HBORF - COVID Causes Harborside Revenues To Fall Misses Estimates Keeps Guidance
Harborside Inc. (CSE: HBOR) (OTCQX: HBORF) reported its financial results for the first quarter ending March 31, 2021, after the market close on Monday. Harborside reported that its net revenues fell 9% to $12.4 million versus last year’s $13.7 million for the same time period. This missed the Yahoo Finance average analyst estimate for revenues of $13.65 million. The company blamed the decline on decreased store traffic due to COVID-19 restrictions, however, there were also declines in the wholesale business related to lower yields. The net losses for the quarter grew 21.9% to $2.9 million from last year’s $2.3 million.
“Our Q1 results reflect the strength of our business as we demonstrated sustained profitability while we executed on the opportunity to scale up our cultivation activities, improve the breadth and depth of our product portfolio, and expand consumer access to our retail stores,” said Matt Hawkins , Chairman of Harborside. “Throughout the quarter, we continued to build Harborside’s management team with a focus on operational strength and deep industry experience which, together with our strong balance sheet, has positioned Harborside with both the resources and depth of talent to execute on our California focused growth strategy.”
Revenue Breakout
Harborside’s retail operations saw its net revenues drop 2% to approximately $10.0 million for the quarter. Gross margins improved from 51.3% to 55.0% on a year-over-year basis. The company said in a statement, “While retail revenue has been supported by improved in-store merchandising and a focus on selling more items that are produced in-house, it was hampered somewhat in Q1 2021 by decreased in-store foot traffic due to COVID-19 capacity restrictions in California , particularly in Alameda County .” On a positive note, Harborside’s retail stores branded products represented 5 of the top 10 selling SKUs in Q1 2021.
Harborside’s wholesale operations net revenues dropped 31% to $2.4 million for the quarter. The company attributed the decline to a lower-than-expected flower yield from Harborside’s cultivation/production facility in Salinas, California , which was caused by several factors, including a delay in completing the planned greenhouse capital improvements due to a COVID-19 related disruption in the supply chain for grow light fixtures; a weather event which damaged the roof over a portion of the flower canopy; and, a subsequent infestation of non-beneficial insects, which was addressed through implementing a more robust plan for how pests are managed. The aforementioned events affected harvests and limited the overall supply of sellable flower during the quarter.
Mr. Hawkins added, “With adult-use consumer sales officially underway at our San Leandro retail store, as well as a new, more conveniently located store expected to open in the second half of the year, and our strong pipeline of acquisition opportunities under review, we have built a strong foundation to accelerate our growth and drive strong value for our shareholders.”
Looking Ahead
In January 2021 , Harborside announced that for the full year of 2021, it expects standalone gross revenues of between $68.0 to $72.0 million . The anticipated increase in revenues for 2021 is expected to be derived from improved retail pricing combined with continued increases in both flower yields and processing efficiencies from the company’s wholesale operations. In addition, the company said it expects an Adjusted EBITDA in the range of 15% to 17% of net revenues for 2021. Management expects to attain this higher level of Adjusted EBITDA in 2021 through more efficient procurement of goods sold and stronger cost discipline on overhead spend.