Clever Leaves Holdings Inc. (Nasdaq: CLVR, CLVRW) (“Clever Leaves”
or the “Company”), a leading multinational operator and licensed
producer of pharmaceutical-grade cannabinoids, is announcing the
wind-down of all operations in Portugal as part of its ongoing
restructuring initiatives. Under this restructuring plan, the
Company expects its Portuguese flower cultivation, post-harvest
processes, and manufacturing activities to cease in full by the end
of the first quarter of 2023.
“By exclusively cultivating and producing our
cannabinoid products in Colombia, we aim to leverage our existing
cost efficiencies in the country as we ramp our dry flower
offering,” said Andres Fajardo, CEO of Clever Leaves. “We believe
this transition will allow us to optimize our production
infrastructure and drive increased cost savings, positioning us to
compete more effectively in the global medicinal cannabis market.
Although our decision was extremely difficult, we believe it is in
the best interests of the Company, since it positions us more
effectively to satisfy our customers’ requirements. Additionally,
we plan to incorporate the substantial learnings from our work in
Portugal to enhance the success of our Colombian operations.
“This next phase of our restructuring work
builds upon the progress we have made with improving our cost
structure and capital efficiency throughout 2022. We look forward
to building upon our sustainable competitive advantages in Colombia
and progressing further into 2023 as a leaner, more agile
multinational operator.”
Colombia Cultivation Transition and
Flower Strategy
Clever Leaves is currently winding down its
agricultural production in Portugal, with flower cultivation
expected to cease in full by the end of the first quarter of 2023.
Beginning in the second quarter of 2023, the Company will solely
cultivate its flower strains in its Colombian greenhouses, where
preparations for dry flower exports have been underway for the past
18 months. Clever Leaves believes it remains on track to commence
sales of dry flower from Colombia later this quarter, and it has
begun the process of transitioning its flower production to
Colombia for current customers.
The Company’s Colombian operations span over 1.8
million square feet of fully built-out cultivation capacity, with
EU-GMP certifications for the production of both cannabis extracts
and dry flower. The Company believes Colombia’s low labor costs and
optimal agricultural climate give Clever Leaves a critically
important competitive advantage, which allows the
Company to provide its customers cost-efficient,
environmentally sustainable production processes.
In addition, the Company’s Colombian operations
house a genetic discovery and development platform, comprised of
both outside strains from major cannabis brands and in-house
developed products. The Company expects that the successful output
from this discovery program will expand further as Clever Leaves
accelerates its dry flower production.
Fajardo continued: “We believe we are
well-positioned to ramp quickly in Colombia to serve our global
customer base, while maintaining our focus on growing the most
premium and commercially viable flower strains. Our expansive,
fully built-out production capacity gives us significant scale to
meet customer demand, and our EU-GMP certifications facilitate
multiple pathways to our key international markets.
“We are working swiftly to refine and expand our
flower portfolio to the specifications of our target markets. We
aim to use our learnings from our Portuguese flower cultivation and
our existing Colombian production efficiencies to build our flower
capabilities and further complement our extract business.”
Restructuring Costs and Expected
Savings
On January 17, 2023, Clever Leaves’ board of
directors authorized a restructuring plan that is designed to
improve operating margin and support the Company’s growth, scale,
and profitability objectives. In conjunction with its restructuring
plan and wind-down in Portugal, the Company announced a collective
dismissal of 63 employees associated with its Portuguese
operations. Clever Leaves expects to incur total charges of
approximately $19 million to $21 million in the fourth quarter of
2022 related to its operational closure in Portugal, inclusive of
the following expenses:
- Approximately $0.7 million to $0.9
million related to severance and employee benefits;
- Approximately $12 million to $13
million related to real estate and equipment exit costs, consisting
of lease impairment, as well as property and equipment abandonment
charges; and
- Approximately $6 million to $7
million related to the write-off of inventories that will not be
sold.
Of the foregoing $19 million to $21 million in estimated
charges, approximately $1.5 million to $2.0 million are expected to
be cash expenditures with the balance being non-cash write-offs of
prior investments. Taken together, the operational transition and
workforce reduction initiatives are expected to generate
approximately $7 million in savings by year-end 2023, compared to
2022.
Fajardo concluded: “We are grateful for our
affected team members and their contributions to Clever Leaves.
While the decision to reduce our workforce was a very difficult
one, it is an important extension of our ongoing work to align our
expense base with our current revenue profile and improve our
operating leverage over time. We expect our operational transition
to drive significant long-term savings for the benefit of our
customers and shareholders as we make progress towards
profitability.”
The Company expects to provide its 2023 outlook
during its 2022 year-end earnings call in March 2023. The charges
that Clever Leaves expects to incur are subject to a number of
assumptions, and actual expenses may differ from the estimates
disclosed above.
About Clever Leaves Holdings
Inc.
Clever Leaves is a leading multinational
operator and licensed producer of pharmaceutical-grade
cannabinoids. Its operations in Colombia produce cannabinoid active
pharmaceutical ingredients (API) and finished products in flower
and extract form to a growing base of B2B customers around the
globe. Clever Leaves aims to disrupt the traditional cannabis
production industry by leveraging environmentally sustainable,
ESG-friendly, industrial-scale and low-cost production methods,
with the world’s most stringent pharmaceutical quality
certifications. We announce material information to the public
through a variety of means, including filings with the SEC, press
releases, public conference calls, and our website
(https://cleverleaves.com). We use these channels, as well as
social media, including our Twitter account (@clever_leaves), and
our LinkedIn page (https://www.linkedin.com/company/clever-leaves),
to communicate with investors and the public about our Company, our
products, and other matters. Therefore, we encourage investors, the
media, and others interested in our Company to review the
information we make public in these locations, as such information
could be deemed to be material information. Information on or that
can be accessed through our websites or these social media channels
is not part of this release, and references to our website
addresses and social media channels are inactive textual references
only.
Forward-Looking Statements
This press release includes certain statements
that are not historical facts but are forward-looking statements
for purposes of the safe harbor provisions under the United States
Private Securities Litigation Reform Act of 1995. Forward-looking
statements generally are accompanied by words such as “aim,”
“anticipate,” “believe,” “can,” “continue,” “could,” “estimate,”
“evolve,” “expect,” “forecast,” “future,” “guidance,” “intend,”
“may,” “opportunity,” “outlook,” “pipeline,” “plan,” “predict,”
“potential,” “projected,” “seek,” “seem,” “should,” “will,” “would”
and similar expressions (or the negative versions of such words or
expressions) that predict or indicate future events or trends or
that are not statements of historical matters. Such forward-looking
statements, including statements relating to the Company’s
wind-down of its operations in Portugal and the expected costs and
cost savings of such wind-down, are subject to risks and
uncertainties, which could cause actual results to differ from the
forward-looking statements. Important factors that may affect
actual results or the achievability of the Company’s expectations
include, but are not limited to: (i) expectations with respect to
future operating and financial performance and growth, including if
or when Clever Leaves will become profitable; (ii) Clever Leaves’
ability to execute its business plans and strategy and to receive
regulatory approvals (including its goals in its key markets);
(iii) Clever Leaves’ ability to capitalize on expected market
opportunities, including the timing and extent to which cannabis is
legalized in various jurisdictions; (iv) expectations with respect
to restructuring costs and savings, including in connection with
the wind-down of the Company’s Portugal operations (v) global
economic and business conditions, including economic sanctions
against Russia and their effects on the global economy; (vi)
geopolitical events (including the ongoing military conflict
between Russia and Ukraine), natural disasters, acts of God and
pandemics, including the economic and operational disruptions and
other effects of COVID-19 such as the global supply chain crisis,
travel restrictions, delays or disruptions to physical shipments
(including outright bans on imported products), delays in issuing
licenses and permits, delays in hiring necessary personnel to carry
out sales, cultivation and other tasks, and financial pressures
upon Clever Leaves and its customers; (vii) regulatory developments
in key markets for the Company's products, including international
regulatory agency coordination and increased quality standards
imposed by certain health regulatory agencies, and failure to
otherwise comply with laws and regulations; (viii) uncertainty with
respect to the requirements applicable to certain cannabis products
as well as the permissibility of sample shipments, and other risks
and uncertainties; (ix) consumer, legislative, and regulatory
sentiment or perception regarding Clever Leaves’ products; (x) lack
of regulatory approval and market acceptance of Clever Leaves’ new
products which may impede its ability to successfully commercialize
its CBD brand in the United States; (xi) the extent to which Clever
Leaves’ is able to monetize its existing THC market quota within
Colombia; (xii) demand for Clever Leaves’ products and Clever
Leaves’ ability to meet demand for its products and negotiate
agreements with existing and new customers, including the sales
agreements identified as a part of the Company’s 2022 strategic
growth objectives; (xiii) developing product enhancements and
formulations with commercial value and appeal; (xiv) product
liability claims exposure; (xv) lack of a history and experience
operating a business on a large scale and across multiple
jurisdictions; (xvi) limited experience operating as a public
company; (xvii) changes in currency exchange rates and interest
rates; (xviii) weather and agricultural conditions and their impact
on the Company’s cultivation and construction plans; (xix) Clever
Leaves’ ability to hire and retain skilled personnel in the
jurisdictions where it operates; (xx) Clever Leaves’ rapid growth,
including growth in personnel; (xxi) Clever Leaves’ ability to
remediate a material weakness in its internal control cover
financial reporting and to develop and maintain effective internal
and disclosure controls; (xxii) potential litigation; and (xxiii)
access to additional financing. The foregoing list of factors is
not exclusive. Additional information concerning certain of these
and other risk factors is contained in Clever Leaves’ most recent
filings with the SEC. All subsequent written and oral
forward-looking statements concerning Clever Leaves and
attributable to Clever Leaves or any person acting on its behalf
are expressly qualified in their entirety by the cautionary
statements above. Readers are cautioned not to place undue reliance
upon any forward-looking statements, which speak only as of the
date made. Clever Leaves expressly disclaims any obligations or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change
in its expectations with respect thereto or any change in events,
conditions or circumstances on which any statement is based.
Clever Leaves Investor
Inquiries:Cody Slach or Jackie KeshnerGateway Group,
Inc.+1-949-574-3860CLVR@gatewayir.com
Clever Leaves Press
Contacts:Rich DiGregorioKCSA Strategic
Communications+1-856-889-7351cleverleaves@kcsa.com
Clever Leaves Commercial Inquiries:Andrew
MillerVice President Sales - EMEA, North America, and
Asia-Pacific+1-416-817-1336andrew.miller@cleverleaves.com
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