The Flowr Corporation (TSX.V: FLWR; OTC: FLWPF) (“Flowr” or the
“Company”) herein announces its financial and operational results
for the second quarter ended June 30, 2020.
Key financial and operating highlights in the
second quarter of 2020:
- The Company generated gross revenue of approximately $2.9
million in the second quarter, a 7% increase vs the same period in
2019 and a 192% increase sequentially from the first quarter in
2020.
- Net revenue in the second quarter 2020 was $2.3 million, a 6%
increase vs the same period in 2019.
- Average Flowr branded price per gram in the second quarter was
$6.69 reflecting the Company’s positioning in the premium
segment. Overall average price per gram in the second quarter
was $5.88, due to bulk sales agreements entered into during the
quarter.
- 419 kgs of dried cannabis sales in the quarter was up 23% vs
the same period in 2019 and up 242% sequentially from the first
quarter in 2020. 345 kgs of sales were of the Company’s
flagship strain BC Pink Kush.
- The Company harvested a total of 1,346 kgs of dried cannabis in
the second quarter, up 193% vs the same period in 2019 and a 174%
increase sequentially from the first quarter in 2020 as all grow
rooms in the facility were being utilized after being fully
licensed by Health Canada in February. 1,196 kgs of BC Pink Kush
were harvested in the second quarter of 2020. The Company
expects to continue to increase the amount of its premium dried
flower available for sale.
- Normalized cash cost per gram was $3.58 in the second quarter,
an improvement from $4.91 in the first quarter of 2020, as the
Company began benefitting from its automated packaging line.
The Company believes more material improvements will be achieved in
the third quarter once automation is fully operational and due to
allocation of fixed costs over larger production quantities.
- SG&A of $4.6 million in the second quarter of 2020 was 16%
lower than the second quarter in 2019 and was 27% lower than in the
first quarter as the Company began seeing benefits of its global
restructuring program announced in March 2020.
- Adjusted EBITDA loss of $2.9 million in the second quarter was
a $4.0 million improvement sequentially from the first fiscal
quarter in 2020.
- The Company strengthened its financial position with the
closing of an aggregate non-brokered $21.5 million secured
subordinated convertible debenture unit private placement in two
tranches, the first on April 27, 2020 and second on June 3, 2020
(the “Offering”). Management, insiders and employees of the
Company, led by Flowr’s Chairman and CEO subscribed in excess of
$12 million to the offering.
- Insiders representing in excess of 55% of total sharecount have
signed a voluntary 1 year lock-up agreement in connection with the
Offering, in addition to any lock-ups they have currently entered
into, and have not sold a share since the Company’s inception.
- On May 14, 2020, the Company announced that it had entered into
an Equity Line and Profit Sharing Agreement (the “Partnership”)
with Terrace Global Inc. (TSX-V: TRCE) (“Terrace Global”) to fund
the development and operations of Holigen, with both parties
expecting Terrace Global to fund at least $3 million over the
course of the Partnership.
- Flowr and Terrace Global have been advancing the operations in
Europe and continue to be on track for harvesting what is believed
to be the largest outdoor THC cultivation project in the EU in the
fourth quarter of 2020. During the second quarter,
approximately 1 million square feet of cultivation space was
planted with a variety of high THC cultivars including Flowr’s
flagship BC Pink Kush.
Subsequent financial and operational highlights
post end of the second quarter:
- Flowr’s BC Pink Kush was the number 1 selling dried flower SKU
in dollar terms sold by the OCS to retailers for the trailing 1, 3
and 6 months for the period ended August 12, 2020.
- Flowr’s BC Pink Kush has not been irradiated in 18 months, a
testament to Flowr’s ability to bring quality product to
market.
- A recent consumer research report by the Brightfield Group
highlighted Flowr as the #7 ranked Brand by Awareness in Canada and
had Flowr ranked #1 or #2 in a variety of Loyalty, Brand Promotion
and Satisfaction scores among the top 10 purchased brands in
Canada. The Company expects to build on this achievement as
it continues to invest in sales and marketing.
- The Company recently received approval of its Autorite des
marches public (“AMP”) application to operate in the Province of
Quebec and expects to be in market with product by the fourth
quarter.
- The Company re-iterates its objective of becoming cash flow
positive in H2 2020 even with the uncertainty around COVID-19.
- Q3 2020 net revenue is expected to be at least 30% higher than
Q2 2020.
MANAGEMENT COMMENTARY
“We made progress against our key strategic and
financial objectives in the second quarter of 2020. Sales
momentum in our flagship BC Pink Kush continues to build. We
have leading market share in Ontario which is evidence that there
is strong consumer demand for premium dried flower despite the
increasing proliferation of value brands in the sector. We
are very excited by the progress we are making with our partners at
Terrace Global in Portugal and continue to expect a sizeable
harvest in Q4 2020 in what we believe is the largest outdoor THC
cultivation project in Europe to date. Given the sales trends
in our Canadian business we continue to believe we will become cash
flow positive in the second half of 2020,” said Vinay Tolia,
Flowr’s Chief Executive Officer.
SECOND QUARTER 2020 RESULTS
The following table summarizes the
Company’s key financial and operational results:
In thousands of Canadian dollars,
(except per share and grams metrics) |
Three months endedJune 30 |
Six months endedJune 30 |
|
2020 |
2019 |
2019 |
2018 |
Grams Harvested – K1* |
1,345,567 |
|
459,956 |
|
1,835,668 |
|
739,716 |
|
Grams Sold |
419,264 |
|
339,624 |
|
541,778 |
|
550,819 |
|
Average Net Realized Price per
Gram |
5.88 |
|
6.41 |
|
6.12 |
|
6.91 |
|
Gross Revenue |
2,960 |
|
2,761 |
|
3,972 |
|
4,573 |
|
Net revenue ** |
2,314 |
|
2,184 |
|
3,090 |
|
3,810 |
|
Gross profit (loss) before fair
value adjustments |
(1,043 |
) |
70 |
|
(2,666 |
) |
184 |
|
Selling, General and
Administrative expense |
4,417 |
|
5,268 |
|
10,436 |
|
8,969 |
|
Share-based compensation |
745 |
|
3,491 |
|
1,602 |
|
5,594 |
|
Net income/(loss)** |
(5,438 |
) |
11,159 |
|
(17,930 |
) |
5,161 |
|
Basic earnings/(loss) per
share |
(0.04 |
) |
0.13 |
|
(0.13 |
) |
0.08 |
|
Diluted earnings/(loss) per
share |
(0.04 |
) |
0.08 |
|
(0.13 |
) |
0.05 |
|
Cash used in investing
activities |
(6,013 |
) |
(14,195 |
) |
(10,036 |
) |
(26,840 |
) |
Cash from financing
activities |
20,876 |
|
16,288 |
|
24,452 |
|
18,397 |
|
|
|
|
|
|
* Excludes trim**
Net of excise tax, sales returns and price concessions.
- 1,346 kgs of production was the Company’s highest quarterly
production number to date, reflective of having 20 grow rooms in
operation.
- 1,196 kgs of BC Pink Kush was harvested in the second quarter
of 2020, with approximately 40% of the harvests occurring late in
the quarter in the month of June.
- Net revenue of $2.3 million was the Company’s highest revenue
quarter since initial industry wide product sell-in in Q4
2018.
The following table summarizes the
Company’s financial results for the three months and six months
ended June 30, 2020:
In thousands of CAD dollars |
Three months ended June 30 |
Six months ended June 30 |
|
2020 |
2019 |
2020 |
2019 |
Net income/(loss) |
(6,908 |
) |
11,010 |
|
(19,686 |
) |
5,013 |
|
Depreciation and
amortization |
1,531 |
|
663 |
|
2,771 |
|
1,133 |
|
Unrealized (gains) losses on fair
value adjustments of biological assets |
1,217 |
|
(1,497 |
) |
3,845 |
|
(1,703 |
) |
Fair value adjustments on
inventory sold |
(553 |
) |
211 |
|
(711 |
) |
169 |
|
Share-based compensation |
836 |
|
3,491 |
|
1,728 |
|
5,594 |
|
Restructuring costs |
(11 |
) |
— |
|
726 |
|
— |
|
Unrealized (gain) loss on fair
value of investments held in shares |
— |
|
— |
|
(2 |
) |
(148 |
) |
Unrealized loss on valuation of
warrant investment |
— |
|
20 |
|
39 |
|
371 |
|
Loss (gain) on acquisition of
investment in Holigen |
— |
|
(18,750 |
) |
— |
|
(18,750 |
) |
Finance costs |
1,003 |
|
— |
|
1,501 |
|
— |
|
Interest expense |
9 |
|
156 |
|
(15 |
) |
196 |
|
Adjusted EBITDA |
(2,876 |
) |
(4,696 |
) |
(9,804 |
) |
(7,829 |
) |
|
|
|
Adjusted EBITDA (Non-IFRS Measure)
Adjusted EBITDA is defined as net loss, plus
(minus) income taxes (recovery), plus (minus) interest income
(expense), net, plus depreciation and amortization, plus
share-based compensation, plus (minus) non-cash fair value
adjustments on biological assets and inventory sold, plus listing
expense costs, plus (minus) loss (gain) on investments and plus
inventory impairments. Management believes this measure provides
useful information as it is a commonly used measure in the capital
markets and as it is a close proxy for repeatable cash used by
operations.
For a full discussion of Flowr’s operational and
financial results for the three and six months ended June 30, 2020,
please refer to the Company’s second quarter 2020 Management’s
Discussion & Analysis and Financial Statements, which have been
filed on SEDAR.
CONFERENCE CALL AND WEBCAST
The Company will host a conference call and
webcast to review these results today at 5:30 p.m. Eastern
Time.
Conference call and webcast details are
as follows:
Toll Free: (888) 869-1189Toll/International:
1-(706) 643-5902Passcode: 8867395Webcast:
flowrcorp.com/investorsOnline registration:
http://www.directeventreg.com/registration/event/8867395
Conference call replay details are as
follows:
Toll Free: 1-800-585-8367Toll/International:
1-416-621-4642Passcode: 8867395Webcast: flowrcorp.com/investors
The replay of the conference call will be
available through midnight on Wednesday, September 9th, 2020.
About The Flowr Corporation
The Flowr Corporation is a Toronto-headquartered
cannabis company with operations in Canada, Europe, and
Australia. Its Canadian operating campus, located in Kelowna,
BC, includes a purpose-built, GMP-designed indoor cultivation
facility; an outdoor and greenhouse cultivation site; and a
state-of-the-art R&D facility that is awaiting licensing from
Health Canada. From this campus, Flowr produces recreational
and medicinal products. Internationally, Flowr intends to
service the global medical cannabis market through its subsidiary
Holigen, which has a license for cannabis cultivation in Portugal
and operates GMP licensed facilities in both Portugal and
Australia.
Flowr aims to support improving outcomes through
responsible cannabis use and, as an established expert in cannabis
cultivation, strives to be the brand of choice for consumers and
patients seeking the highest-quality craftsmanship and product
consistency across a portfolio of differentiated cannabis
products.
For more information, please visit flowrcorp.com
or follow Flowr on Twitter: @FlowrCanada and LinkedIn: The Flowr
Corporation.
On behalf of The Flowr Corporation:Vinay
ToliaCEO and Director
CONTACT INFORMATION:
INVESTORS & MEDIA:Thierry ElmalehHead of Capital
Markets(877) 356-9726 ext. 1528thierry@flowr.ca
Notice regarding future-oriented financial
information:
To the extent any forward-looking information in
this press release constitutes future-oriented financial
information or financial outlooks within the meaning of securities
laws, such information is being provided to demonstrate the
potential financial performance of the Company and readers are
cautioned that this information may not be appropriate for any
other purpose and that they should not place undue reliance on such
future-oriented financial information and financial outlooks.
Future-oriented financial information and financial outlooks, as
with forward-looking information generally, are, without
limitation, based on the assumptions and subject to the risks set
out below under “Notice regarding forward-looking information”.
Forward-Looking Information
This press release contains “forward-looking
information” within the meaning of Canadian Securities laws, which
may include but is not limited to: the Company’s expectation that
it will continue to increase the amount of its premium dried flower
available for sale; the Company’s belief that more material
improvements will be achieved in the third quarter once its
automated packaging line is fully operational and due to allocation
of fixed costs over larger production quantities; the terms of
lock-up agreements; the anticipated funding by Terrace Global under
the Partnership; the Company continuing to be on track for a
harvest in Portugal in the fourth quarter of 2020, and the
anticipated size of such harvest; the Company’s belief that
Aljustrel is the largest outdoor THC cultivation project in Europe
to date; the Company’s expectation that it will build on its
achievements as it continues to invest in sales and marketing; the
Company continuing to invest in sales and marketing; the Company’s
expected timeline for sales of product in Quebec; the Company
becoming cash flow positive in H2 2020; the Company’s expectation
that Q3 2020 net revenue will be at least 50% higher than in Q2
2020; sales momentum in BC Pink Kush continuing to build; there
being strong consumer demand for premium dried flower despite the
proliferation of value brands; the Company continuing to make
progress with Terrace Global in Portugal; Flowr servicing the
global medical cannabis market and operating GMP facilities in
Portugal and Australia; Flowr supporting improving outcomes through
responsible cannabis use and striving to be the brand of choice for
consumers and patients seeking highest-quality craftmanship and
product consistency; and Flowr’s business, production and products
and Flowr’s plans to provide premium quality cannabis to adult use
recreational and medical markets.
Often, but not always, forward-looking
information can be identified by the use of words such as “plans”,
“is expected”, “expects”, “scheduled”, “intends”, “contemplates”,
“anticipates”, “believes”, “proposes” or variations (including
negative and grammatical variations) of such words and phrases, or
state that certain actions, events or results “may”, “could”,
“would”, “might” or “will” be taken, occur or be achieved. Such
information and statements are based on the current expectations of
Flowr’s management and are based on assumptions and subject to
risks and uncertainties. Although Flowr’s management believes that
the assumptions underlying such information and statements are
reasonable, they may prove to be incorrect. The forward-looking
events and circumstances discussed in this press release may not
occur by certain specified dates or at all and could differ
materially as a result of known and unknown risk factors and
uncertainties affecting Flowr, including risks relating to: the
Company’s being unable to continue to increase the amount of its
premium dried flower available for sale; the Company’s not
achieving more material improvements in the third quarter once its
automated packaging line is fully operational and due to allocation
of fixed costs over larger production quantities; the Company being
unable to complete harvest in Portugal on the anticipated timeline,
or at all; the Company being unable to complete harvest in Portugal
of the anticipated size, or at all; Aljustrel not being the largest
outdoor THC cultivation project in Europe to date; the Company’s
being unable to build on its achievements as it continues to invest
in sales and marketing; the Company being unable to continue to
invest in sales and marketing; the Company’s sales of product in
Quebec not happening on the anticipated timeline, or at all; the
Company not becoming cash flow positive in H2 2020, or at all; the
Company’s not realizing net Q3 2020 net revenue at least 50% higher
than in Q2 2020; sales momentum in BC Pink Kush not continuing to
build; there not being strong consumer demand for premium dried
flower despite the proliferation of value brands; the Company being
unable to continue to make progress with Terrace Global in
Portugal; the funding received from Terrace Global under the
Partnership being less than anticipated; the Company being unable
to achieve a substantial increase in production and sales through
the remainder of the year; the net revenues for Q3 and Q4 being
less than anticipated, which could put further pressure on the
trading price of the Company’s securities; the Company being unable
to become cash flow positive in H2 2020, and thus requiring the
Company to obtain additional liquidity and/or file for creditor
protection; the Company failing to realize sales out of Holigen,
and thus having limited growth and revenue generation generally and
outside of Canada; the Company failing to produce, or having crop
failures of, its new product offerings, given the limited amount of
experience growing such strains; the Company’s view that customers
demand high THC products and are willing to pay a premium for such
products not materializing, which could materially adversely affect
the Company’s business, operations and financial results; sales
trends and demand for the Company’s BC Pink Kush strain not being
robust; the Company’s foundational thesis that growing high quality
cannabis at scale is difficult and only a few companies are both
focused and able to do so not materializing, thus impacting the
Company’s strategy and ultimately its financial results; EU-GMP
certification failing to open the medicinal cannabis opportunity
for the Company in global markets; Flowr’s inability to scale its
business in 2020, which could materially adversely impact its
financial condition and result in breach of its debt arrangements;
Flowr being unable to complete its crop and harvest at Aljustrel in
2020, which could materially adversely impact its competitive
position globally and its business and operations; the Company’s
infrastructure being unable to support Flowr’s objective to be cash
flow positive in the second half of 2020; the Company being unable
to complete its objectives and/or those objectives not positioning
the Company for long term success; the Company being unable to
execute its near and long-term goals; new genetics not driving
further operational improvements and/or enhancing the Company’s
product mix; the Canadian industry not being in short supply of
premium dry flower; the Company’s expectations, including timing,
for the first harvest from Portugal not being realized; the Company
not being well positioned to distribute EU-GMP compliant product
into underserviced markets; the Company being unable to address
consumer demand with new genetics; the Company being unable to
prioritize data acquisition to ensure production planning is driven
by consumer insights and that its portfolio of finished products
will address consumer preference; Flowr being unable to advance its
plan for its Kelowna Campus to be a single hub for all aspects of
cultivation, processing and packaging to service the Canadian
cannabis market; Kelowna 1 being unable to produce high caliber
dried flower; the Company being unable to double its operating
capacity at Kelowna 1; Flowr being unable to deliver finished
products from new genetics into the marketplace in 2020; new
genetics not delivering higher yields and/or not supporting the
rollout of an expanded line of high THC products; Kelowna 1 being
unable to reach the anticipated production run-rate at the end of
2020; the Company not realizing premium pricing relative to the
broader adult-use market; any inaccuracies in the estimated total
capex for Kelowna 1; Flowr Forest’s production per annum being less
than anticipated; the Company being unable to launch concentrate
products; the inability to complete construction of facilities in
Portugal in a timely fashion or at all; the inability to realize
revenue from the Company’s European operations within the
anticipated timeframe or at all; the Company being unable to
establish sales and distribution channels in Europe and Australia
to deliver medicinal cannabis to underserviced markets; any failure
to realize expectations with respect to the anticipated timing for
harvests, propagation, completion of construction and installation
of extraction infrastructure at the Company’s Sintra facility; the
Company being unable to commence GMP packaging and commercial sales
in Europe within the anticipated timeframe or at all; the Company
being unable to realize expectations for annual production and
processing capacity at its Sintra facility; the inability to
complete a partial extraction and processing facility at the
Company’s Aljustrel facility; the Aljustrel facility being unable
to complete a phased ramp up of production; the Company’s inability
to realize expectations for harvests at its Aljustrel facility in
2020; Flowr’s assets in Australia not being a hub for distribution
and sales of medicinal cannabis into the Australasian region; Flowr
being unable to service the global medical cannabis market and/or
operate GMP-designed manufacturing facilities in Portugal and
Australia; Flowr being unable to support improving outcomes through
responsible cannabis use and/or striving to be the brand of choice
for consumers and patients seeking highest-quality craftmanship and
product consistency; the construction and development of Holigen’s
and the Company’s cultivation and production facilities; general
economic and stock market conditions; adverse industry events; loss
of markets; future legislative and regulatory developments in
Canada and elsewhere; the cannabis industry in Canada generally;
the ability of Flowr to implement its business strategies; Flowr’s
inability to produce or sell premium quality cannabis; the impacts
of the COVID-19 pandemic materially adversely effecting Flowr’s
business; the risks and uncertainties detailed from time to time in
Flowr’s filings with the Canadian Securities Administrators; and
many other factors beyond the control of Flowr.
Although Flowr has attempted to identify
important factors that could cause actual actions, events or
results to differ materially from those described in
forward-looking information, there may be other factors that cause
actions, events or results to differ from those anticipated,
estimated or intended. No forward-looking information can be
guaranteed. Except as required by applicable securities laws,
forward-looking information speaks only as of the date on which
they are made and Flowr undertakes no obligation to publicly update
or revise any forward-looking information, whether as a result of
new information, future events or otherwise. When considering such
forward-looking information, readers should keep in mind the risk
factors and other cautionary statements in Flowr’s Annual
Information Form dated April 28, 2020 (the “AIF”) and filed with
the applicable securities regulatory authorities in Canada. The
risk factors and other factors noted in the AIF could cause actual
events or results to differ materially from those described in any
forward-looking information.
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.
The Flowr (TSXV:FLWR)
Historical Stock Chart
From Aug 2024 to Sep 2024
The Flowr (TSXV:FLWR)
Historical Stock Chart
From Sep 2023 to Sep 2024