Harborside (HBOR.C) is a $22 million company that operates three big dispensaries in the San Francisco Bay Area, a dispensary in the Palm Springs, a dispensary in Oregon and a cultivation/production facility in Salinas, California.
Harborside generated Q2, 2020 net retail revenue of $10.9 million and net wholesale revenue of approximately $5.2 million, for total gross revenue of $16.1 million in Q2 2020, compared to $12.5 million in Q2 2019, a 28.8% increase year-over-year.
The 142% year-over-year increase in wholesale revenues was driven by improved harvest yields and higher average prices per pound at HBOR’s Salinas Farm.
Last quarter’s gross revenue was 73% of the company’s current market cap.
Perhaps it’s not fair to compare a juvenile whippet to an arthritic water buffalo, but let’s do it anyway: Aurora Cannabis (ACB.T) just posted quarterly revenues of $72 million, which amounts to 12% of its current market cap.
Aurora would need quarterly revenues of $430 million, to reach Harborside’s 73% quarterly-revenues/market cap ratio.
Sick of the phrase “vertically integrated”?
Fine – let’s put this way: HBOR owns dispensaries, branded products and a grow-op in the world’s largest cannabis market.
In the clip below (min: 1:19) Harborside founder and current Chairman Emeritus Steve DeAngelo leads MSNBC’s Jacob Soboroff through HBOR’s California farm and dispensaries.
He also talks about his objective to “produce marijuana on a massive scale and eventually become a brand name in weed”.
On June 9, 2020 HBOR “was granted a cease trade order as a result of its financial statements not being in order,” reported The Deep Dive, “Harborside last traded at $0.60 on the CSE, and is currently halted from further trading.”
I took a while to get the paperwork submitted to the CSE, and for the CSE to review it.
The complete trading history of HBOR shows a company asphyxiating in a sector-wide cloud of cannabis-investment gloom – halted – and then perking up.
While HBOR was halted it continued to grow weed, sell weed, manufacture products and do good things in the community.
On July 3, 2020 Harborside announced a $10,000 charitable contribution to Oakland-based Peralta Colleges Foundation which serves a diverse population of over 21,000 students largely consisting of African American, Hispanic American and Asian American students.
When HBOR began trading again the beginning of September 2020, it quickly separated itself from the pack.
On September 1, 2020, Harborside reported its financial results for the period ending June 30, 2020 (Q2 2020).
Some of the key numbers were cited at the top of this article.
Additionally: the 5.3% year-over-year increase in retail revenue was driven primarily by the company’s improved product mix, selected pricing changes and higher sell-through of internally produced products.
Across Harborside’s retail stores in California, its branded products represented between seven and nine of the 20 top-selling SKUs in Q2 2020.
Retail gross margins were approximately 51.2% for the quarter, reflecting a year-over year improvement of approximately 2.5% despite increased costs for safety and staffing related to COVID-19 and inventory losses that occurred during the civil unrest that occurred in the Bay Area.
Overall gross profit for Q2 2020 was $7.6 million, resulting in a 49.7% overall gross margin, compared to approximately $4.25 million and 35.0% in Q2 2019.
Total operating expenses for Q2 2020 were $7.1 million, compared to $10.8 million in Q2 2019. The 34.2% year-over-year decrease in operating expenses is primarily related to a decrease in professional fees of $2.7 million.
HBOR believes that its Q2,2020 results indicate that the company is accelerating to profitability.
“We will continue to focus on both our cultivation and retail level initiatives, which have improved the overall product mix we sell and increased the sell through of Harborside produced products on our store shelves,” stated Peter Bilodeau, Chairman and interim CEO, “We enter the second half of 2020 with strong momentum.”
Harborside is conducting a strategic review of the business and opportunities in the marketplace to maximize shareholder value including, potential merger and acquisition opportunities and equity financings.
There is no intrinsic (guaranteed) financial benefit to investing in growing companies that are also good corporate citizens.
Despite this, according to the Globe and Mail, in 2017, “About $1.5-trillion in assets are under some kind of responsible investing strategy in Canada – up 49% from two years prior.”
“Global ethical funds grew to more than $30 trillion in 2018,” reports CNBC, “some estimates say it could reach $50 trillion over the next two decades”.
Harborside is simultaneously growing their bottom line and nurturing the fates of small businesses in their ecosystem.
“Harborside launched an initiative to highlight Black-owned cannabis brands such as Oakland Extracts, the Congo Club, Cannabis on Fire and Viola,” stated The San Jose Spotlight a month ago, “Harborside dispensaries across the state, including those in San Jose, are promoting Black-owned brands with promotional materials and displays.
Having entered the cannabis industry as a budtender, Terryn Buxston [who is black] understands how the day-to-day tasks of being a guide to customers in dispensaries can stifle people of color trying to cultivate a business.
Buxston and his business partner, Aaron Tran, own Oakland Extracts. He said he hopes Harborside’s campaign leads to upward mobility in commercial marijuana.” – End of San Jose Spotlight.
In the video below, Buxston describes his career trajectory from a Harborside bud-tender to an entrepreneur.
“Our signature Cookie Crumble wax—and everything we do—focuses on natural flavor and high potency,” explains Buxston, “We never add terps, THC or any other flavorings or additives, and everything we make is single source.
Quality over quantity.
People over profits.
Culture over commerce.
That’s Oakland Extracts”
In Q2 2020, Harborside experienced a decrease in general and administrative expenses of $300,000; a decrease in share-based compensation of $900,000.
Wholesale gross margins were 46% for the quarter, which was an improvement of approximately 52% year-over-year.
As of June 30, 2020, Harborside had about $13.6 million in cash.
- Lukas Kane
Full Disclosure: Harborside is an Equity Guru marketing client