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 second quarter ended June 30, 2023. All financial information is provided in US dollars unless otherwise indicated.
“In the second quarter, we demonstrated continued execution on our key strategic growth objectives, resulting in strong year-over-year revenue growth, optimized cash management, and expansion into new global markets,” said Andres Fajardo, CEO of Clever Leaves. “We drove 21% year-over-year growth in our revenues, driven by 151% growth in the cannabinoid segment as a result of sales traction for our extracts. In our non-cannabinoid business, we maintained our margin performance of this segment on both a sequential and year-over-year basis, despite continued revenue headwinds within the specialty retail channel. With the continued progress in our restructuring and cost reduction initiatives, we drove an approximately 25% year-over-year decrease in operating expenses and significantly improved our Adjusted EBITDA performance with ($2.1) million in second quarter 2023 versus ($3.5) million last year. As we progress into the second half of the year, our efforts remain focused on expanding our commercial momentum within and beyond our international target markets, along with maintaining a refined, efficient operational infrastructure.
“With the restructuring initiatives implemented over the past year, including our wind-down in Portugal, we reduced our cash expenditure run rate and driven increased cost savings in the first half of 2023 resulting in $5.1 million in cash as of the end of the second quarter. Subsequent to the end of the second quarter, we completed the sale of our Portuguese processing assets, adding $2.7 million in cash to our balance sheet. We continue to target selling our remaining Portuguese agricultural assets by the end of this year.”
Second Quarter 2023 Summary vs. Same Year-Ago Quarter1
- Revenue in the second quarter of 2023 increased 21% to approximately $5.0 million compared to $4.1 million for the same period in 2022. The improvement was driven by an increase in cannabinoid segment revenues of 151% to $1.9 million compared to $0.7 million for the same period in 2022, partially offset by lower revenues in the non-cannabinoid segment. The increase in cannabinoid segment revenues was primarily driven by ongoing sales strength for the Company’s extract products, particularly in Brazil, Australia, and Israel. The decrease in non-cannabinoid revenues was due to continued demand headwinds in the segment’s specialty channel.
- All-in cost per gram of dry flower was $0.70. There is no comparative data from the prior year, as the Company did not harvest crops at its Colombian operations in the year-ago quarter.
- Gross profit, including a $0.2 million inventory provision, increased 10% to $2.7 million, compared to a $2.5 million gross profit in the year-ago quarter, which included a $0.2 million inventory provision. Adjusted gross profit (a non-GAAP financial measure defined and reconciled herein), which excluded such inventory provisions, increased 8% to $2.9 million compared to $2.7 million. The increase was driven by the aforementioned revenue growth during the second quarter, as well as stabilized pricing for both raw materials and labor in the non-cannabinoid segment.
- Gross margin was 54.7% compared to 60.5%, last year. Adjusted gross margin (a non-GAAP financial measure defined and reconciled herein), which excluded inventory provisions, was 58.8% compared to 66.3%. The decrease was attributed to customer and product mix differences compared to the year-ago period.
- Operating expenses in the second quarter of 2023 improved to $5.9 million compared to $7.8 million for the same period in 2022. The decrease in operating expenses was driven by the continued benefits of the restructuring and cost reduction initiatives the Company implemented over the past year.
- Net loss was $3.6 million compared to $1.0 million. Net loss in the year-ago quarter included a $6.9 million gain on investment following the Company’s sale of a portion of its minority equity stake in Cansativa, along with a $1.3 million gain on remeasurement of warrant liability. Excluding the gains, net loss in the year-ago quarter would have been approximately $9.2 million.
- Adjusted EBITDA (a non-GAAP financial measure defined and reconciled herein) improved to $(2.1) million compared to $(3.5) million. The improvement reflects the aforementioned benefits of the Company’s restructuring and cost reduction initiatives over the past year.
- Cash, cash equivalents and restricted cash were $5.1 million at June 30, 2023, compared to $12.9 million at December 31, 2022. The decrease was primarily attributable to operating losses, working capital needs, and cash expenditures related to the remaining wind-down activities for the Company’s Portuguese operations. The Company expects to drive additional cash savings through completing the wind-down process and selling its remaining agricultural assets in Portugal. Further, the evaluation of additional sources of capital remains ongoing.
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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 fiscal period ended June 30, 2023.
Fajardo continued: “We continue to leverage growing momentum in both our current target markets and new markets. Within our extracts business, we maintained sales strength in Brazil, Australia and Israel, and we have started cultivating a limited amount of new CBD hemp crops to ensure we can continue addressing this demand. During the second quarter, we also completed extract shipments to SOMAÍ Pharmaceuticals in Portugal and Astrasana Holding AG (Astrasana) in Switzerland, and we are preparing to launch extract shipments to Astrasana’s pharmaceutical operations in the Czech Republic. Exporting to these new markets has expanded our global footprint along with strengthening our strategic regional positioning in Europe.
“Following the completion of our previous commercial flower shipments to Australia and Germany, we completed our first commercial shipment of Colombian flower to Australian Natural Therapeutics Group (ANTG). This shipment builds upon our flower products’ historical traction in this market, and we aim to launch a second flower strain in Australia in the third quarter of this year. We have already developed three strains for our broader Colombian flower portfolio, and we anticipate completing development of at least two additional strains by year-end 2023. As we further refine our flower cultivation and adapt to our target markets’ regulatory requirements, we continue to track towards launching our dry smokable flower products in Germany this year.
“As we work to build upon our progress in the second half of 2023, we remain focused on our key strategic areas of growth, comprising our focused commercial strategy; low-cost, high-quality Colombian production operations; and optimized cash management. I am proud of the strategic strides we’ve made on each of these fronts, and we look forward to further strengthening Clever Leaves’ position within the global medical cannabis supply chain.”
Sale of Processing Assets in Portugal
Subsequent to the second quarter of 2023, the Company completed the sale of its Portuguese processing assets to Terra Verde, Lda., an affiliate of Curaleaf Holdings, Inc. (CSE: CURA) (OTCQX: CURLF). Proceeds from the sale amounted to $2.7 million which Clever Leaves plans to use for working capital and general corporate purposes.
Reiterated 2023 Outlook
With the Company’s current commercial traction and visibility—along with its ongoing work to drive cost savings and improve capital efficiency—Clever Leaves is reaffirming its full year 2023 financial outlook. The Company continues to expect its full-year revenue to range between $19 million and $22 million, with an adjusted gross margin of between 58% and 63%. The Company also continues to expect its 2023 adjusted EBITDA to range between $(13.6) million and $(10.6) million. Additionally, Clever Leaves anticipates approximately $0.5 million to $0.7 million of annual capital expenditures in 2023, representing an estimated 50% reduction compared to 2022.
Conference Call
Clever Leaves will conduct a conference call today at 5:00 p.m. Eastern time to discuss its results for the second quarter ended June 30, 2023.
Clever Leaves management will host the conference call, followed by a question-and-answer session.
Conference Call Date: Monday, August 14, 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: 10180940
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 August 21, 2023.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 10180940
