Harrow Inc (HROW) Reports 50% Revenue Growth in Q3 2023
Record revenues of $34.3 million in Q3 2023, marking a 50% increase year-over-year.
Adjusted EBITDA reached $9.2 million, a significant rise from $2.5 million in the same quarter last year.
GAAP net loss reported at $(4.4 million) with a core gross margin improvement to 78%.
Harrow Inc (NASDAQ:HROW) adjusts its 2023 financial guidance and sets optimistic expectations for 2024.
On November 13, 2023, Harrow Inc (NASDAQ:HROW) released its 8-K filing, announcing its financial results for the third quarter of 2023. The company reported record revenues of $34.3 million, a 50% increase compared to $22.8 million in the prior-year quarter, and a 2% increase over the sequential quarter. Despite the revenue growth, Harrow Inc (NASDAQ:HROW) experienced a GAAP net loss of $(4.4 million) during the quarter.
Financial Performance Overview
Harrow Inc (NASDAQ:HROW) achieved a gross margin of 71%, consistent with the previous year, while the core gross margin improved from 72% to 78%. The company's cash and cash equivalents stood at $65.6 million as of September 30, 2023. Adjusted EBITDA for the quarter was notably higher at $9.2 million, a 270% increase from $2.5 million in the prior-year quarter. This growth in Adjusted EBITDA reflects the company's ability to manage its earnings before interest, taxes, depreciation, and amortization effectively.
Operational Highlights and Challenges
Mark L. Baum, CEO of Harrow, commented on the mixed operational performance, stating,
During the third quarter, we produced record revenues, a 50% increase over prior-year revenues. However, operationally, the third quarter was a mixed bag, with some areas performing exceptionally well, like our launch of IHEEZO, and some areas underperforming, such as our Fab Five products and our compounding business.
The revenue increase was primarily driven by branded pharmaceutical products, with IHEEZO exceeding internal expectations.
However, Harrow Inc (NASDAQ:HROW) faced delays in marketing and sales efforts for the "Fab Five" products due to strategic focus on IHEEZO. Investments in compliance and operations also impacted the compounding business, which underperformed during the period. Baum remains optimistic, expecting the compounding business to return to growth in the first quarter of 2024.
Financial Guidance and Future Outlook
Due to the operational challenges, Harrow Inc (NASDAQ:HROW) has adjusted its 2023 financial guidance to revenues of $129 million to $136 million and Adjusted EBITDA of $36 million to $41 million. For 2024, the company anticipates revenues of more than $180 million, excluding contributions from TRIESENCE. Baum believes that the strategic actions taken in 2023 have positioned Harrow Inc (NASDAQ:HROW) for another record-breaking year in 2024.
Balance Sheet and Cash Flow Highlights
The balance sheet of Harrow Inc (NASDAQ:HROW) showed total assets of $286.1 million as of September 30, 2023, compared to $157.4 million at the end of 2022. The increase in assets is primarily due to the growth in both current and other assets. Total liabilities stood at $210.7 million, with loans payable, net of unamortized debt discount, accounting for a significant portion at $182.2 million.
The company's cash flow statements revealed a net decrease in cash and cash equivalents of $(30.7 million) for the nine months ended September 30, 2023. This change was primarily due to significant investing activities, partially offset by financing activities.
In conclusion, Harrow Inc (NASDAQ:HROW)'s third quarter of 2023 showcased substantial revenue growth and a significant increase in Adjusted EBITDA, despite facing operational challenges. The company has adjusted its financial outlook for the remainder of the year and provided an optimistic forecast for 2024. Investors and stakeholders are encouraged to review the detailed financial results and future expectations outlined in the company's Letter to Stockholders and corporate presentation available on the Harrow website.
Explore the complete 8-K earnings release (here) from Harrow Inc for further details.
This article first appeared on GuruFocus.
