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 fourth quarter and full year ended December 31, 2021. All financial information is provided in US dollars unless otherwise indicated.
Fourth Quarter 2021 Summary vs. Same Year-Ago Quarter
- Revenue increased 25% to $4.2 million compared to $3.3 million. Cannabinoid revenue increased 11% to $1.1 million compared to $1.0 million, and non-cannabinoid revenue increased 31% to $3.1 million compared to $2.4 million.
- All-in cost per gram of dry flower was $0.47 compared to $0.15, attributed to the continued ramp of early-stage operations in Portugal.
- Gross profit was $(0.3) million, which includes a $3.0 million inventory write-down, compared to $2.3 million. Adjusted gross profit (a non-GAAP financial measure defined and reconciled herein), which excludes such write-down, was flat at $2.7 million.
- Gross margin, which includes such inventory write-down, was (6.9)% compared to 67.9%. Adjusted gross margin (a non-GAAP financial measure defined and reconciled herein), which excludes such write-down, was 64.1% compared to 79.8%.
- Net loss was $24.0 million compared to $0.9 million driven primarily by an $18.5 million non-cash goodwill impairment charge, a $3.3 million non-cash share-based compensation expense, a $3.0 million inventory write-down and higher professional fees related to being a public company and was offset by an $11.5 million gain on measurement of warrant liability.
- Adjusted EBITDA (a non-GAAP financial measure defined and reconciled herein) was $(7.8) million compared to $(6.3) million due to higher expenses related to being a public company.
Full Year 2021 Summary vs. 2020
- Revenue increased 27% to $15.4 million compared to $12.1 million. Cannabinoid revenue increased 29% to $3.2 million compared to $2.5 million, and non-cannabinoid revenue increased 26% to $12.1 million compared to $9.6 million.
- All-in cost per gram of dry flower was $0.22 compared to $0.14, attributed to the continued ramp of early-stage operations in Portugal.
- Gross profit was $6.8 million, which includes a $3.0 million inventory write-down, compared to $7.4 million. Adjusted gross profit, which excludes such inventory write-down, increased 25% to $9.8 million compared to $7.8 million.
- Gross margin was 44.3% compared to 61.2%. Adjusted gross margin, which excludes such inventory write-down, was 63.7% compared to 64.5%.
- Net loss was $45.7 million compared to $25.9 million driven primarily by an $18.5 million non-cash goodwill impairment charge, an $11.5 million non-cash share-based compensation expense, a $3.0 million inventory write-down and higher legal and professional fees related to being a public company and was offset by a $16.9 million gain on measurement of warrant liability.
- Adjusted EBITDA (a non-GAAP financial measure defined and reconciled herein) was $(24.9) million compared to $(23.3) million.
“We have made progress in the fourth quarter by strengthening our operational foundation and advancing our commercial momentum to better position us for 2022,” said Andres Fajardo, President and incoming CEO of Clever Leaves. “We delivered year-over-year revenue growth of 26% and 29% across our non-cannabinoid and cannabinoid businesses, respectively. We also maintained our prudent approach to cost management as we drove continued production efficiencies. We believe the incremental milestones we achieved throughout our first year as a public company will enable us to leverage our low-cost production advantages and advance our global distribution efforts in 2022.
“Our work to optimize our production footprint has positioned us to further enhance how we serve our growing global B2B partner base. In Portugal, after we completed the construction of our cultivation expansion in the third quarter, we received a license from the Portuguese regulatory health authority, INFARMED, I.P. in December for the newly expanded facilities. Finishing the construction and licensing marks the near completion of our capital expenditures cycle, and we remain focused on ramping our Portuguese flower operations as we move past the capital-intensive phase of our growth. In Colombia, we have continued to prepare our operations to support dried flower exports. With our continued production efficiencies in Colombia, and the learnings we’ve gained from our flower operations in Portugal, we believe we are well-positioned for this expanded market opportunity. Once the guidelines are issued from the Colombian authority for the commercial export of dried flower, we expect to begin the export of dried flower in the fourth quarter of 2022.
“From a commercial standpoint, we are entering 2022 with a refined strategic focus as we align our efforts across six key markets: Australia, Germany, Brazil, Israel, the United States, and Colombia. In the last two months alone, we have announced two new supply agreements in Australia and three agreements in Germany, comprising both new partnerships and expanded agreements with current partners. We are making similar commercial strides within Israel, including our recently announced global strategic partnership with InterCure (Nasdaq: INCR). Having launched our CBD brand, JoySol, in the U.S. and sustained our progress with dried flower export preparations in Colombia, we are leveraging our robust distribution and production networks to expand our overall market opportunity. We look forward to providing further updates as we look to continue our momentum throughout the year.
“As we move further into 2022, we believe we are off to a strong start with building upon our solid foundation and transitioning Clever Leaves into its next phase of growth. I am proud of our team’s dedication to supporting our strategy and advancing our position within the global cannabinoid supply chain.”
Fourth Quarter 2021 Financial Results
Revenue in the fourth quarter of 2021 increased 25% to $4.2 million compared to $3.3 million for the same period in 2020, driven by sustained performance strength within the non-cannabinoid segment, as well as the cannabinoid segment.
All-in cost per gram of dry flower in the fourth quarter of 2021 was $0.47 per gram compared to $0.15 per gram for the same period in 2020. The increase was primarily attributable to continued production costs associated with ramping early-stage operations in Portugal, partially offset by sustained cost efficiencies in the Company’s Colombian production operations.
Gross profit, including a $3.0 million inventory write-down, was $(0.3) million compared to $2.3 million for the same period of 2020, with a gross margin of (6.9)% compared to 67.9% for the same period of 2020. Adjusted gross profit, which excludes such write-down, was flat at $2.7 million compared to $2.7 million for the same period of 2020, with an adjusted gross margin of 64.1% compared to 79.8% for the same period of 2020. Adjusted gross profit was primarily driven by the aforementioned revenue growth across both segments of the business, offset by labor and supply chain-related cost impacts within the non-cannabinoid segment.
Operating expenses in the fourth quarter of 2021 were $11.4 million, excluding the impact of an $18.5 million non-cash goodwill impairment charge related to the Company’s acquisition of its Colombia operations in November 2019, compared to $9.6 million for the same period in 2020. The charge was triggered due to certain impairment indicators present during the fourth quarter of 2021, primarily related to the decline in previously forecasted revenues and decline in the Company’s share price. The increase in operating expenses during the fourth quarter was primarily driven by higher non-cash share-based compensation expense, which grew to approximately $3.3 million compared to $0.5 million in the year-ago period, as well as insurance and professional fees related to being a public company, partially offset by continued cost cutting measures.
Net loss in the fourth quarter of 2021 was $24.0 million compared to a net loss of $0.9 million for the same period in 2020. This was driven primarily by $18.5 million of non-cash goodwill impairment taken in the fourth quarter of 2021 in addition to higher non-cash share-based compensation expense, inventory write-down, higher public company expenses, and non-cash interest expense recognized in connection with the conversion feature related to the Company’s Convertible Note due 2024 with Catalina LP, as amended on January 13, 2022 (the “2024 Convertible Note”), partially offset by the gain on remeasurement of warrant liability and continued cost-cutting measures.
Adjusted EBITDA in the fourth quarter of 2021 was $(7.8) million compared to $(6.3) million for the same period in 2020. This was primarily driven by higher public company expenses.
Cash, cash equivalents and restricted cash were $37.7 million at December 31, 2021, compared to $79.5 million at December 31, 2020. The decrease was primarily attributable to sustained operating losses and capital investments partially offset by proceeds from borrowings and from the exercise of public warrants during the year.
Full Year 2021 Financial Results
Revenue in 2021 increased 27% to $15.4 million compared to $12.1 million in 2020. The increase in the Company’s non-cannabinoid segment revenue was primarily driven by stronger demand from specialty distributors combined with less stringent COVID-19 restrictions compared to the prior period, during which the Company saw a decline in sales due to closure of store fronts and a reduction in foot traffic for its retail partners. The increase in the Company’s cannabinoid segment sales was primarily driven by the continued expansion of sales activity.
All-in cost per gram of dry flower in 2021 was $0.22 per gram compared to $0.14 per gram in 2020. The increase was largely driven by production costs associated with ramping early-stage operations in Portugal, partially offset by the sustained cost efficiencies with the Company’s Colombian production operations.
Gross profit, including a $3.0 million inventory write-down, was $6.8 million compared to $7.4 million in 2020, with a gross margin of 44.3% compared to 61.2% in 2020. Adjusted gross profit, which excludes such inventory write-down, increased 25% to $9.8 million compared to $7.8 million in 2020, reflecting a 63.7% adjusted gross margin compared to 64.5% in 2020. The increase in adjusted gross profit was primarily driven by the aforementioned revenue growth across both segments of the business, partially offset by labor and supply chain-related cost impacts within the non-cannabinoid segment.
Operating expenses in 2021 were $45.5 million, which excludes the impact of an $18.5 million non-cash goodwill impairment charge related to the Company’s acquisition of its Colombia operations in November 2019, compared to $34.3 million in 2020, which excludes the impact of a $1.7 million non-cash goodwill impairment charge the Company recorded in the first quarter of 2020 related to the Company’s Herbal Brands acquisition in the non-cannabinoid segment. The increase in operating expenses in 2021 was attributable to increased non-cash share-based compensation expense, which grew to $11.5 million compared to $1.7 million in 2020, as well as insurance and professional fees related to being a public company, partially offset by continued cost-cutting measures.
Net loss in 2021 was $45.7 million compared to a net loss of $25.9 million in 2020. This was driven primarily by $18.5 million of non-cash goodwill impairment taken in the fourth quarter of 2021 in addition to higher non-cash share-based compensation expense, the aforementioned inventory write-down, higher public company expenses, and a non-cash interest expense recognized in connection with the conversion feature related to the 2024 Convertible Note, partially offset by a gain on remeasurement of warrant liability and continued cost-cutting measures.
Adjusted EBITDA in 2021 was $(24.9) million compared to $(23.3) million in 2020. The decrease was mainly driven by public company expenses.
In connection with its audit for the year ended December 31, 2021, the Company identified certain changes to the preliminary unaudited results included in its Current Report on Form 8-K (as amended by Amendment No. 1 to the Current Report on Form 8-K, the “Preliminary Results Form 8-K”) filed by the Company with the Securities and Exchange Commission (the “SEC”) on February 9, 2022. As noted in the Preliminary Results Form 8-K, the estimates and estimated ranges provided therein were prepared by management in good faith based upon internal reporting for the quarter and full year ended December 31, 2021; and the Company’s independent registered public accounting firm, BDO Canada LLP, had not audited, reviewed, compiled or performed any procedures on such preliminary financial data. We have now finalized the audit for our 2021 FYE results and have determined that the Preliminary Results Form 8-K should not be relied upon. This press release supersedes the Preliminary Results Form 8-K and should be read in conjunction with the Company’s Form 10-K for the year ended December 31, 2021, as filed with the SEC.
Reiterated 2022 Outlook and Strategic Growth Objectives
Following on the operational and commercial progress Clever Leaves has made throughout 2021, the Company continues to expect full year 2022 revenue to range between $20 million and $25 million, with an adjusted gross margin between 50% and 55%. Clever Leaves also expects adjusted EBITDA to range between $(23) million and $(20) million. The Company expects approximately $2 million to $3 million of annual capital expenditures, representing an estimated 70% reduction compared to 2021.
The Company has identified the following focused strategic growth objectives and key regions for 2022:
- Australia: Capitalize on early traction with expansion of flower products and scale and secure additional extract sales agreements.
- Germany: Commence full commercial launch for the IQANNA flower brand, initiate sales of products through extract B2B partnerships, and activate import path for flower from our Portugal operation.
- Brazil: Activate sales agreements for products that have recently received regulatory approval and complete approval for other key products.
- Israel: Scale existing relationships for APIs and secure a large commercial-scale partnership for flower.
- United States: Commercially launch first CBD brand, JoySol.
- Colombia: Continue preparation for first flower sales, pending passage of final government resolutions.
While Clever Leaves is committed to accelerating revenue growth and leveraging its low-cost unit economics while driving down its operating expenses and capital intensity, it is focused on improving its balance sheet, which may include several initiatives such as raising capital, reducing working capital and monetizing non-core assets. Additionally, Clever Leaves continues to focus on the relative size of its expense structure. As a result, Clever Leaves believes it is positioned to drive continued growth and create shareholder value.
Conference Call
Clever Leaves will conduct a conference call today at 5:00 p.m. Eastern time to discuss its results for the fourth quarter and full year ended December 31, 2021.
Clever Leaves management will host the conference call, followed by a question and answer session.
Conference Call Date: March 24, 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: 13727298
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 March 31, 2022.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13727298
