Avant Brands, a leading producer of innovative and award-winning cannabis products, announced its audited financial results for the fiscal year ending November 30, 2023. The company showed impressive growth in gross revenue, cash flow, and adjusted EBITDA, but also reported a net loss of almost $5.2 million.
Strong Performance in Recreational and Export Markets
Avant Brands, formerly known as GTEC Holdings, operates six production facilities in BC, Alberta, and Ontario and sells its products under various brands such as BLK MKT, Tenzo, Flowr, Cognoscente, and Treehugger. The company focuses on selling high-quality flowers that it produces in-house but also engages in some business-to-business (B2B) sales and international exports.
According to its financial report, Avant Brands achieved a record gross revenue of $30.2 million in fiscal 2023, representing a 33% increase compared to fiscal 2022. The net revenue was $26.3 million, a 31% increase from the previous year. The company attributed the growth to a $1.4 million increase in recreational revenue and a $5 million increase in export/wholesale revenue.
Recreational cannabis sales accounted for 60% of the net revenue, with an average selling price of $6.31 per gram (net of excise tax). This was a slight decrease from $7.18 per gram in fiscal 2022, due to price compression in the industry and product sales. The company sells its products in various markets across Canada, including BC, Saskatchewan, Manitoba, Ontario, Quebec, and Atlantic Canada. It also sells products in Alberta through its online medical cannabis portal.
Export and B2B sales comprised 39% of the total revenue, with an average selling price of $2.64 per gram. The company completed significant sales to Israel and Australia in fiscal 2023 and is preparing to fulfill further orders with existing export clients. It is also in discussions with new potential clients in Europe and other regions. The company noted that it faced some challenges in exporting to Israel due to regulatory changes and market conditions.
Improved Operational Efficiency and Cash Flow
Avant Brands also reported a record cash flow from operations of $5.4 million, a 256% surge compared to fiscal 2022. The adjusted EBITDA was $4.4 million, a 132% increase from the previous year. The adjusted EBITDA margin (net revenue) was 17%, indicating improved operational efficiency and profitability.
The company maintained two consecutive fiscal years of positive cash flow and positive adjusted EBITDA, which is a rare feat in the cannabis industry. The company said it achieved this by focusing on cost control, operational excellence, and strategic growth.
The cost of sales was nearly $17.3 million, resulting in a gross margin of 34%. This was slightly higher than the 32% gross margin in fiscal 2022. The recreational gross margin was 48%, while the export gross margin was 35%. The overall margin was reduced by negative margin B2B sales of aged and out-of-spec products, which the company said it would phase out in the future.
The operating expenses increased by $1.8 million, or 26%, over the prior year. The company attributed this to higher regulatory fees, performance bonuses, and estimated professional and audit fees. The net loss from operations was $1.5 million, compared to a loss of $8.5 million in fiscal 2022.
Strategic Acquisitions and Integration
Avant Brands also highlighted its strategic acquisitions and integration during fiscal 2023, which it said will position the company for long-term success and shareholder value creation.
In June 2023, the company acquired Flowr Group Okanagan, a subsidiary of The Flowr Corporation, for $8.5 million. The acquisition added a 50,000-square-foot indoor cultivation facility in Kelowna, BC, and the Flowr brand to Avant’s portfolio. The company said it successfully integrated the facility and the brand and expects to generate synergies and economies of scale from the deal.
In November 2023, the company acquired Treehugger Organics, a certified organic cannabis producer in BC, for $2.5 million. The acquisition added a 10,000-square-foot indoor facility and the Treehugger brand to Avant’s portfolio. The company said it plans to leverage organic certification and the brand to capture the premium segment of the market.
The company also completed $23 million in deal financing in July 2023 and a $10 million private placement in November 2023. The company said it will use the proceeds to fund its growth initiatives, working capital, and general corporate purposes.
Outlook and Guidance
Avant Brands expressed optimism and confidence in its outlook and guidance for fiscal 2024 and beyond. The company said it expects to achieve the following:
- Increase its annual production capacity to over 12,000 kg of premium flower
- Increase its annual net revenue to over $40 million
- Increase its annual adjusted EBITDA to over $10 million
- increase its market share and brand recognition in Canada and internationally
- Launch new products and formats, such as pre-rolls, vapes, and edibles
- Pursue strategic partnerships and acquisitions to expand its footprint and portfolio
Norton Singhavon, Founder and CEO, commented: “We’re thrilled by the remarkable growth across all key financial metrics during Fiscal Year 2023, showcasing our dedication to strategic excellence and operational efficiency. The successful integration of the Flowr Group Okanagan sets the stage for even greater success in Fiscal Year 2024 and beyond, bolstering our expansion efforts and strengthening our position on a global scale. Additionally, the two strategic acquisitions we made during Fiscal Year 2023 underscore our commitment to long-term success and maximizing shareholder value in a dynamic market. We look forward to delivering more value to our customers, partners, and shareholders in the coming year.”