Hill Incorporated Releases Fiscal Year 2024 and Q4 Results

October 28, 2024 at 16:30 PM EDT

Highlights for the Year

Through significant operations and cost management, Hill narrowed the net loss for the full fiscal year 2024 by 23% vs. FY2023, despite declines in revenue.
Hill made significant strides in FY2024 to expand the base of US DehydraTECH customers through its commercialization partner Dehydr8, LLC.
- Major multi-state operator MariMed Inc. launched products in Q2 and continued development and rollout of DehydraTECH-powered product initiatives through the fiscal year. MariMed now has brands being powered by DehydraTECH in Massachusetts, Maryland, Delaware and Illinois, with more states on the horizon.
- Another exciting multi-state operator, Greenlight Dispensary finalized launch plans for multiple new DehydraTECH-powered products with Dehydr8 in Missouri in Q4, with subsequent launch in Q1 FY2025.
- New licensee Drecisco Farms launched new Sweet Buzz’ DehydraTECH-powered products in Illinois in Q4.
To support their continued development of the US market, Hill expanded the licensing rights of its DehydraTECHcommercialization partner Dehydr8, LLC to extend to all legal US states.
Hill amended its licensing fee structure with legacy DehydraTECH licensee 1906 to support 1906’s evolved go-forward strategies and growth agenda. The new agreement includes revenue reductions and write-downs for Hill that impacted FY 2024 financial performance.

Q4 Highlights

Q4 net revenues were relatively flat (-2%) compared to year ago, with cost reductions driving a significant improvement to net loss YoY (-36%)

Toronto, ON — October 28, 2024 — TheNewswire – Hill Incorporated, formerly Hill Street Beverage Company Inc. (TSXV: HILL) ("Hill” or the "Company"), announces today that it has released its audited financial results for the three-month period (“Q4 2024”) and year ended June 30, 2024 (“FY 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 audited data for FY2024.

FULL YEAR FY2024 HIGHLIGHTS

Through significant operations and cost management, Hill narrowed the net loss for the full fiscal year 2024 by 23% vs. FY2023, despite a decline in revenue.

Significant focus on cost management resulted in narrowing of the net loss for FY 2024 by 23%, building on the 18% improvement in FY 2023 vs. FY 2022. This narrowing of the loss was achieved despite a 23% reduction in net revenue. The net revenue decline was driven by the combination of (i) reductions in licensing revenues received from DehydraTECH licensees due to renegotiated fees and declines in category pricing in the evolving US cannabis industry, and (ii) shifts in the timing of inventory arrivals affecting when revenue is recognized in Hill’s transformed, more efficient alcohol-free business model.

As explained previously, improvements made to Hill’s forecasting and inventory management systems in the alcohol-free wine business have now allowed for a reduction in the overall alcohol-free wine inventory held onshore to drive efficiency. Since revenue is now recognized when larger orders are shipped directly to Hill’s Canadian distributor from their European supplier, revenue now varies more dramatically simply based on inventory arrivals.

With this transformed business model, the comparison of recognized revenues between periods is not a strong indicator of the trends in the business. Instead, depletions – i.e. sales figures from Hill’s distributor to Canadian retailers – are a better reflection of the pace of Vin(Zero) at retail. In the past 12 months through September 2024, Vin(Zero) depletions are up 5%.

Hill made significant strides in FY2024 to expand the base of US DehydraTECH customers through its commercialization partner Dehydr8, LLC. Key additions to the DehydraTECH licensee ecosystem include:

Major multi-state operator MariMed Inc. launched products in Q2 and continued development and rollout of DehydraTECH-powered product initiatives through the fiscal year. MariMed now has brands being powered by DehydraTECH in Massachusetts, Maryland, Delaware and Illinois, with more states on the horizon.
Another exciting multi-state operator, Greenlight Dispensary, finalized their launch plans of multiple new DehydraTECH-powered products with Dehydr8 in Missouri in Q4, with subsequent launch in Q1 FY2025.
New licensee Drecisco Farms launched new Sweet Buzz’ DehydraTECH-powered products in Illinois in Q4.

To support their continued development of the US market, Hill expanded the licensing rights of its DehydraTECH commercialization partner Dehydr8, LLC to extend to all legal US states.

From the initial July 2021 R&D and pilot DehydraTECH market launch in Michigan, Dehydr8 has expanded its DehydraTECH operations to seven states including Michigan, Illinois, Oregon, Massachusetts, Maryland, Delaware and Missouri. In expanding Dehydr8’s DehydraTECH licensing rights to all legal US states, Hill recognizes Dehydr8’s significant investments in a national DehydraTECH commercialization strategy and streamlines the administrative process of launching new states with multi-state operators like MariMed and Greenlight, as well as and other cannabis operators.

Hill amended its licensing fee structure with legacy DehydraTECH licensee 1906 to support 1906’s evolved go-forward strategies and growth agenda. The new agreement includes revenue reductions and write-downs for Hill that impacted FY 2024 financial performance.

Legacy DehydraTECH licensee 1906 evolved its go-forward strategies and growth agenda during FY 2024, by exiting multiple lower-performing states and consolidating their wholesale dispensary channel sales to six core states while launching a hemp-derived direct-to-consumer “Drops” product line, sold across a majority of US states.

Hill worked with the 1906 team to harmonize the licensing fee structures with their evolved business strategies, ensuring that both are working together as partners for shared success. To support continued 1906 growth, Hill agreed to revise the licensing fee terms to better match the current 1906 operations and footprint. As a result of this agreement, Hill recognized significant bad debt expense in the FY 2024 financials and reversed certain revenue in Q4 from 1906 that was recognized in prior quarters based on the higher licensing fees in the prior agreement.

Q4 FY2024 HIGHLIGHTS

Q4 revenues were relatively flat (-2%) compared to year ago, with cost reductions driving a significant improvement to net loss YoY (-36%)

Net revenues for Q4 were $473,040 compared to $484,028 for the same period a year ago. This 2% decrease reflects a few factors – (i) a reduction in DehydraTECH revenues from Hill licensee Nuka as part of the renegotiated licensing structure, offset by (ii) an increase in Dehydr8 licensing revenues vs. year ago and (iii) higher alcohol-free revenues vs. year ago, which are a function of the inventory planning and timing of that business.

The Company recorded a net loss of $633,183 for the three months ended June 30, 2024, compared to a net loss of $983,019 for the same period in 2023 - this represents a 36% improvement in net loss. The improvement in net loss was primarily driven by a higher impairment of intangible assets and higher stock-based compensation in the prior year’s quarter.

FULL-YEAR FY 2024 RESULTS OF CONSOLIDATED OPERATIONS

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About Hill Incorporated (TSXV: HILL)

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.

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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.

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