Flora growth reports third quarter 2022 financial results
Fort lauderdale, fla. & toronto--(business wire)--flora growth corp. (nasdaq: flgc) (“flora'' or the “company”), a leading all-outdoor cultivator, manufacturer and distributor of global cannabis products and brands, reported today its financial and operating results for the third quarter and nine months ended september 30, 2022. all financial information is provided in u.s. dollars unless indicated otherwise. “the third quarter of 2022 was another exciting quarter for flora as we continued to lay the foundation of our business for the long-term,” said luis merchan, chairman a ceo of flora growth. “during the quarter, we exported products to several new markets, including distribution of our colombian grown high-cbd dried cannabis flower to switzerland and the czech republic, as well as cbd isolate to the united states. our global distribution network, coupled with our high-quality colombian flower and derivatives, leave flora well positioned to capitalize on the evolving global cannabis landscape.” “subsequent to the quarter, we signed a definitive agreement to acquire franchise global health, a pharmaceutical and medical cannabis distributor with principal operations in germany. this transformative deal would connect our colombian commercial infrastructure and product portfolio to the german and eu cannabis markets, allowing flora to significantly increase its international footprint. “as we look ahead to the end of the year, we expect to finalize the transaction and solidify our presence in the european cannabis market. with our industry leading production costs and expanding global footprint, we believe our business is well positioned to accelerate growth into 2023 and beyond.” 3q2022 financial highlights total revenue for the quarter was $10.8 million, an increase of 414% year over year, driven by flora’s house of brands division, which includes the acquisitions of justcbd and vessel. gross profit increased to approximately $5.0 million, up approximately 703% year over year. gross margin in the quarter improved from 29.6% to 46.2% year over year, and demonstrated a gradual improvement from 43.9% during 1h2022. net loss was approximately $7.4 million compared to a net loss of $3.6 million in 3q 2021. net loss margins reduced year over year, year to date, and in comparison to 1h2022. adjusted ebitda (a non-ifrs measure defined below) was $(3.9) million compared to $(3.1) million in 3q 2021. adjusted ebitda margin improved significantly from -150.1 % in 3q2021 to -36.5 % in 3q2022. for a reconciliation of these non-ifrs financial measures to the most directly comparable ifrs financial measures, please see table 4 under "reconciliation of ifrs to non-ifrs financial results" included at the end of this release. as of september 30, 2022, the company had approximately $5.9 million in cash compared to $37.6 million as of december 31, 2021. the decrease was primarily due to cash paid for the acquisition of justcbd, as well as higher operating expenses related to investments in headcount, sales and marketing and one-time expenses associated with cosechemos operations and the flora lab expansion. 2022 outlook flora growth remains on track to meet its 2022 revenue guidance of $35-45 million. recent operational highlights announced the appointment of former jp morgan executive brandon konigsberg to flora’s board of directors and former amazon executive elshad garayev as the company’s chief financial officer announced a joint venture with colombia’s largest indigenous tribe to process and distribute cannabis products throughout the country acquired the no cap hemp co. brand, bolstering new product offerings and revenue streams for the expanding house of brands division awarded best m&a deal at the benzinga cannabis capital conference for the acquisition of justcbd completed multiple commercial cannabis and cbd isolate exports to international markets in the united states, switzerland and the czech republic signed a definitive agreement to acquire franchise global health (fgh). while the completion of the transaction is subject to customary closing conditions for a transaction of such nature, including a formal vote by fgh shareholders, fgh shareholders holding in excess of 73% of fgh’s outstanding shares have agreed to vote in favor of the transaction. earnings call: november 28, 2022, at 4:30pm et live webcast details date: monday, november 28, 2022 time: 4:30 p.m. et online participant link: https://us02web.zoom.us/webinar/register/wn_zaiec74lqygi_i9yyxcooq the recording will be available on the company’s investor page until november 2023. the live webcast will be available online through the above participant link and will be archived and available on the company’s website within approximately 24 hours. about flora growth corp. flora is building a connected, design-led collective of plant-based wellness and lifestyle brands, designed to deliver the most compelling customer experiences in the world, one community at a time. as the operator of one of the largest outdoor cannabis cultivation facilities, flora leverages natural, cost-effective cultivation practices to supply cannabis derivatives to its commercial, house of brands, and life sciences divisions. 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 20-f filed with the sec on may 9, 2022, as amended, 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-ifrs financial measures to supplement our condensed consolidated financial statements, which are prepared and presented in accordance with international financial reporting standards ("ifrs"), we use the following non-ifrs financial measures: adjusted ebitda and adjusted ebitda margin. adjusted ebitda is a non-ifrs financial measure that does not have any standardized meaning prescribed by ifrs and may not be comparable to similar measures presented by other companies. the company calculates adjusted ebitda as total net loss, plus (minus) income taxes (recovery), plus (minus) interest expense (income), plus depreciation and amortization, plus (minus) non-operating expense (income), plus share based compensation, plus impairment charges, plus (minus) unrealized loss (income) 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, plus (minus) non-cash fair value adjustments on the sale of inventory and biological assets. adjusted ebitda margin % is a non-ifrs financial measure that does not have any standardized meaning prescribed by ifrs and may not be comparable to similar measures presented by other companies. the company calculates adjusted ebitda margin % as adjusted ebitda, as described above, divided by revenue for the period. table 1. consolidated statements of financial position flora growth corp. interim condensed consolidated statements of financial position (unaudited - prepared by management) (in thousands of united states dollars) september december 30, 31, as at: 2022 2021 assets current cash $ 5,900 $ 37,614 restricted cash 1 2 trade and amounts receivable 4,392 5,324 loans receivable and advances 255 273 prepaid expenses 1,990 1,700 biological assets 91 37 inventory 10,280 2,993 total current assets 22,909 47,943 non-current property, plant and equipment 4,349 3,750 right of use assets 3,258 1,229 intangible assets 12,652 9,736 goodwill 28,856 20,054 investments 839 2,670 other assets 271 97 total assets $ 73,134 $ 85,479 liabilities current trade payables and accrued liabilities $ 7,559 $ 5,628 current portion of long term debt 5 18 current portion of lease liability 1,102 412 other accrued liabilities 18 61 total current liabilities 8,684 6,119 non-current non-current debt 79 - non-current lease liability 2,137 908 deferred tax 1,531 1,511 other long term liabilities 6,537 - total liabilities 18,968 8,538 shareholders' equity share capital 120,160 102,428 options 6,242 3,712 warrants 9,276 10,670 accumulated other comprehensive loss (2,723 ) (1,108 ) deficit (78,457 ) (38,536 ) non-controlling interest (332 ) (225 ) total shareholders' equity 54,166 76,941 total liabilities and shareholders' equity $ 73,134 $ 85,479 table 2. consolidated statements of loss flora growth corp. interim condensed consolidated statements of loss and comprehensive loss (unaudited - prepared by management) (in thousands of united states dollars, except per share amounts which are in thousands of shares) for the for the three three for the nine for the nine months months months months ended ended ended ended september september september, september 30, 30, 30, 30, 2022 2021 2022 2021 revenue $ 10,765 $ 2,093 $ 25,682 $ 4,211 cost of sales 5,936 1,474 14,351 2,580 gross profit before fair value adjustments 4,829 619 11,331 1,631 unrealized gain on changes in fair value of biological assets 152 - 198 - realized fair value amounts included in inventory sold (10 ) - (12 ) - gross profit 4,971 619 11,517 1,631 operating expenses consulting and management fees 3,237 1,905 8,480 4,167 professional fees 802 904 2,898 1,670 general and administrative 1,186 610 3,615 2,091 promotion and communication 2,195 34 6,914 1,214 travel expenses 288 140 889 283 share based compensation 139 393 2,994 488 research and development 170 (20 ) 592 65 depreciation and amortization 985 67 2,697 186 bad debt expense 631 - 1,036 100 goodwill impairment - - 16,000 - other expenses (income), net 346 198 1,524 131 total operating expenses 9,979 4,231 47,639 10,395 operating loss (5,008 ) (3,612 ) (36,122 ) (8,764 ) interest expense 75 57 144 121 foreign exchange loss (gain) 128 (38 ) 328 (116 ) unrealized loss from changes in fair value 2,177 - 3,510 - net loss before income taxes (7,388 ) (3,631 ) (40,104 ) (8,769 ) income tax benefit - - - - net loss for the period $ (7,388 ) $ (3,631 ) $ (40,104 ) $ (8,769 ) other comprehensive loss exchange differences on foreign operations 1,048 463 1,615 663 total comprehensive loss for the period $ (8,436 ) $ (4,094 ) $ (41,719 ) $ (9,432 ) net loss attributable to: flora growth corp. $ (7,358 ) $ (3,608 ) $ (39,969 ) $ (8,705 ) non-controlling interests (30 ) (23 ) (135 ) (64 ) comprehensive loss attributable to: flora growth corp. $ (8,406 ) $ (4,071 ) $ (41,584 ) $ (9,368 ) non-controlling interests (30 ) (23 ) (135 ) (64 ) basic and diluted loss per share attributable to flora growth corp. $ (0.10 ) $ (0.08 ) $ (0.54 ) $ (0.21 ) weighted average number of common shares outstanding - basic and diluted 76,611 44,199 74,335 41,152 table 3. statement of cash flows flora growth corp. consolidated statement of cash flows (unaudited - prepared by management) (in thousands of united states dollars) for the for the nine months nine months ended ended september september 30, 30, 2022 2021 cash flows from operating activities: net loss $ (40,104 ) $ (8,769 ) adjustments to net loss: depreciation and amortization 2,697 186 stock-based compensation 3,184 488 impairments 16,000 - changes in fair value of investments, biological assets and liabilities 3,312 - bad debt expense 1,036 100 interest expense 123 18 income tax benefit - - income tax (paid) received - - (13,752 ) (7,977 ) net change in non-cash working capital: trade and other receivables 909 (9,692 ) inventory (884 ) (1,025 ) prepaid expenses and other assets 353 (1,596 ) trade payables and accrued liabilities (458 ) 1,005 net cash used in operating activities (13,832 ) (19,285 ) cash flows from financing activities: common shares issued - 18,067 equity issue costs (88 ) (2,431 ) exercise of warrants and options 179 10,357 repayments of lease liability (707 ) (97 ) common shares repurchased (255 ) - interest paid (126 ) - loan borrowing (repayments) 66 (247 ) net cash (used) provided by financing activities (931 ) 25,649 cash flows from investing activities: loans provided - (268 ) loan repayments received - 224 purchases of property, plant and equipment and other assets (948 ) (1,472 ) purchase of investments - (3,653 ) business and asset acquisitions, net of cash acquired (15,388 ) (1,284 ) net cash used in investing activities (16,336 ) (6,453 ) effect of exchange rate on changes on cash (615 ) (613 ) change in cash during the period (31,714 ) (702 ) cash and cash equivalents at beginning of period 37,614 15,523 cash and cash equivalents at end of period $ 5,900 $ 14,821 supplemental disclosure of non-cash activities right of use assets and lease liabilities acquired $ 2,042 $ - common shares issued for business combinations 14,917 - table 4. reconciliation of ifrs to non-ifrs financial results adjusted ebitda (non-ifrs measure) reconciliation to net loss and adjusted ebitda margin to net income (loss) margin. the reconciliation of the company’s adjusted ebitda, a non-ifrs financial measure, to net loss, the most directly comparable ifrs financial measure, for the three and nine months ended september 30, 2022, and september 30, 2021 is presented in the table below: (in thousands of united states dollars) for the three months ended september 30, 2022 for the three months ended september 30, 2021 for the nine months ended september 30, 2022 for the nine months ended september 30, 2021 net loss for the period $ (7,388 ) $ (3,631 ) $ (40,104 ) $ (8,769 ) income tax expense (benefit) - - - - interest expense 75 57 144 121 depreciation and amortization 985 67 2,697 186 non-operating expense (1) 128 (38 ) 328 (116 ) share based compensation 140 393 3,184 488 impairments (2) - - 16,000 - unrealized loss from changes in fair value (3) 2,177 - 3,510 - charges related to the flow-through of inventory step-up on business combinations - - 1,631 - other acquisition and transaction costs 94 10 653 10 non-cash fair value adjustments on the sale of inventory and biological assets (142 ) - (186 ) - adjusted ebitda $ (3,931 ) $ (3,142 ) $ (12,143 ) $ (8,080 ) adjusted ebitda margin % -36.5 % -150.1 % -47.3 % -191.9 % (1) non-operating expense includes foreign exchange gain (loss). (2) impairments include goodwill impairment. (3) unrealized loss from changes in fair value includes changes in the value of the company’s long-term investment in an early-stage european cannabis company and the value of the company’s contingent consideration associated with its acquisition of justcbd.
