Fuelled by a string of acquisitions and strong organic growth, Ottawa-based cannabis firm Origin House posted a 500 per cent jump in revenues in fiscal 2018, the company said Monday.
In one of its last earnings reports as an independent entity, Origin House (CSE:OH) – which announced at the end of March it was being acquired by Chicago-based Cresco Labs in an all-stock deal worth $1.1 billion – reported total revenues of $18.7 million last year, up from $3.1 million in 2017.
The Ottawa firm, which finances and invests in cannabis ventures and operates one of the largest pot distribution networks in California, also ramped up its spending in fiscal 2018 as it continued its aggressive expansion push and boosted its sales and marketing budget from about $1.5 million in 2017 to more than $8 million last year.
Origin House’s overall operating expenses were $36.2 million last year, a 173 per cent increase over 2017’s total of $13.3 million. The firm posted a net loss of slightly more than $9 million, about the same as a year earlier.
Meanwhile, the company reported fourth-quarter revenues of $7.9 million, up 638 per cent from $1.1 million it posted in the same three-month period in 2017. It posted a net loss of almost $6.2 million, up from $1.2 million a year earlier.
Cresco’s acquisition of Origin House, which remains subject to regulatory and shareholder approval, is expected to close by the end of June. If the deal is approved, Origin House shareholders would own roughly 20 per cent of the combined entity.
In a statement on Monday, Origin House CEO Marc Lustig said the proposed merger will create a “powerhouse” pot distribution company. The two companies exist in a similar space in the burgeoning U.S. cannabis market, operating as licensed growers, creating and distributing branded products for dispensaries across the country and running their own retail outlets.
“The combined entity will be a U.S. distribution powerhouse, with a growing portfolio of over 50 brands on the shelves of over 725 dispensaries across 11 states,” Lustig said. “In the coming months, we will work side-by-side with the Cresco team to accelerate recognition and sales for our combined brand portfolios across the U.S., and in the process, continue to build substantial shareholder value.”
Origin House, which employs about a dozen people in Ottawa, burst on the cannabis scene a few years ago as CannaRoyalty, looking to acquire promising pot firms in an uncertain industry with a patchwork of laws and regulations scaring off institutional investors but opening opportunities in the grey areas.
CannaRoyalty sold itself as a vehicle for investors to legally get exposure to the burgeoning cannabis market in Canada as well as the United States, where it remains federally illegal to invest directly in pot firms.
Origin House shares were up 11 cents to $12.74 in late-morning trading on the Canadian Securities Exchange.
– With files from Craig Lord