• 21% Increase in DehydraTECH Licensing Revenues vs. Same Quarter Year Ago 

• Added Major New DehydraTECH Licensing Deal with Leading Multi-State Operator MariMed Inc., the Result of Significant Product RD and Manufacturing Development Efforts in the Quarter 

• 5% Growth in Vin(Zero) Alcohol-Free Wine Depletions (Case Sales from Distributor to Canadian Retailers) for the Fiscal Year to Date vs. Same Period Year Ago 

• Secured Major New Vin(Zero) Retail Distribution, Adding the Largest Grocery Retailer in Western Canada - Save-On-Foods - to Our Base of Vin(Zero) Customers 

• Narrowed Net Loss for the Period by Almost Half, Improving a Full 49% vs. Same Quarter Year Ago 

Toronto, ON - TheNewswire - November 29, 2023 - Hill Incorporated, formerly Hill Street Beverage Company Inc. (TSXV:HILL) (OTC:HSEEF) ("Hill” or the "Company"), is pleased to announce that it has released its financial results for the three-month period ended September 30, 2023 (“Q1 2024”), which can be found at www.sedarplus.com.  The progressive bioscience implementation company is dedicated to building pathways to better and healthier living by leveraging deep CPG expertise to commercialize leading-edge technologies, crafting superior cannabis solutions and non-alcoholic beverage products globally. The financial information summarized in this press release is based on data from Q1 2024.  

 

21% Increase in DehydraTECH Licensing Revenues vs. Same Quarter Year Ago

Our DehydraTECH licensing revenues (in USD) increased 21% in the quarter vs. year ago, as our strong ecosystem of licensees continued to drive sales in their existing state footprints and licensee 1906 expanded their DehydraTECH-powered ‘Drops’ products to New York.

Subsequent to the quarter end, 1906 also launched an exciting new direct-to-consumer (DTC) initiative across a majority of US states, offering hemp-derived Delta-9 THC micro-dose versions of their popular ‘Drops’ products, which are also produced using DehydraTECH.  This DTC launch expanded access of 1906 Drops varieties to a much broader footprint of consumers, adding DTC distribution across approximately 36 states to the current dispensary availability of the higher dose, marijuana-derived delta-9 THC 1906 Drops in Colorado, Illinois, Massachusetts, Michigan, Missouri, New Jersey, New York, Oklahoma, and Pennsylvania. More information on 1906’s products can be found at https://1906.shop/.

Added Major New DehydraTECH Licensing Deal with Leading Multi-State Operator MariMed Inc., the Result of Significant Product R&D and Manufacturing Development Efforts in the Quarter

 

The quarter was also a period of intensive R&D, product and commercial manufacturing development, culminating in the November 16, 2023 announcement that leading multi-state operator MariMed will use the patented DehydraTECH biodelivery technology to power the next generation of cannabis edibles sold under several of its award-winning brands.  

Over the next few months, MariMed will roll out the improved DehydraTECH products, including ‘Vibations™’ all-natural, full-spectrum cannabis drink mix and ‘K Fusion™’ chewable tablets, in Massachusetts, Maryland, Illinois, and Delaware.

 

This new addition to our DehydraTECH licensee ecosystem represents continued expansion by Hill on the key factors driving the growth agenda of our DehydraTECH licensing business:

1. new licensees– increasing our base of active licensees and brands; 

2. new states– new state launches expanding the geographic coverage for active licensees or brands;  

3. new product form factors– innovation to expand the number of DehydraTECH-powered consumer product forms and types in market to fill consumer needs and occasions; and  

4. deeper penetration of products across operations– driving deeper penetration of the breadth of product forms and brands across current and new states. 

 

The following chart shows the significant advances we have made year-over-year in the DehydraTECH licensing business, beginning from the December 2020 rights acquisition through December 2023 (expected).

 

5% Growth in Vin(Zero) Alcohol-Free Wine Depletions (Case Sales from Distributor to Canadian Retailers) for the Fiscal Year to Date vs. Same Period Year Ago

 

As outlined in earlier communications, we transformed our Vin(Zero) alcohol-free wine business model at the end of FY 2022, with major adjustments across all the key areas of production planning, shipping and logistics, warehousing, sales and retail distribution.  These changes have led to several key positive financial impacts:

• shortened our order-to-cash cycle; 

• reduced the level of working capital that we hold in finished goods inventory;  

• reduced warehousing and transportation costs with streamlined distribution; 

• Reduced the need for more expensive temperature-controlled containers for our products as our forecasting, operations planning, and inventory logistics models create a more efficient shipping cycle. 

 

As also previously communicated, this new streamlined commercial model creates a new and different cadence to the business.  More dramatic periodic swings in both our inventory order patterns and our recognized revenues are planned based on more efficient supply chain logistics, and the business results must be looked at differently across longer time frames. We now place inventory procurement orders less frequently, but more rapidly convert those orders to revenues on the P&L and cash on the balance sheet.  

As we expected, there were no major shipment arrivals nor their resulting recognized revenues in this quarter, reflecting the continued new cadence of the business.  Last year in the same quarter we did receive a replenishment shipment of one of our SKUs that was reflected in Q1 revenues, so our recognized revenues this year are down 95% in the quarter.  However, we have already received shipment of a large order that will be reflected in revenues for the FY2024 Q2 period ending December 31, 2023.

As we adapt to the new cadence of shipments and revenues, a key measure of the underlying business in this new model is our case depletions, which are the sales figures from our distributor to retailers.  Case depletions have increased 5% for the fiscal year to date, recovering well from the price increase we implemented last summer that eliminated one of our key merchandising programs at a major retailer.  The increase in depletions shows the continued core growth of the business, demonstrating two important sales trends for this business:

1. New IWSR data shows no/low-alcohol consumption will increase by a third in 10 markets including Canada by 2026, spearheaded by the growth of no-alcohol products1; and 

2. Vin(Zero) is the #1-selling brand of alcohol-free wine in the two largest grocery retailers in Canada. 

 

Secured Major New Vin(Zero) Retail Distribution, Adding the Largest Grocery Retailer in Western Canada - Save-On-Foods - to Our Base of Vin(Zero) Customers

 

In addition to our core organic results in FY 2024 to date, we also secured a major new account in Q1, adding Save-On-Foods to our customer base.  Save-On-Foods is Western Canada’s largest grocery retailer2, with a dynamic history dating back to 1915.  Their Wholesale Division also services Choice Markets, Quality Foods, Georgia Main, AG Foods, Buy-Low Foods & Calgary Co-Op.  In total, this placement provides new consumer access to Vin(Zero) through approximately 165 Save-On-Foods stores across British Columbia, Alberta, Saskatchewan, Manitoba and the Yukon Territory.  We are excited about this new additional new business and its impact in future quarters, on top of our strong existing base of customers.

Narrowed Net Loss for the Period by Almost Half, Improving a Full 49% vs. Same Quarter Year Ago

On a consolidated basis, net revenue declined 36% for the quarter vs. year ago, due as noted to the differing timing of alcohol-free wine shipments and revenue timing patterns between the two years. Despite this decline, gross profit for the quarter declined only 8% vs. year ago, clearly demonstrating the positive impact of the more profitable DehydraTECH licensing business on gross profit.  These revenue results, combined with the significant cost reduction measures we have taken have resulted in the net loss for the period improving a full 50% vs. year ago, decreasing from $645,871 to $327,938.

For the Company’s full financial statements and a comprehensive Company update by way of its Management Discussion and Analysis, please visit the Company’s profile at www.sedarplus.com.

 

About Hill Incorporated (TSXV: HILL) / (OTCQB: HSEEF)

 

Hill Incorporated is a progressive bioscience implementation company that is dedicated to building pathways to better and healthier living by leveraging our deep CPG expertise to commercialize leading-edge technologies to craft superior cannabis solutions and non-alcoholic beverage products globally. Our Hill Avenue Cannabis business unit is pioneering the space where craft consumer products meet bioscience by combining our deep CPG commercialization expertise with our rights to use Lexaria Bioscience Corp’s ground-breaking DehydraTECH patent portfolio for product development, licensing and B2B and B2C sales of cannabis ingredients or products on a global scale. Our Hill Street Beverages business unit represents the Company’s legacy alcohol-free consumer beverage marketing and distribution business.

 

For more information on our business activities visit www.hillincorporated.com, to learn more about our DehydraTECH cannabis biodelivery technology, go to www.dehydratech-thc.com, or to check out Hill Street Beverage’s award-winning alcohol-free wine line-up and order product to be delivered straight to your home, go to www.hillstreetbeverages.com.

 

If you wish to sign up for the Hill Incorporated mailing list, click HERE.

 

For more information, contact:

Craig Binkley, Chief Executive Officer

Email: craig@hillincorporated.com

Phone: 604-609-6154

 

FORWARD-LOOKING STATEMENTS

 

Statements in this press release may contain forward-looking information. Any statements in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as “may”, “should”, “would”, “anticipate”, “expects”, and similar expressions. The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances, such as future availability of capital on favourable terms, may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company. The reader is cautioned not to place undue reliance on any forward-looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement. The forward-looking statements contained in this press release are made as of the date of this press release. The Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as required by securities law.

 

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

1 https://www.theiwsr.com/no-and-low-alcohol-category-value-surpasses-11bn-in-2022/

2 Source: Save-On-Foods