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Aug. 29, 2022, 10:36 p.m. EDT

GABY Reports Second Quarter Results for 2022

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  • Reports revenue of $5.2 million as the Company focuses on higher margin revenue

  • Gross margin improved to 43% up from 35% over same quarter last year despite California headwinds

  • Reduced SG&A expenses by 11% in the quarter over the same quarter last year

  • Sale of Company owned brands now makes up 15% of flower sold in GABY's retail dispensary

  • New proprietary brand, Dank Space™ has become top premium flower seller in GABY's retail dispensary

  • Additional cost savings of $0.7 million annually realized from streamlining inventory management

SAN DIEGO, CA / ACCESSWIRE / August 29, 2022 / GABY Inc. ("GABY" or the "Company") /zigman2/quotes/207479053/delayed CA:GABY +50.00% (otcqb:GABLF), a California consolidator of cannabis dispensaries and the parent company of San Diego's Mankind Dispensary ("Mankind "), reported its financial and operating results for the quarter ending June 30, 2022 ("Q2 2022") All financial information is provided in United States dollars unless otherwise indicated. GABYs financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS").

Q2 2022 Financial & Operational Highlights

  • Revenue for Q2 2022 was $5.2 million, which after adjustment for the closure of GABY's wholesale distribution business, is down from $7.1 million or -26% over same quarter last year, while margins remained relatively stable at 43%.

  • Gross profit for Q2 2022 was $2.2 million which is down from $3.2 million in Q2 2021 but the gross margin is up 8% to 43% from 35% in Q2 2021. Adjusted EBITDA [1] was $0 down from $0.7 million in Q2 2021 on lower revenue as described above.

  • The net loss of $3.0 million for Q2 2022 included a $1.1 million foreign exchange loss on translation of the $25.5 million promissory note (the "Note") issued as consideration for the acquisition of the Mankind Dispensary on April 1, 2021, and was $1.7 million down from the same quarter last year.

  • In Q2 2022, the number of transactions in the delivery channel grew by 28% to 8,141, revenue grew 4% to $0.9 million, and margin remained stable at 57% as compared to Q2 2021 - despite pricing pressures and expansion of service

Management's Commentary

Wholesale flower prices in California dropped 43% over the same period last year as artificially high prices during the pandemic came down as a result of over-supply and decreased consumer demand in the market. These headwinds in wholesale flower pricing have pushed retail revenue downwards over the last 12 months as operators look to pass cost savings on to the consumer, but retail margins have remained stable due to management's ability to control supplier costs while maintaining premium services through it is focus on the customer experience, staff education, a high quality product mix and its focus on the expansion of its proprietary product offering.

Over the last 12 months, retail sales in mature markets like California saw a return to pre Covid-19 demand and consumption levels with a negative 15% variance from Q2 2021 to Q2 2022 [1] . During this same period the number of dispensaries in San Diego County increased by 44% from 45 to 65 [2] . Mankind has largely protected its customer base - generating for the 12 month period ending June 30, 2022 - 87% of the number of transactions generated in same period for the prior year.

Management has given notice to the holders of the Note of certain claims to which they believe GABY is entitled to indemnification pursuant to the Stock Purchase Agreement (the "Indemnity Claim"). Management is of the view that the Indemnity Claim has merit and is currently in discussions with the Note holders to offset the amount due under the Indemnity Claim against the principal amounts due under the Note.

Margot Micallef, Founder and Chief Executive Officer of GABY commented, "The artificially high prices and demand brought on by the pandemic have made for a challenging market as pricing and demand stabilizes to pre-COVID levels. This market will benefit the good operators. The experience our team has in running retail operations gives us an advantage over other operators with less experience and I am confident the strategies we have implemented and the operating efficiencies we have generated will result in increased revenue in the back half of the year."

"We remain relentlessly focused on managing costs, inventory turns, and cashflow," said Paul Stacey, Senior Vice-President, and Chief Financial Officer of GABY. "Now that prices and demand are stabilizing, our focus for the rest of the year is to continue to work with our supplier partners to ensure we can bring the best products to market at the best prices while continuing to keep our retail store margins stable", he concluded.

/zigman2/quotes/207479053/delayed
CA : Canadian Securities Exchange
$ 0.02
+0.0050 +50.00%
Volume: 0.00
Nov. 23, 2022 3:21p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$10.67 million
Rev. per Employee
N/A
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