Fire & Flower Announces Second Quarter 2020 Financial Results – Quarterly revenue up 158% to $28.6 million
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.
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.
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.
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.”
|
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% |
||||||
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
August 1, 2020 (the “Q2 MD&A“).
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) |
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.
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Date: |
Tuesday, September 15, 2020 |
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Time: |
8:30 AM Eastern Time |
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Conference Call: |
1-888-390-0546 |
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Replay Number: |
1-888-390-0541 |
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Replay Passcode: |
863557# |
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Note: Replay is available until October 6, 2020. |
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www.sedar.com and on Fire & Flower’s website at www.fireandflower.com/investor-relations/.” data-reactid=”85″>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/.
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.
www.sedar.com. ” data-reactid=”91″>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.
SOURCE Fire & Flower Holdings Corp.
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