CFO
Humble & Fume, Inc.