- Flora generated $20.1 million in revenue in Q1 2023, a 307%
increase year-over-year.
- Gross profit for Q1 2023 increased 105% year-over-year, to $5.5
million.
- Posting a net loss of $3.9 million for Q1 2023 (decreased from
Q1 2022). New leadership plans to further reduce expenses and focus
on organic revenue growth.
Flora Growth Corp. (NASDAQ: FLGC) (“Flora'' or the “Company”), a
global cultivator, manufacturer, and distributor of cannabis
products and brands, reported today its financial and operating
results for the quarter ended March 31, 2023. All financial
information is provided in U.S. dollars unless indicated
otherwise.
“As I take the reins of the organization, I am pleased to share
the results of the first quarter of 2023, which included increased
revenue generation for the Company,” said Hussein Rakine, newly
appointed CEO of Flora. “The first quarter was focused on
strengthening our operational performance, focusing on financial
discipline, and optimizing the integrations of all our M&A
transactions. Our House of Brands continued to be the primary
revenue-generating pillar, posting sequential growth and steady
margins. Our Commercial and Wholesale division was positively
impacted by the addition of our German distribution business while
our pharmaceutical initiatives continued to progress.”
Rakine continued, “However, the first quarter was not without
its challenges which included impediments in our ability to export
cannabis from Cosechemos, delays in the realization of operating
expense reductions, and the prior period’s M&A-related
transaction costs and liabilities, all affecting both the Company's
liquidity position and ability to fully realize our strategic plan
for the quarter.
With respect to the challenges in exporting cannabis, we did not
have the inventory of premium cannabis material required for the
fulfillment of pending purchase orders and purchase intent notices
in the first quarter. In addition, the export process from Colombia
has proven to take longer and operate with less consistency than we
had anticipated. Additionally, despite implementing various
cost-saving initiatives to lower operating expenses, the Company
has not yet achieved its ultimate organization-wide cost-reduction
goals. To address this challenge, we will continue exploring
various strategies to reduce operating costs.”
Rakine noted, “If we are not successful in meeting our business
plans we may continue to face cash flow deficiencies. As a result,
we may explore debt, equity financing or strategic alternatives to
fund continued operations.
My priority is to further optimize the organization, reduce
spend and focus on organic growth in revenue areas which offer the
highest margin contribution and return on investment. I look
forward to sharing our progress in the coming months, as we seek to
chart the path to unlock the most shareholder value possible. I
would like to thank the Flora team for their hard work and for
welcoming me into my new role.”
Q1 2023 Financial and Operational
Summary
- 1Q2023 revenue of $20.1 million, representing a 307% increase
year-over-year and the highest revenue-generating quarter in the
Company’s history.
- Expanding revenue generation in the quarter and for the House
of Brands segment, which contributed $14.2 million of the total
revenue.
- The Commercial and Wholesale segment delivered nearly $8.0
million in revenue, driven by the German-based pharmaceutical
distribution subsidiary.
- Gross profit for 1Q2023 increased by 105% year-over-year to
$5.5 million.
- Gross margin was 27%, a decrease from 54% in 1Q2022. This
expected reduction was primarily driven by the contribution of
lower-margin sales in the German pharmaceutical distribution
subsidiary.
- Adjusted EBITDA loss for 1Q2023 was $1.4 million, compared to a
loss of $3.4 million in 1Q2022.
- Adjusted EBITDA margin for 1Q2023 improved to -7% from -69% in
1Q2022. This improvement is in line with our expectations for the
quarter.
- Net loss for the period was $3.9 million, as compared to $7.6
million for Q12022, and net loss margin for Q12023 improved to -19%
from -154% in Q12022.
- Operating expenses for Q12023 were $8.6 million, a 17% decrease
year-over-year.
- As a percentage of sales, operating expenses for 1Q2023
decreased to 43% from 209% in 1Q2022.
- As of March 31, 2023, the Company had approximately $5.3
million in cash and cash equivalents as compared to $9.5 million as
of December 31, 2022.
- Delays with revenue capture from Cosechemos, challenges in the
realization of overhead reductions, and acquisition-related costs
and liabilities continue to be the primary contributors to the
Company’s liquidity position.
About Flora Growth Corp.
Flora Growth Corp. is a global cannabis company dedicated to
bringing the benefits of cannabis to people worldwide. Our
commitment is to create, master and connect the international
cannabis supply chain by setting the standard for world-class
cultivation and manufacturing, thoughtful brand development, and
rigorous research and development of medical-grade cannabis
products that meet the highest standards of quality, safety, and
efficacy. Our mission is to create a world where the benefits of
cannabis are accessible to everyone, and we are working toward that
goal by becoming a leading importer and exporter of cannabis to
meet demand in every corner of the market. Visit
www.floragrowth.com or follow @floragrowthcorp on social media for
more information.
Cautionary Statement Concerning Forward-Looking
Statements
This press release contains ‘‘forward-looking statements,’’ as
defined by federal securities laws. Forward-looking statements
reflect Flora’s current expectations and projections about future
events at the time, and thus involve uncertainty and risk. The
words “believe,” “expect,” “anticipate,” “will,” “could,” “would,”
“should,” “may,” “plan,” “estimate,” “intend,” “predict,”
“potential,” “continue,” and the negatives of these words and other
similar expressions generally identify forward looking statements.
Such forward-looking statements are subject to various risks and
uncertainties, including those described under the section entitled
“Risk Factors” in Flora’s Annual Report on Form 10-K, previously
filed with the SEC on March 31, 2023, as amended April 28, 2023, as
such factors may be updated from time to time in Flora’s periodic
filings with the SEC, which are accessible on the SEC’s website at
www.sec.gov. Accordingly, there are or will be important factors
that could cause actual outcomes or results to differ materially
from those indicated in these statements. These factors should not
be construed as exhaustive and should be read in conjunction with
the other cautionary statements that are included in this release
and in Flora’s filings with the SEC. While forward-looking
statements reflect Flora’s good faith beliefs, they are not
guarantees of future performance. Flora disclaims any obligation to
publicly update or revise any forward-looking statement to reflect
changes in underlying assumptions or factors, new information, data
or methods, future events or other changes after the date of this
press release, except as required by applicable law. You should not
place undue reliance on any forward-looking statements, which are
based only on information currently available to Flora (or to third
parties making the forward-looking statements).
About non-U.S. GAAP measures
Adjusted EBITDA is a non-U.S. GAAP financial measure that does
not have any standardized meaning prescribed by U.S. GAAP and may
not be comparable to similar measures presented by other companies.
We calculate Adjusted EBITDA as total net loss, plus (minus) income
taxes (benefit), plus (minus) interest expense (income), plus
depreciation and amortization, plus (minus) non-operating expense
(income), plus share based compensation expense, plus goodwill and
other asset impairment charges, plus (minus) unrealized loss
(gains) from changes in fair value, plus charges related to the
flow-through of inventory step-up on business combinations, plus
other acquisition and transaction costs. Management believes that
Adjusted EBITDA provides meaningful and useful financial
information as this measure demonstrates the operating performance
of the business.
Adjusted EBITDA margin % is a non-U.S. GAAP financial measure
that does not have any standardized meaning prescribed by U.S. GAAP
and may not be comparable to similar measures presented by other
companies. We calculate Adjusted EBITDA margin % as Adjusted
EBITDA, as described above, divided by revenue for the period.
For a reconciliation of these non-U.S. GAAP financial measures
to the most directly comparable U.S. GAAP financial measures,
please see Table 4 under "Reconciliation of GAAP to non-U.S. GAAP
financial results" included at the end of this release.
Table 1. Condensed Interim Consolidated Statements of
Financial Position
(in thousands of United States dollars,
except share amounts which are in thousands of shares)
As at:
March 31, 2023
December 31, 2022
ASSETS
Current
Cash
$
5,259
$
9,537
Trade and amounts receivable, net of
$3,024 allowance ($2,988 at December 31, 2022)
6,729
6,851
Loans receivable and advances
273
271
Prepaid expenses and other current
assets
1,875
978
Indemnification receivables
3,432
3,429
Inventory
10,311
10,089
Total current assets
27,879
31,155
Non-current
Property, plant and equipment
4,968
4,810
Operating lease right of use assets
2,345
2,537
Intangible assets
17,470
18,096
Goodwill
23,372
23,372
Investments
730
730
Other assets
276
287
Total assets
$
77,040
$
80,987
LIABILITIES
Current
Trade payables
$
6,322
$
7,748
Contingencies
4,998
5,044
Current portion of debt
1,086
1,086
Current portion of operating lease
liability
1,241
1,188
Other accrued liabilities
1,852
2,381
Total current liabilities
15,499
17,447
Non-current
Non-current operating lease liability
1,614
1,869
Deferred tax
1,616
1,712
Contingent purchase considerations
4,699
3,547
Total liabilities
23,428
24,575
SHAREHOLDERS' EQUITY
Share capital, no par value, unlimited
authorized, 136,938 issued and outstanding (135,573 at December 31,
2022)
-
-
Additional paid-in capital
150,403
150,420
Accumulated other comprehensive loss
(2,375
)
(2,732
)
Deficit
(93,976
)
(90,865
)
Total Flora Growth Corp. shareholders’
equity
54,052
56,823
Non-controlling interest in
subsidiaries
(440
)
(411
)
Total shareholders' equity
53,612
56,412
Total liabilities and shareholders'
equity
$
77,040
$
80,987
Table 2. Condensed Interim Consolidated Statements of Loss
and Comprehensive Loss
(in thousands of United States dollars,
except per share amounts which are in thousands of shares)
For the three months ended
March 31, 2023
For the three months ended
March 31, 2022
Revenue
$
20,107
$
4,946
Cost of sales
14,630
2,276
Gross profit
5,477
2,670
Operating expenses
Consulting and management fees
4,040
2,444
Professional fees
33
1,249
General and administrative
528
922
Promotion and communication
1,314
2,549
Travel expenses
139
242
Share based compensation
654
1,526
Research and development
16
210
Operating lease expense
366
207
Depreciation and amortization
942
454
Bad debt expense
29
1
Other expenses (income), net
493
528
Total operating expenses
8,554
10,332
Operating loss
(3,077
)
(7,662
)
Interest expense (income)
23
(21
)
Foreign exchange (gain) loss
(12
)
(11
)
Unrealized loss from changes in fair
value
883
-
Net loss before income taxes
(3,971
)
(7,630
)
Income tax recovery
(66
)
-
Net loss for the period
$
(3,905
)
$
(7,630
)
Other comprehensive gain (loss)
Exchange differences on foreign
operations, net of income taxes of $nil ($nil in 2021)
$
357
$
(577
)
Total comprehensive loss for the
period
$
(3,548
)
$
(8,207
)
Net loss attributable to:
Flora Growth Corp.
$
(3,876
)
$
(7,566
)
Non-controlling interests in
subsidiaries
(29
)
(64
)
Comprehensive loss attributable to:
Flora Growth Corp.
$
(3,519
)
$
(8,143
)
Non-controlling interests in
subsidiaries
(29
)
(64
)
Basic and diluted loss per share
attributable to Flora Growth Corp.
$
(0.03
)
$
(0.11
)
Weighted average number of common shares
outstanding - basic and diluted
132,868
69,604
Table 3. Condensed Interim Statement of Cash Flows
(in thousands of United States
dollars)
For the three months ended
March 31, 2023
For the three months ended
March 31, 2022
Cash flows from operating
activities:
Net loss
$
(3,905
)
$
(7,630
)
Adjustments to net loss:
Depreciation and amortization
942
454
Stock-based compensation
654
1,715
Changes in fair value of investments and
liabilities
883
-
Bad debt expense
29
1
Interest expense (income)
23
(21
)
Interest paid
(23
)
(17
)
Income tax recovery
(66
)
-
(1,463
)
(5,498
)
Net change in non-cash working
capital:
Trade and other receivables
91
707
Inventory
(113
)
192
Prepaid expenses and other assets
(920
)
58
Trade payables and accrued liabilities
(1,919
)
(2,020
)
Net cash used in operating
activities
(4,324
)
(6,561
)
Cash flows from financing
activities:
Equity issue costs
-
(79
)
Exercise of warrants and options
-
78
Loan borrowings
-
212
Loan repayments
(19
)
(18
)
Net cash (used) provided by financing
activities
(19
)
193
Cash flows from investing
activities:
Purchases of property, plant and equipment
and intangible assets
(102
)
(187
)
Business and asset acquisitions, net of
cash acquired
-
(15,457
)
Net cash used in investing
activities
(102
)
(15,644
)
Effect of exchange rate on changes on
cash
167
(359
)
Change in cash during the
period
(4,278
)
(22,371
)
Cash and restricted cash at beginning of
period
9,537
37,616
Cash and restricted cash at end of
period
$
5,259
$
15,245
Supplemental disclosure of non-cash
investing and financing activities
Common shares issued for business
combinations
$
-
$
14,917
Assets acquired for contingent
consideration
303
-
Common shares issued for other
agreements
95
272
Operating lease additions to right of use
assets
97
-
Table 4. Reconciliation of GAAP to non-U.S. GAAP financial
results
The reconciliation of the Company’s Adjusted EBITDA, a non-U.S.
GAAP financial measure, to net loss, the most directly comparable
U.S. GAAP financial measure, for the three months ended March 31,
2023 and 2022 is presented in the table below:
(in thousands of United States
dollars)
For the three months ended
March 31, 2023
For the three months ended
March 31, 2022
Net loss for the period
$
(3,905
)
$
(7,630
)
Income tax benefit
(66
)
-
Interest expense (income)
23
(21
)
Depreciation and amortization
942
454
Non-operating income (1)
(12
)
(11
)
Share based compensation
654
1,526
Unrealized loss from changes in fair value
(2)
883
-
Charges related to the flow-through of
inventory step-up on business combinations
45
1,631
Other acquisition and transaction costs
(3)
-
651
Adjusted EBITDA
$
(1,436
)
$
(3,400
)
Adjusted EBITDA Margin %
-7.1
%
-68.7
%
(1)
Non-operating expense includes
foreign exchange losses.
(2)
Unrealized loss from changes in
fair value includes changes in the value of the Company’s
contingent consideration associated with its acquisition of
JustCBD.
(3)
Other acquisition and transaction
costs are one-time legal and due-diligence fees related to business
combinations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230515005721/en/
Investor Relations: Investor Relations
ir@floragrowth.com
Public Relations: Cassandra Dowell +1 (858) 221-8001
flora@cmwmedia.com
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