Continued Commercial Momentum Within Core Cannabinoid Markets –
– Recent Commercial Launches of Colombian Dry Flower Exports to Australia and Germany Mark Key Operational Milestone –
– Continuing Cost Reduction Measures Drive Leaner Operational Infrastructure –
– Reiterating Previously Issued 2023 Outlook –
TOCANCIPÁ, Colombia, May 11, 2023 (GLOBE NEWSWIRE) — Clever Leaves Holdings Inc. (NASDAQ: CLVR, CLVRW) (“Clever Leaves” or the “Company”), a global medicinal cannabis company, is reporting financial and operating results for the first quarter ended March 31, 2023. All financial information is provided in US dollars unless otherwise indicated.
“Our first quarter performance reflects the progress we are making on our key growth objectives, including our focused commercial strategy, Colombian production, and leaner cost structure,” said Andres Fajardo, CEO of Clever Leaves. “We continued to build upon our commercial momentum within our core target markets—notably Brazil, Australia, and Israel—and ramp our Colombian smokable dry flower exports. Within our non-cannabinoid segment, we also generated sequential and year-over-year margin improvements. In addition, we drove an approximately 48% year-over-year decrease in our operating expenses, demonstrating the significant and sustained benefit of our restructuring and cost reduction initiatives. As a result, net loss was reduced by nearly 75% and adjusted EBITDA loss was reduced by 35% as we continued to progress on our path to cash flow positivity. As we move further into 2023, we aim to continue executing on these fronts to drive greater operational efficiency and enhance our positioning within the global cannabinoid supply chain.”
First Quarter 2023 Summary vs. Same Year-Ago Quarter1
- Revenue was $4.0 million compared to $5.0 million. Cannabinoid revenue was $1.2 million compared to $1.8 million, and non-cannabinoid revenue was $2.8 million compared to $3.2 million. The decrease in cannabinoid revenues is the result of a one-time order from Brazilian customers to fill the distribution pipeline in Q1 2022, as well as the discontinuation of Portuguese flower while Colombian flower production is being ramped up. The decrease in non-cannabinoid revenue was due to some marketplace adjustments with the onboarding of a new online marketplace partner and implementing new sales terms in its specialty channels.
- All-in cost per gram of dry flower was $1.29 compared to $0.12, attributed to the Company’s significantly reduced agricultural output, along with ongoing extraction and processing costs at its Colombian operations.
- Gross profit, including a $0.1 million inventory provision, was $2.2 million, compared to a $2.6 million gross profit in the year-ago quarter, which included a $0.3 million inventory provision. Adjusted gross profit (a non-GAAP financial measure defined and reconciled herein), which excluded such inventory provisions, was $2.4 million compared to $2.9 million. The reduction in gross profit was a result of the lower revenue levels during the quarter.
- Gross margin, which included such inventory provision of $0.1 million, increased 480 basis points to 56.2% compared to 51.4%, which included such inventory provision of $0.3 million. Adjusted gross margin (a non-GAAP financial measure defined and reconciled herein), which excluded such inventory provisions, increased 160 basis points to 59.2% compared to 57.6%.
- Net loss improved substantially to $4.1 million compared to $16.1 million, driven primarily by the Company’s continued restructuring and cost reduction measures, as well as significantly reduced interest expense and amortization of debt issuance cost compared to the year-ago period. Net loss in the year-ago quarter included a $3.8 million restructuring charge related to charging off certain excess extraction equipment for the Company’s Colombian operations and employee exit costs, as well as $2.3 million in loss on debt extinguishment.
- Adjusted EBITDA (a non-GAAP financial measure defined and reconciled herein) improved to $(3.0) million compared to $(4.7) million.
Fajardo continued: “With Colombia now serving as our sole cannabinoid cultivation and production geography, we are focused on our core competency and working to leverage our existing cost advantages as we ramp our first commercial flower sales in Germany and Australia in the second quarter. We have already completed commercial flower shipments to both countries, and we will refine our products based on market feedback. Within our flower cultivation strategy, we continue to focus on growing the most premium and commercially viable strains. Accordingly, we have remained diligent with right-sizing and optimizing our harvests towards the cultivation of THC flower, which we expect to drive greater demand and cost efficiencies as the business continues to scale.
“We have also successfully continued with winding down our operations in Portugal. We have now sold most of our remaining Portuguese flower inventory into Australia2, leveraging our core competencies that we previously developed in the Australian market. As of the end of the first quarter, our Portuguese flower cultivation, post-harvest processes, and manufacturing activities have all ceased in full, and we have completed the bulk of our workforce reductions. Additionally, we are optimistic about our ability to sell these non-core assets before the end of the year based on expected demand and thanks to the tireless and dedicated efforts of our team.
“While restructuring cash expenditures will continue through the first half of 2023, we will reach a lower cash expenditure run rate later in the second quarter. Taken in conjunction with the significant opex reductions we have driven—and the minimal capex required by our Colombian production operations—we believe we are positioned to operate from a much leaner foundation and drive towards becoming a positive cash flow generative business. To further support our growth and enhance our liquidity position, we continue to evaluate potential sources of additional capital. We expect to report on progress on selling our non-core Portuguese assets this year, while also identifying other opportunities to generate cash from non-core asset sales.
“Across our core markets, we have continued to develop commercial progress and sign new partnerships. We recently complemented our existing Brazilian product sales under RDC 327 with the announcement of our five-year partnership with a leading pharmaceutical company, Hypera Pharma. Under the agreement, we will continue supplying CBD-dominant oral solutions for prescription to Brazilian patients. We also announced a new partnership with Praetorian Global Inc., a US-based cannabis and hemp brand owner, including Binske, and intellectual property provider, to cultivate and produce premium flower and branded products for distribution to medical cannabis patients across the European Union, United Kingdom, and Australia by Q2 2024. These agreements highlight the pipeline we are steadily developing throughout our key geographies.
“Looking ahead, we believe we are positioned to further optimize our capital efficiency and cost structure, as well as to expand our dry flower and extracts sales. We look forward to providing further updates on our strategic progress going forward.”
First Quarter 2023 Financial Results1
Revenue in the first quarter of 2023 was $4.0 million compared to $5.0 million for the same period in 2022. The decrease in cannabinoid revenues reflect a one-time influx of pipeline shipments to Brazil in the year-ago period that did not repeat during the first quarter of 2023. The decrease in non-cannabinoid segment revenues was due to some marketplace adjustments with the onboarding of a new on-line marketplace partner and implementing new sales terms in our specialty channels as well as current economic challenges amongst select customers.
All-in cost per gram of dry flower in the first quarter of 2023 was $1.29 per gram compared to $0.12 per gram for the same period in 2022. The increase was primarily attributable to the Company’s significantly reduced agricultural output in Colombia, along with continued extraction and processing costs on existing inventory.
Gross profit, including a $0.1 million inventory provision, was $2.2 million in the first quarter of 2023 compared to $2.6 million for the same period of 2022, which included a $0.3 million inventory provision. Gross margin, which included such provisions, increased 480 basis points to 56.2% in the first quarter of 2023 compared to 51.4% for the same period of 2022. The increase reflects a lower inventory provision relative to the year-ago quarter, as well as improved gross margin performance within the Company’s non-cannabinoid segment. Adjusted gross profit, which excluded the above provisions, was $2.4 million compared to $2.9 million for the same period of 2022. Adjusted gross margin, which excluded such provisions, increased 160 basis points to 59.2% compared to 57.6% for the same period of 2022.
Operating expenses in the first quarter of 2023 improved significantly to $6.4 million compared to $12.3 million for the same period in 2022. The decrease in operating expenses was driven by the Company’s continued restructuring and cost reduction initiatives. Operating expenses in the year-ago quarter included a $3.8 million restructuring charge related to charging off certain excess extraction equipment for our Colombian operations, as well as employee exit costs.
Net loss in the first quarter of 2023 improved to $4.1 million compared to a net loss of $16.1 million for the same period in 2022. This was driven primarily by the Company’s ongoing restructuring and cost reduction measures, as well as a significantly lower interest expense and amortization of debt issuance cost compared to the year-ago period. Net loss in the year-ago quarter included the aforementioned $3.8 million restructuring charge, as well as a $2.3 million loss on debt extinguishment.
Adjusted EBITDA in the first quarter of 2023 improved to $(3.0) million compared to $(4.7) million for the same period in 2022. The improvement was mainly attributable to realized cost reductions and implemented restructuring initiatives.
Cash, cash equivalents and restricted cash were $6.7 million at March 31, 2023, compared to $12.9 million at December 31, 2022. The decrease was primarily attributable to operating losses, working capital needs, and upfront cash expenditures related to the wind-down of the Company’s Portuguese operations. As the Company completes the sale of non-core assets from our Portugal operations, it currently expects that a material portion of those upfront cash expenditures will be offset. In addition, while it expects restructuring cash expenditures to persist through the first half of 2023, the Company is already seeing a significantly reduced cash burn rate in the second quarter, which is expected to continue to improve going forward.
Reiterated 2023 Outlook
Based on current commercial traction within our core markets, along with the benefit of its sustained cost improvement initiatives, Clever Leaves is reaffirming its full year 2023 revenue outlook to a range of between $19 million and $22 million, with an adjusted gross margin between 58% and 63%. The Company also continues to expect its 2023 adjusted EBITDA to range between $(13.6) million and $(10.6) million, which represents a substantial improvement compared with last year’s AEBITDA loss of $(23.4) million. Additionally, Clever Leaves expects approximately $0.5 million to $0.7 million of annual capital expenditures in 2023, representing an estimated 50% reduction compared to 2022.
1 Due to the cessation of the Company’s production operations in Portugal, as well as the ongoing wind-down process for these operations, Clever Leaves has determined that these operations meet the “discontinued operations” criteria as of March 31, 2023, in accordance with Accounting Standards Codification (ASC) 205, Presentation of Financial Statements. As a result, the Company’s Consolidated Balance Sheets and Consolidated Statements of Operations, and the notes to the Consolidated Financial Statements, have been restated for all periods presented to reflect the discontinuation of these operations in accordance with ASC 205. For additional detail on this presentation, please refer to the Company’s Form 10-Q for the three months ended March 31, 2023.
2 The Company’s sales of its Portuguese flower to Australia amounted to approximately $300,000 during the first quarter of 2023, recognized as part of its discontinued operation. See Note 19 in the Company’s Form 10-Q for the three months ended March 31, 2023 for further information.
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, 2023.
Clever Leaves management will host the conference call, followed by a question-and-answer session.
Conference Call Date: Thursday, May 11, 2023
Time: 5:00 p.m. Eastern time
Toll-free dial-in number: 1-855-238-2333
International dial-in number: 1-412-317-5222
Conference ID: 10177405
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 18, 2023.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10177405