Canadian extracts processor Adastra Holdings Ltd. (CSE: XTRX) (FRA: D2EP) posted a solid year-over-year revenue increase for the third quarter this year, with gross revenue up to C$8.1 million from C$5.4 million.
Net revenue, which excludes excise taxes collected, was C$4.4 million, up 14% year-over-year.
While the company still posted a loss of C$642,191, that’s a 40% improvement sequentially after Adastra lost C$1 million in the second quarter.
Losses for the 2023 calendar year so far have topped C$2 million, up from the C$1.6 million that Adastra lost in the same time period for 2022.
However, Adastra did achieve free cash flow of C$1.5 million for the first nine months of the year, compared to a negative cash flow last year of C$221,000.
CEO Michael Forbes said in a statement that the year-over-year revenue increase was thanks to “an increase in throughput at our Langley facility.”
“Although we observed a dip in sales from the second quarter of 2023 due to our strategic shift towards prioritizing our in-house brands over production for third-party licensed producers, we are confident in the long-term benefits of this transition,” Forbes said. “Our in-house brand, Endgame, is in high demand, consistently securing numerous best-selling SKUS on Headset.”
Forbes said Adastra is on track to hit C$40 million in annual sales this year, and the company noted in its quarterly highlights that its Endgame brand is among top sellers in the Canadian provinces of Alberta, British Columbia, and Ontario.
The company has also been focusing on streamlining production operations and cutting costs, which helped it grow its gross profit margin by 36% in the third quarter by “increasing the economies of scale of production as well as managing the costs of inputs of production.”
Adastra also cut its operating expenses year-over-year from 38% of gross revenues to 32%, but the total spent on operating expenses increased 27% to C$2.6 million because of “increased expenditures on advertising and promotion.”
At the end of September, Adastra had C$32.4 million in total assets, including C$1.7 million in cash, against C$16.3 million in total liabilities.
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