/NOT FOR DISSEMINATION IN THE UNITED
STATES OR FOR DISTRIBUTION TO UNITED
STATES WIRE SERVICES/
EDMONTON, AB, Sept. 15, 2020 /CNW/ - Fire & Flower Holdings
Corp. ("Fire & Flower" or the "Company") (TSX:
FAF) (OTCQX: FFLWF), today announced its financial and
operational results for the thirteen-weeks ended August 1, 2020.
Financial and Operational Highlights for the Thirteen Weeks
Ended August 1, 2020
- Total revenue of $28.6 million
at a gross profit of 34.8%, compared to revenue of $11.1 million in Q2-2019 at a gross profit of
36.5% - representing a 158% increase in revenue
year-over-year.
- Adjusted EBITDA1 (loss) of $0.3 million, reduced from $4.8 loss million in Q2-2019 through optimization
of the retail store network.
- Completed the final steps required for licensing two
cannabis retail store locations in the major urban market of
Vancouver, British
Columbia.
- Repayment of $28.2 million of
debt including the principal amount of 8.0% unsecured
convertible debentures and accrued and unpaid interest
thereon.
- Entered into an amendment agreement which includes a proposed
early exercise of the majority of Alimentation Couche-Tard's
("ACT") Series A warrants (through an indirect wholly-owned
subsidiary) that, upon exercise, would result in ACT holding an
approximate 15% ownership interest and gross proceeds to the
Company of approximately $19 million
in 2020.
- The proposed extension of the maturity date of the unsecured
debentures held by ACT potentially increases operational
flexibility.
- Opened two cannabis retail locations co-located with
Circle K stores in the province of Alberta.
- Continued to refine the Company's business practices in
response to the COVID-19 public health crisis and maintained
continuity of operations through digital engagement with customers
and best-in-class in-store safety protocols.
Subsequent Financial and Operational Highlights post
August 1, 2020
- Acquired a prominent downtown Toronto cannabis retail store location at
the high-traffic intersection of Yonge Street and Gerrard Street, in close proximity to
Yonge-Dundas square.
- Launched the Revity CBD™ private label wellness brand
driven by consumer insights in the underserved CBD market in the
province of Saskatchewan, through
the Company's wholly-owned distribution business, Open Fields
Distribution™.
- Hifyre's Spark Perks™ member program achieved an increase of
approximately 45,000 members since the beginning of Q2-2020 and now
has more than 145,000 members in the program that typically
visit more frequently and transact with higher basket sizes,
compared to non-members.
- Continued to realize positive financial and operational
results as a result of optimization of the retail store network
with a focus on maximizing the number of retail stores delivering
positive margin contribution.
"Fire & Flower continues to drive towards delivering
positive adjusted EBITDA and during our second quarter of
fiscal 2020, we have made meaningful progress towards this critical
goal," shared Trevor Fencott, Chief
Executive Officer of Fire & Flower. "We believe the Company is
well positioned to expand its footprint in the Ontario market and expects to have access to
the necessary capital to support our growth plans. As the cannabis
and retail industry continue to adapt to the COVID-19 public health
crisis, we will remain on the leading edge of driving consumer
engagement in this dynamic environment."
Selected Summary of Financial Results
(in thousands of dollars, except per share amounts)
|
|
Thirteen weeks
ended
|
Twenty-six weeks
ended
|
Statement of Loss
and Comprehensive Loss
|
|
August 1, 2020
($)
|
August 3, 2019
($)
|
$
Change
|
August 1, 2020
($)
|
August 3, 2019
($)
|
$
Change
|
|
%Change
|
%
Change
|
Revenue
|
|
28,593
|
11,080
|
|
51,715
|
20,618
|
|
|
17,513
|
31,097
|
|
158%
|
151%
|
Cost of goods
sold
|
|
(18,643)
|
(7,040)
|
|
(34,230)
|
(12,910)
|
|
|
(11,603)
|
(21,320)
|
|
165%
|
165%
|
Gross
profit
|
|
9,950
|
4,040
|
5,910
|
17,485
|
7,708
|
9,777
|
|
146%
|
127%
|
Expenses
|
|
|
|
|
|
|
|
General and
administrative
|
|
8,550
|
7,075
|
1,475
|
17,411
|
13,141
|
4,270
|
|
21%
|
32%
|
Share-based
payments
|
|
711
|
331
|
380
|
1,409
|
1,585
|
(176)
|
|
115%
|
-11%
|
Marketing and
promotion
|
|
260
|
626
|
(366)
|
436
|
793
|
(357)
|
|
-58%
|
-45%
|
Acquisition and
business development costs
|
|
2
|
-
|
2
|
186
|
-
|
186
|
|
NM
|
NM
|
Depreciation &
Amortization
|
|
2,987
|
1,940
|
1,047
|
6,012
|
3,414
|
2,598
|
|
54%
|
76%
|
Impairment
|
|
-
|
-
|
-
|
4,279
|
-
|
4,279
|
|
NM
|
NM
|
Total
Expenses
|
|
12,510
|
9,972
|
2,538
|
29,733
|
18,933
|
10,800
|
|
25%
|
57%
|
Loss from
operations
|
|
(2,560)
|
(5,932)
|
3,372
|
(12,248)
|
(11,225)
|
(1,023)
|
|
-57%
|
9%
|
Listing
expense
|
|
-
|
-
|
-
|
-
|
(1,835)
|
1,835
|
|
NM
|
-100%
|
(Loss) gain on
revaluation of derivative liability
|
|
(18,330)
|
2,287
|
(20,617)
|
(14,714)
|
6,394
|
(21,108)
|
|
-901%
|
-330%
|
Loss on debt
extinguishment
|
|
-
|
-
|
-
|
-
|
(9,028)
|
9,028
|
|
NM
|
-100%
|
Interest
income
|
|
27
|
76
|
(49)
|
88
|
170
|
(82)
|
|
-64%
|
-48%
|
Finance
costs
|
|
(8,218)
|
(2,924)
|
(5,294)
|
(14,945)
|
(4,989)
|
(9,956)
|
|
181%
|
200%
|
Other
expense
|
|
(26,521)
|
(561)
|
(25,960)
|
(29,571)
|
(9,288)
|
(20,283)
|
|
4627%
|
218%
|
Net loss and
comprehensive loss
|
|
(29,081)
|
(6,493)
|
(22,588)
|
(41,819)
|
(20,513)
|
(21,306)
|
|
348%
|
104%
|
Net loss per
share, basic
|
|
($0.18)
|
($0.06)
|
($0.12)
|
($0.26)
|
($0.19)
|
($0.07)
|
|
212%
|
37%
|
Net loss per
share, diluted
|
|
($0.18)
|
($0.06)
|
($0.12)
|
($0.26)
|
($0.19)
|
($0.07)
|
|
212%
|
37%
|
NM – Not Meaningful
During the thirteen weeks ended August 1,
2020, the Company generated revenue of $28.6 million including sales of $23.4 million in the Retail channel, $4.3 million in the Distribution channel
and sales of $0.9 million in
the Digital Retail and Analytics channel.
Total gross profit for the thirteen weeks ended August 1, 2020 was $10.0
million or 43.8% of revenue with the Retail channel
delivering $8.2 million, or 35.1% of
net sales, compared to $3.3 million
or 34.6% for the thirteen weeks ended August
3, 2019.
For the thirteen weeks ended August 1,
2020, the Company recorded net comprehensive loss of
$29.1 million, or net loss per share,
and on a fully diluted basis of $0.18. The net comprehensive loss incurred during
the quarter was due to gross margin of $10.0
million being more than offset by total expenses of
$12.5 million and other expenses of
$26.5 million. Other expenses are
comprised of losses on the revaluation of derivative liabilities of
$18.3 million and finance costs of
$8.2 million.
Retail Update
Fire & Flower continues to work towards delivering positive
adjusted EBITDA2 through a focus on "four-wall retail
economics", the optimization of its retail network and expansion
into key provinces such as Ontario
and British Columbia. In addition,
the Company continues to monitor the COVID-19 public health crisis
and adapts its business model to optimally serve customers.
At the end of the thirteen weeks ended August 1, 2020, the Company was operating a total
of 51 stores, with 40 stores located in Alberta, 7 stores in Saskatchewan, 2 stores in Ontario, and 1 store in each of Manitoba and Yukon.
Retail revenue for the thirteen weeks ended August 1, 2020 was $23.4
million, an increase of $13.7
million from the prior year and $4.9
million from the previous quarter. The increase in revenue
was driven by a larger number of operating retail stores during the
quarter.
Gross profit for the thirteen weeks ended August 1, 2020 was $8.2
million, an increase of $4.8
million from the prior year and $0.5
million from the previous quarter. The Company improved its
product assortment strategy through a better understanding of its
customers and their product preferences in each local market.
During the thirteen weeks ended August 1,
2020, Fire & Flower completed the final stages of the
licensing process for two cannabis retail stores in Vancouver, British Columbia and intends to
open these stores at the earliest opportunity. Additional stores in
the province of British Columbia
are awaiting licensing.
Development of retail stores in the province of Ontario has been affected by the slowdown in
the issuance of licences and store construction due to the COVID-19
public health crisis. Fire & Flower is awaiting licensing on a
number of locations in the province and intends to open these
stores once final licensing is complete.
Subsequent to the thirteen weeks ended August 1, 2020, Fire & Flower announced the
acquisition of a flagship downtown Toronto store at 378 Yonge Street. This store
is currently open and will be transitioned to the Fire & Flower
brand in the coming weeks.
During the onset of the COVID-19 public health crisis, Fire
& Flower saw meaningful sales with basket sizes increasing as
consumers purchased larger volumes of product. The Company is now
seeing consumer behaviour return to normal seasonal levels and
increased popularity in large format cannabis products, vapes,
beverages and edibles.
Open Fields Distribution Update
During the thirteen weeks ended August 1,
2020, Open Fields revenue increased to $4.3 million from $3.9
million in Q1-2020, representing an 10% increase between
Q1-2020 and Q2-2020 and a 78.2% increase compared to Q2-2019.The
growth is attributed to Open Fields continuing to gain traction as
an exclusive supplier of cannabis products from major licensed
producers to external accounts throughout the province of
Saskatchewan.
In addition to creating an increased margin opportunity in the
province, the Distribution channel demonstrates how this supply
chain model can be adapted by the Company for use in other
jurisdictions where direct wholesale relationships with licensed
producers and accessory suppliers are permitted.
HifyreTM Digital Retail and Analytics
Update
During the thirteen weeks ended August 1,
2020, Hifyre continued to develop and commercialize products
within the Digital Retail and Analytics Platform. Products include
Spark Perks, a member engagement program, Hifyre ONE, a white-label
software service deployed through its strategic agreement with COVA
Software Solutions, and Hifyre IQ, an advanced data and analytics
platform.
The Spark Perks program has surpassed more than 145,000 members.
Program members transact more frequently and spend more per
transaction than non-member customers. During the quarter, the
platform has provided the Company with an enhanced understanding of
its customers which allows the Company to create a tailored
customer experience resulting in higher customer lifetime
value.
Customers using the Hifyre IQ platform now include the majority
of major cannabis licensed producers. Customers also include equity
research analysts, consulting firms and investment banks. The
platform provides clients with a comprehensive understanding of
consumer purchase behaviours in the Canadian adult-use cannabis
market.
Non-IFRS Measures – Adjusted EBITDA
The Company's "Adjusted EBITDA" is a Non-IFRS metric used by
management that does not have any standardized meaning prescribed
by IFRS and may not be comparable to similar measures presented by
other companies. Management defines the Adjusted EBITDA as the
Income (loss) for the period, as reported, before accretion and
interest, tax, and adjusted for removing the share-based
compensation expense, depreciation and amortization, gains and
losses related to derivative liability revaluations and debt
extinguishments, professional fees associated with financing and
acquisition and business development activities, impairment
charges, restructuring costs, and includes lease liability payments
that would have been excluded from profit and loss due to the
application of IFRS 16 accounting standards. Management believes
"Adjusted EBITDA" is a useful financial metric to assess its
operating performance on a cash basis before the impact of non-cash
items. For a reconciliation of Adjusted EBITDA please refer to
"Non-IFRS Financial Measures" in the Company's management
discussion and analysis for the thirteen weeks ended August 1, 2020 (the "Q2 MD&A").
Adjusted EBITDA for the thirteen weeks ended August 1, 2020 was a $0.3
million loss compared to a $4.8
million loss for the thirteen weeks ended August 3, 2019 and a $2.7
million loss for the thirteen weeks ended May 2, 2020.
|
Thirteen weeks
ended
|
Twenty-six weeks
ended
|
(in thousands of
dollars)
|
August 1, 2020
($)
|
August 3, 2019
($)
|
August 1, 2020
($)
|
August 3, 2019
($)
|
Net loss and
comprehensive loss – as reported
|
(29,081)
|
(6,493)
|
(41,819)
|
(20,513)
|
Non-operating other
expenses
|
26,521
|
561
|
29,571
|
9,288
|
Share-based
payments
|
711
|
331
|
1,409
|
1,585
|
Acquisition and
business development costs
|
2
|
-
|
186
|
0
|
Depreciation &
Amortization
|
2,987
|
1,940
|
6,012
|
3,414
|
Professional fees
related to financing activities
|
-
|
-
|
92
|
168
|
Impairment
|
0
|
-
|
4,279
|
-
|
Lease liability
payments
|
(1,407)
|
(1,122)
|
(2,683)
|
(2,114)
|
Adjusted
EBITDA
|
(267)
|
(4,783)
|
(2,953)
|
(8,172)
|
Conference Call
Fire & Flower will host a conference call today,
September 15, 2020 at 8:30 AM ET to discuss these results.
Trevor Fencott, President and Chief
Executive Officer and Nadia
Vattovaz, Executive Vice President, Operations and Chief
Financial Officer will provide a management presentation followed
by a question and answer session with equity research analysts.
Date:
|
Tuesday,
September 15, 2020
|
Time:
|
8:30 AM
Eastern Time
|
|
|
Conference
Call:
|
1-888-390-0546
|
|
|
Replay
Number:
|
1-888-390-0541
|
Replay
Passcode:
|
863557#
|
|
|
Note: Replay is
available until October 6, 2020.
|
Fire & Flower's financial statements and management
discussion and analysis for the period are available on Fire &
Flower's SEDAR profile at www.sedar.com and on Fire &
Flower's website at www.fireandflower.com/investor-relations/.
About Fire & Flower
Fire & Flower is a leading
purpose-built, independent adult-use cannabis retailer poised
to capture significant Canadian market share. The Company guides
consumers through the complex world of cannabis through
education-focused, best-in-class retailing while the
HifyreTM digital platform connects consumers with
cannabis products. The Company's leadership team combines extensive
experience in the cannabis industry with strong capabilities in
retail operations.
Fire & Flower Holdings Corp. owns all issued and outstanding
shares in Fire & Flower Inc., a licensed cannabis retailer that
owns or has interests in cannabis retail store licences in the
provinces of Alberta, Saskatchewan, Manitoba and Ontario and the Yukon territory.
Through the strategic investment of Alimentation Couche-Tard
Inc., the Company has set its sights on the global expansion as new
cannabis markets emerge.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
This news release contains certain
forward-looking information within the meaning of applicable
Canadian securities laws ("forward-looking statements"). All
statements other than statements of present or historical fact are
forward-looking statements. Forward-looking statements are often,
but not always, identified by the use of words such as
"anticipate", "achieve", "could", "believe", "plan", "intend",
"objective", "continuous", "ongoing", "estimate", "outlook",
"expect", "project" and similar words, including negatives thereof,
suggesting future outcomes or that certain events or conditions
"may" or "will" occur. These statements are only
predictions.
Forward-looking statements are based on the opinions and
estimates of management of Fire & Flower at the
date the statements are made based on information then available to
the Fire & Flower. Various factors and
assumptions are applied in drawing conclusions or making the
forecasts or projections set out in forward-looking
statements. Forward-looking statements are subject to and
involve a number of known and unknown, variables, risks and
uncertainties, many of which are beyond the control of Fire
& Flower, which may cause Fire &
Flower's actual performance and results to differ materially
from any projections of future performance or results expressed or
implied by such forward-looking statements. Such factors,
among other things, include: final
regulatory and other approvals or
consents; fluctuations in general macroeconomic
conditions; fluctuations in securities markets; the impact of the
COVID-19 pandemic; the ability of the
Company to successfully achieve its business objectives
and political and social uncertainties.
No assurance can be given that the expectations reflected in
forward-looking statements will prove to be correct. Although
the forward-looking statements contained in this news release are
based upon what management of the Company believes, or believed at
the time, to be reasonable assumptions, the Company cannot assure
shareholders that actual results will be consistent with such
forward-looking statements, as there may be other factors that
cause results not to be as anticipated, estimated or intended.
Readers should not place undue reliance on the forward-looking
statements and information contained in this news release.
Additional information regarding risks and uncertainties relating
to the Company's business are contained under the heading "Risk
Factors" in the Company's annual information form dated
April 29, 2020 and the heading "Risks
and Uncertainties" in the management discussion and analysis for
the fifty-two weeks ended February 2,
2020 and the Q2 MD&A, each filed on its issuer profile
on SEDAR at www.sedar.com.
Financial Outlook
This press release contains a financial outlook within the
meaning of applicable Canadian securities laws. The financial
outlook has been prepared by management of the
Company to provide an outlook as tow hen the
Company expects to achieve positive Adjusted EBITDA and may
not be appropriate for any other purpose. The financial outlook has
been prepared based on a number of assumptions including the
assumptions discussed under the heading "Cautionary
Statement Regarding Forward-Looking Information"
above and assumptions with respect to market conditions,
pricing, and demand. The actual results of the
Company's operations for any period will likely vary and
such variations may be material. The Company and
its management believe that the financial outlook has been prepared
on a reasonable basis. However, because this information is highly
subjective and subject to numerous risks, including the risks
discussed under the heading " Cautionary
Statement Regarding Forward-Looking Information"
above, it should not be relied on as necessarily indicative of
future results.
No stock exchange, securities commission or other regulatory
authority has approved or disapproved the information contained
herein.
Fire & Flower assumes no obligation to publicly
update or revise forward-looking statements to reflect new
information, future events or otherwise, except as expressly
required by applicable law.
_____________________________
1 Please see "Non-IFRS Measures - Adjusted
EBITDA"
2 Please see "Non-IFRS Measures - Adjusted
EBITDA"
SOURCE Fire & Flower Holdings Corp.