– Revenue Increased 50% Year-Over-Year to $5.2 Million
– Commercial Progress Across Target Markets Demonstrates Strong Execution on Redefined Growth Strategy
– Additional Proactive Steps Taken to Enhance the Company’s Cost Structure
– Significant Debt Pay-Down Achieved Subsequent to Quarter End
– Reiterating Previously Provided 2022 Outlook
BOCA RATON, Fla., May 12, 2022 (GLOBE NEWSWIRE) — Clever Leaves Holdings Inc. (Nasdaq: CLVR, CLVRW) (“Clever Leaves” or the “Company”), a leading multinational operator and licensed producer of pharmaceutical-grade cannabinoids, is reporting financial and operating results for the first quarter ended March 31, 2022. All financial information is provided in US dollars unless otherwise indicated.
First Quarter 2022 Summary vs. Same Year-Ago Quarter
- Revenue increased 50% to $5.2 million compared to $3.5 million. Cannabinoid revenue increased 195% to $2.0 million compared to $0.7 million, and non-cannabinoid revenue increased 15% to $3.2 million compared to $2.8 million.
- All-in cost per gram of dry flower increased to $0.35 compared to $0.16. The change in cost was attributed to the ramping of pre-commercial operating expenses ahead of expected revenue at the Company’s recently completed greenhouse expansion and post-harvest facility in Portugal.
- Gross profit was $2.0 million, which includes a $0.8 million inventory write-down, compared to $2.1 million, which includes a $0.2 million inventory write-down. Adjusted gross profit (a non-GAAP financial measure defined and reconciled herein), which excludes such inventory write-down, increased 25% to $2.9 million compared to $2.3 million.
- Gross margin, which includes such inventory write-down of $0.8 million, was 39.0% compared to 61.5%. Adjusted gross margin (a non-GAAP financial measure defined and reconciled herein), which excludes such inventory write-down, was 55.2% compared to 66.4%.
- Net loss in the first quarter of 2022 increased to $16.1 million compared to $13.8 million for the same period in 2021, driven primarily by a $4.0 million restructuring expense, offset by increase in loss due to $1.7 million of debt discount write off and loss on debt extinguishment of $2.3 million due to extinguishment of debt as offset by gain on remeasurement of warrant liability.
- Adjusted EBITDA (a non-GAAP financial measure defined and reconciled herein) was $(6.7) million compared to $(5.5) million predominantly due to increased cost of sales including an inventory write-down and nominally higher R&D expense related to positioning for Colombian dried flower export as well as sales and marketing expenses.
“Our first quarter performance reflects our strong execution on our redefined growth strategy,” said Andres Fajardo, CEO of Clever Leaves. “Our revenue increased 50% year-over-year to $5.2 million, reflecting robust growth in our cannabinoid revenues across our target markets, as well as continued performance strength in our nutraceuticals business. While our bottom line reflects the impacts of certain one-time restructuring charges, the ramp-up of our Portuguese operation, and margin pressure in our non-cannabinoid business, we believe our work to align our cost structure with our strategic priorities has improved our positioning for longer-term profitability. As we progress further into 2022, we remain committed to strengthening our operational efficiencies and enhancing the value we create for our stakeholders.
“After narrowing our 2022 commercial focus to a core group of key markets—comprising Australia, Germany, Brazil, Israel, and the U.S.—we have already made solid progress activating and expanding our existing agreements, as well as adding new partnerships and growth initiatives, in those markets. We generated particular momentum in Australia and Germany through strengthening our relationships with our current prominent pharmaceutical partners in each region. This positions us to continue leveraging regulatory tailwinds and growing our B2B client base within both markets. In addition, our experience with navigating complex quality and regulatory frameworks has allowed us to strengthen our market presence in Brazil and Israel, where we are working diligently to ramp our early-stage partnerships. Our deep understanding of our core markets and end consumers also helped fuel the first quarter launch of our Portugal-grown IQANNA flower products in Germany. Over the coming quarters, we will continue working to enhance our active partnerships and products, as well as to seek additional opportunities for growth.
“Subsequent to quarter’s end, we announced several strategic developments that enhance our market opportunities, positioning, and cost efficiency. In early April, the Colombian government announced the issuance of Joint Resolution 539, which completed the country’s required regulatory framework for dried flower exports. Following this resolution, as well as our months of preparation, we are on track to begin high-THC medical flower exports at the end of this year, with milled medical flower exports slated to begin as early as the third quarter. We also expanded our distribution pathways in the U.S. and Germany by forming a research-oriented partnership with Biom Therapeutics in the U.S. and becoming a fully-licensed medical cannabis distributor in Germany. Further, we took aggressive actions to improve our balance sheet and our underlying cost structure, which we expect will yield cash savings in excess of $4.0 million per year. These initiatives allow us to operate from a leaner foundation as we strengthen our distribution network and capabilities.
“Across our organization, we will continue working to drive enhanced operational efficiencies and identify additional commercial opportunities within our key markets. With our streamlined growth strategy in place, we are well-positioned to continue building upon our foundation as an emerging supplier of choice within the international cannabis industry.”
First Quarter 2022 Financial Results
Revenue in the first quarter of 2022 increased 50% to $5.2 million compared to $3.5 million for the same period in 2021. This was driven by accelerating growth within the cannabinoid segment of 195%, primarily in Brazil, Israel and Australia, and continued solid growth within our non-cannabinoid segment of 15%.
All-in cost per gram of dry flower in the first quarter of 2022 was $0.35 compared to $0.16 per gram for the same period in 2021. The increase was primarily attributed to higher production costs related to ramping operations in Portugal, partially offset by sustained cost efficiencies in the Company’s Colombian production operations.
Gross profit, including a $0.8 million inventory write-down, was $2.0 million compared to $2.1 million, including a $0.2 million inventory write-down, for the same period of 2021, with a gross margin of 39.0% compared to 61.5% for the same period of 2021. Adjusted gross profit, which excludes such inventory write-down, increased 25% to $2.9 million compared to $2.3 million for the same period of 2021, with an adjusted gross margin of 55.2% compared to 66.4% for the same period of 2021. The increase in adjusted gross profit was primarily driven by the aforementioned revenue growth across both business segments, partially offset by continued labor and supply chain-related cost impacts within the non-cannabinoid segment.
Operating expenses in the first quarter of 2022 were $13.9 million compared to $9.9 million in the year-ago period, with the main driver being a one-time $4.0 million restructuring expense related to write-offs of certain excess extraction equipment for the Company’s Colombian operations, as well as employee severance costs.
Net loss in the first quarter of 2022 increased to $16.1 million compared to $13.8 million for the same period in 2021, driven primarily by a $4.0 million restructuring expense. This was offset by increased loss due to $1.7 million of debt discount write-off and loss on debt extinguishment of $2.3 million due to extinguishment of debt as offset by gain on remeasurement of warrant liability.
Adjusted EBITDA in the first quarter of 2022 was $(6.7) million compared to $(5.5) million for the same period in 2021. The decrease was mainly due to increased cost of sales, including an inventory write-down, R&D expenses for Colombian dried flower, and additional sales and marketing activities.
Cash, cash equivalents and restricted cash increased to $44.8 million at March 31, 2022 compared to $37.7 million at December 31, 2021. The increase was attributable to net proceeds raised from the Company’s at-the-market stock offering during the quarter.
Reiterated 2022 Outlook and Strategic Growth Objectives
Based on current commercial momentum across its target markets, Clever Leaves reaffirms full year 2022 revenue to be within the range of $20 million and $25 million, with adjusted gross margin expected to range between 50% and 55%. The Company also expects adjusted EBITDA to range between $(23) million and $(20) million. In addition, Clever Leaves expects approximately $2 million to $3 million of annual capital expenditures.
Significant Actions to Improve the Balance Sheet and Cost Structure
While the Company remains committed to accelerating revenue growth and leveraging its low-cost unit economics, it is simultaneously focused on improving its balance sheet while driving down operating expenses and capital intensity. Subsequent to the quarter end, the Company used the cash proceeds derived from its at-the-market-offering of common stock to fully settle its secured convertible note, as well as the Herbal Brands debt. As a result, the Company’s debt has been reduced from $22.6 million to $2.1 million, thereby yielding annual cash interest expense savings of $0.8 million through the end of 2022.
Subsequent to the quarter end, Clever Leaves also completed a global work-force reduction. This reduction is expected to generate cash savings of $2.0 million in 2022 and $4.0 million in subsequent years.
“Although measures like this are never desirable and we profoundly value each one of our dedicated team members, they were necessary to closely align our expense base with our current revenue profile. As a result, we fully expect to achieve the operating leverage previously anticipated in our business strategy over time,” said Andres Fajardo.
Clever Leaves will conduct a conference call today at 5:00 p.m. Eastern time to discuss its results for the first quarter ended March 31, 2022.
The Company’s management will host the call, followed by a question-and-answer session, and the dial-in details are as follows:
Conference Call Date: May 12, 2022
Time: 5:00 p.m. Eastern time
Toll-free dial-in number: 1-877-407-9208
International dial-in number: 1-201-493-6784
Conference ID: 13729300
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Group at (949) 574-3860.
The conference call will be broadcast live and available for replay here.
A telephonic replay of the conference call will also be available after 8:00 p.m. Eastern time on the same day through May 19, 2022.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13729300