Flora Growth Reports Third Quarter 2022 Financial Results

  • Revenue for the three-month period ended September 30, 2022 was $10.8 million, an increase of 414% year over year
  • Revenue for the nine-month period ended September 30, 2022 was $25.7 million, an increase of 510% year over year
  • Gross profit for the three-month period ended September 30, 2022 was $5.0 million, an increase of 703% year over year with gross margins improving from 29.6% to 46.2%.
  • Company reaffirms its 2022 revenue guidance to range between $35 million – $45 million
  • Flora management to host a webcast today at 4:30PM ET

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.

“Reconciliation of IFRS to non-IFRS financial results”

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“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.

 

Contacts

Investor Relations:
Sean Mansouri, CFA
ir@floragrowth.com

Public Relations:
Cassandra Dowell
+1 (858) 221-8001
flora@cmwmedia.com

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