Flora Growth (FLGC) 3 Apr 232022 Q4 Earnings call transcript

[Abrupt Start] Before we begin, I'd like to note that the webcast is being recorded and will be published for viewing shortly after the end of the webcast.

On the call with me today are Luis Merchan, Chief Executive Officer and Chairman of the Board; as well as Elshad Garayev, Chief Financial Officer.

Today, we'll be discussing the results of fiscal year 2022. Once we complete our prepared remarks, we'll begin the Q&A session, please feel free to use the Q&A function within the webcast. On Friday, March 31, our audited financial statements and earnings release for the period ended December 31, 2022 were filed with the SEC under the cover of a Form 10-K. be and the on can of Relations both website Flora's EDGAR. of found Investor in section Copies

I'd like are to management's and prepared remind you that may uncertainties. forward-looking during contain statements, which subject risks remarks to this webcast,

statements undue should therefore, not performance, them. reliance upon do not placed Forward-looking future and guarantee be

publicly see factors no detailed differ law. forward-looking any except materially the cause or under our The required actual undertakes that correct please company XX-K. a applicable to forward-looking may as reflect For during of results the our obligation from presentation statements could securities be the circumstances, description future statements or to update made, business or events made to

conjunction and should not for or to a be be considered substitute presented results. measures an GAAP that alternative IFRS-based considered Please U.S. financial superior as adjusted as statements. U.S. EBITDA. reported measures which the Flora reconciliation adjusted We refer financial adjusted U.S. to as previous We'd GAAP not and today's to, refer filing EBITDA, of presented not calculation with IFRS certain accordance do our in call, comparable measures our filings the and gross addition, these GAAP. In GAAP profit for to should financial and any like These non-IFRS to previously measures calculated non-U.S. in such by all gross and will directly prescribed and to may standardized such also note were in meaning margin, most included the reported to measures non-U.S. under GAAP. adjusted compare have as with financial measures, reference

Merchan. it will Chairman over I and CEO, that, Luis to with hand And

morning, from be intro, us early today. to proud Thank and XXXX, appreciate to time results the I'm and where we but $XX.X fiscal everyone. Jessie, the the you, share with a you have year our making line, taken we in the We $XX.X million for and the in to year with day the guidance revenue, million by date. top also company met revenue revenue-generating closed delivering for only it quarter record QX not highest good

is House products the effectiveness integration M&A our Brands, value of completion of our the of our operational in proposition throughout compelling transactions the performance of of our milestones This and strategy, the result year. and we achieved the pivotal the

that in XXXX It's Flora revenues put building where XXXX than was incredible at pre-revenue. in more us just Flora the our that realize was will blocks a year our XXXX. mission to back transformational place to allow and for double look

in we $XXX to have potential a the Now XXXX, become million company. revenue-generating

that challenging not ours without build value was to mind long such But environments to its as all that in important XXXX the for having critical in a are navigate date, top. nascent ensuring the It's course. of despite long-term shareholder cannabis those we most the haul, note hostile industry companies will one challenges, in are have to for years the rise accomplished built industry. business to especially those of with

streamline the three towards operations, and take M&A key the evolving of achievement, to business advantage prioritizing our in to XXXX, an help we goals. in In us us serve pressures allow Ongoing worked addition fine-tune revenue industry to market.

as House our Pharmaceutical three-pillar the Wholesale approach, announced cannabis This for to with industry, road our streams of The be first and Commercial strategy deployment was year. a of the every major proliferate. Each and continues provides Brands, access map. cannabis our diversified critical of to last global allows which growth market, us represents to continues our reform area nearly we revenue pillar, and development us

foreign as framework a from convert reporting private we to a our filer. informed issuer U.S. also has This domestic

better level, our see will but and transparency at to company report clarity only operations. of well, the now providing our not in performance core the as we filings, you by As pillar

XXXX, In believe operations outflows And front, meaningful macro headwinds. continue optimizing there as especially and our and the plan the work for industry streamlining is cash weathered expenses, we prioritized have to reduction microeconomic this operational done better while we on the needed of left we also efficiencies. to be our

most perhaps knew the Global we activities needed end we transformational for primary in us company And M&A Health, we operations of the with the of cannabis our mission. XXXX, Franchise multinational to realization of Germany. a importantly, completed prepare At acquisition

of supply operations of Germany. German chain to countries existing to and We actively own X,XXX the are and Colombia now value from cannabis of network their realize integrating XX the the distribution pharmacies to

acquisition fundamentally Franchise, of distribution our expanded JustCBD XXXX and our reach chain networks, supply both business, us giving makeup internationally. the and with diversifying QX The acquisition have of domestically coupled of changed the and

Throughout the goals team to and realize ambitious revenue worked our last year, these guidance. achieve diligently

and Our of domestic first farming traction from Colombia, we our construction the lab the saw We cannabis to export derivatives pharmaceutical compound House international markets. brands show Colombia, our Cosechemos incredible continue completed in in in prescription Bogotá. and of and Bucaramanga, of

the leader All today be milestones stage. to us these a to of cannabis we on international poised are bring where

now Garayev, Chief to it Officer, financial the With to Financial pass that, discuss Elshad performance year. for I'd like off our the to

a as Luis. you, we officially recent GAAP would U.S. of to to reiterating standards that most foreign filings. reporting begin Flora private like issuer, Thank is by moved longer I no and

metrics forward – to and growth more look [ph] that providing with our you to we performance with align updated clearly strategy. such, our As

in bolstered primarily XXXX, representing X% from driven We full generate QX sequential $XX.X revenue, quarter in able increase to When our Turning primarily was we first was This by House XXXX. organic growth. of representing 'XX, year of revenue million, Brand by businesses. increase to were $XX.X year-over-year. XXX% examine the million

XXXX by to XXX% for $XX.X Gross million. increased profit

expansion and in gross which of due to our to margin year, the gross We was to compared acquired from see businesses. recognition in integration to significant prior Increase XX%. continue the margin revenue XX% high-margin increased primarily

including noncash expenses of impairment for charge recent the decline acquisition were of company a million, operating in market Brand price. by share $XX.X primarily values of impacted House was charges, Impairment half Our $XX.X conditions and which period million. related to were almost

depreciation, amortization Those from operating purchase was expenses which last Notably, unit, - JustBrands items our noncash a in and year. transaction operating Other when our business charges charges. allocation and amortization, February our in percentage operational include acquired as expenses compensation to M&A-related compared XXXX charges. sales depreciation price included share-based and expenses of decreased

Company also provides as measure as non-U.S. performance. which measure, certain operating information a and excludes EBITDA believe - disclosed measure financial adjusted nonrecurring demonstrates charges. adjusted a and EBITDA We useful GAAP other meaningful business noncash

of million, note For year-over-year. increase the period, Flora increase while increase an XX% compared with XXXX. company simultaneously XXX% this reported loss of occurred important $XX.X to revenue when EBITDA that adjusted It's

to Adjusted for meaningful XXX.X% for while for $XX.X in margin improvement XXXX from XXXX. XXXX, year Net loss EBITDA $XX.X improved the XXXX. million net loss negative was year in margin experienced to XXXX fiscal XXX.X% with as period full million the negative compared compared

decreased to cultivation million. Cosechemos Labs. the capital primarily driven year XXXX, smaller by larger in Flora in expenditures as the facility while CapEx include build-out on $X.X cultivation was the XXXX of completion and of in facility, scale Decrease our activating investment focused such projects projects

Turning balance sheet. to

to operating million position related expenses one-off XXXX, of decrease and from of equivalents M&A-related XX, December sales represents roughly $XX JustCBD, paid were December cash and to as cash marketing million. cash acquisition attributed This to of charges. XXXX for our acquired $XX.X XX, expenses cash as cash million, higher businesses, of primarily $X.X and As well

I now Marketing to will Jessie cover our over of hand to House Chief our Casner, Officer, update. it Brands

revenue. the having you, company's Brands the standout of year XXXX division, is Thank driven majority Elshad. a for of House the

contributions Turning synergies The continues CBD And while at have and roughly seen accretive to in JustCBD. acquisition business, XX realized exceptionally a look this the in across space contraction proved company many their players Flora months in of the to of rate. be healthy other ownership growth JustCBD at as we the XXXX.

most JustCBD which making customer achieved a event in the QX, new in history. sales line in has all-in-one during favorite. QX, to brand's due sales quickly the the This sales Friday vape was successful event in become part introduced the Black record-breaking it

potencies line the X becoming with CBD quarter launch The best in quickly already expansion This of QX original since top our a seller fourth XXXX. also plus line new its of popular of flavors, saw million segment CBD XX a had didn't developed their with from meet undervalued was that large who experience products previously their nearly a brands reported of audience to and myriad reacquire customers potential expectations. of

spectrum as offering With well new and as of customers. full innovation hemp extraction research deliver designed entourage for the our a better and and more the a leverage set production, of new formulation phase in dosages a to action mechanism CBD's team effect developed experience actionable the

program, and that Day X the X,XXX a delivered to the the Looking proud ongoing their Vessel say trees via to at Vessel with by in helped Vessel, on fourth just community exceed plant Foundation. supporting partnering buy goal one one their team community months Arbor to planting committed the in that we're commitment quarter.

the patent-pending all-time high which The launch dry-herb hit category, also category of in helped an Vessel the products leverages fourth products in launched the dry-herb revenue Vessels Helix new quarter. these technology.

and to featured fourth This with continue to JustCBD We're also battery products. between in two edition that limited Vessel line a quarter the of fruit brands synergies launch collection the pleased bear report the co-branded franchise. colorways history factors of top-selling the and fastest for co-branded launch sell-through product Vessels time collaboration product the most JustCBD's one resulted frames successful form signature branding. one in Vessel The and in in any of

servicing line access our Latin fruit chain. boasts December juices secured beverage agreement most across the over sell and juices in rights finalized canned country. food out the come to and of The non-cannabinoid America, Juan coffee to of In the into which XXX well-known and the outposts food brand Columbia Mambe to natural Valdez coffee the category, provides

of broader initiatives our Reflecting our critical Vessel and opportunities, pleased priorities the progress integrate pillar. logistics performance and identify all of brands. and We're the new the distribution expanded made JustCBD to of synergies, on were key all across this to on organization, our including overall XXXX, operations with network leveraging into and streamline doors

brands contribute trajectory. we XXXX, revenue we our to expect their of target ahead overall continue to this pillar and for organic approximately As look XX% to our

back on cultivation to I'll business. now to pass wholesale elaborate Luis commercial our it and

lens our operation punctuated the through As XXXX three by commercial we look models. at cultivation, key wholesale was our of and

The planting for licensed export. X Colombian government when producers first one was allowed begin the THC high April to flower

began one late the and when Colombia of the licensed first was for began processing geographies. plants The product coming when out second August leaving other third October ground one and for the was testing

Product harvested stabilization sterilization geographies our Australia QX underway shipments certification follow-on in and through going processed distribution for with earmarked partner product and and and now Portugal facility critical in in in Germany. E&P and is like

the acquisition to a positioned opportunity of network presented As distribution, X,XXX cannabis the has on FGH Germany, look accelerated distribution better now the wholesale markets given Flora of our Europe. pharmacies, with European meaningfully and ever of in first at one our ever we path to licenses than capitalize is

expect We will that year, our of acquired line. of total the to XX% revenue the pillar be driver primary up business this this distribution contributing top

cannabis a highly intricate The the very As navigation. barriers a cannabis into from agencies significant gained knowledge to the players required global B supply the of relationships cannabis of and organization, the regulatory is understanding with comprehensive complexities the have globe successful leading possess point A chain. of across point international we entry and few and movement for

organization strong and to valuable navigate has However, us gained effectively our built landscape. this insights, relationships complex allowing

Now Jessie pharmaceutical our review for of to pillar. back a

Thank you, Luis.

will in the in novel Annabelle is study pharmaceutical Looking XXXX in patients formulations all measurable help U.K. proprietary the facility with and with Lab EEG led Currently, completion in readings. pain the use research of being collection team musculoskeletal in a The and awaits well the the suffering explore for Dr. global and make will leverage Colombia. agency The to efforts, at development to in Flora work progress techniques our as progress. order of preclinical by from X pain continued pillar, the cannabinoid study they our completed our Manchester the conjunction approvals the conducted of of as University Manalo-Morgan, team data study with

Colombian inspection specializing and process doctors and the addition Lab X,XXX approval state-of-the-art cannabis-based proprietary compounding In the in also is X, completed care Bogotá, formulations custom in facility initiated of Flora Colombia around sponsored the a to the This completed cannabis construction X which team its prescription foot by and system. formulations of e-beam health the research, are medications. that lab the square work fully can now we've prescribe in covered

in We year. beginning lab expect QX from revenues of to this this see

revenue year to it fiscal this pillar we expect generates. continue XX% mainstream cannabis the contribute investment with this We XXXX. in industry the of to in future up will lies the be commensurate of to in the revenue transformation know while And of pillar medications, total the our into

And closing to pass I'll our that core completes our operational remarks. updates for business back from units. Luis it

year of was diversified you thank growth company. by I a acquisitions, want XXXX marked attending It metrics - today's by webinar. improved our to streams. right. was by transformative again for acquisition All all and revenue for

Our the cannabis a for map strategy be proven Flora industry. in major to with success, market to nearly road access is providing every

Our domestic brands both in and continue to international show impressive traction markets.

reach cannabis and positions company become supply well global one expanding top diversified us of the Our chain - companies. to

confident one as global opportunity cannabis and we with of not the Today, change in patients distributors more the world-class be Flora's industry, landscape remain ever than players to international with cannabis cannabis I of they with the medicines to consumers connect products, but largest need. medical-grade only the that in

of the guidance quarter necessary $XX the to the to in have fourth $XXX XXXX. foundation our in revenue million and million achieve a year, we revenue record-setting momentum and established With strong

I'd customers, our team. to a our of to entire like and offering close thank our Board the always, As by shareholders, Directors you sincere Flora

to that, we up over Jessie, I'm can the with And open going to it pass Q&A. so

you, you, Thank and Luis, Elshad. thank

So Q&A session. this in remarks performance XXXX, Flora of prepared the completes begin and will on we our our

invite Grey with from ahead Hi, go Aaron. the begin Aaron call. let's to I'll Aaron So AGP, and

good Can you morning. okay? hear guys me, Hi,

We can.

Thanks for All Good right. morning. questions Fantastic. the today.

question I for increase the first here. see So revenue me.

EBITDA. to about more Just the talk bit wanted little a

might guys I down reported EBITDA bit - have I you year. wanted So more speak little wasn't a XQ, spoke based my for on been the towards for math, it’s it bit. the it a EBITDA a just bit quarter know little towards little

guys that included the XQ end So about that been and be you wanted what for the XXXX. last it have, we I that would closed in how to of talk outlook that think about EBITDA then have will EBITDA just year, and at now FGHs

expectations that within really to Thanks. for guys revenue have guidance you just included be [ph] So EBIT provided. the

that to to going Elshad. I'm give question Okay.

impacted. by impacted in seen reduction morning. to gross XQ results, But EBITDA, and based and difference are we division, publish IFRS XQ, year-end adjusted Hi, by based comparison resulted were House We on definitely on did, year terms our as year-end We EBITDA of definitely which year provided. Aaron. Good a we and results because mathematical results previously year in a we full were - quarter, the for didn't publishing provided Brands lower driven adjusted which for full well full adjustments in primarily we've some full of in the sales was - campaigns profit as discounts, compared which year. are a if EBITDA

still – In we're integrating terms for of in process FGH of operational next the our a for into projections year, framework.

As well the sales. trying revenue higher-margin ascertain to new to cannabis to the the - fully related streams of we as go as impact

be by XQ results. go will we As the coming when streams. publish that we continue offset our will gross believe assessing lower FGH revenue from impacts, margin as we we profit be partially guideline next we year, And more those accurate providing those new a to

Elshad. that, for Thanks Great. it. Got

me, some the question about just I Second of exports. for expectations talk for want to

been now phased at how [Technical you're change And reports Germany today. Just the Colombia expectations obviously, to Germany landscape were that with pilot. might terms the more export initial see there's I in have international being Difficulty] potentially from Friday already know last of some to to wanted you how going an rollout. weren't its to ability It's initial looking

we of important think I off slightly, components but have You question. that Aaron, cut the most

framework and that the then today around allow I that and I'll to the on revenue our team globe. So complement. is I'm based going foremost, start to guidance exists my would of first any members say regulation

terms been very key terms expected a of standpoint. we on we laid if been we conservative already years. very, over budgeting to times regulatory, component are know our the from of because is what forecasting and we're in number has of down regulatory in We ensure That of been a a planning the have careful that have comp

derivatives exporting Colombia across and So are do it's we're globe. cannabis, to with already so of into both geographies able the important said, that to highlight we that where flower out being

Portugal we and to Colombia [ph] normalize. in I standardization the have will excited about landing that my Australia opportunity already we're continues As spot mentioned and in transforming have those Germany, the GMP quality as exponentially our increase in in being remarks, and our activate is markets that exports through of and product product some to a in

in that close for cannabis With to like three are being immediately we're which since landscape. world. one of said, massive would would we carefully what's we become the And geographies evaluating have leader the very in inside interest We purposes, change recreational own. very a Colombian Colombia is happening the know market, or regulatory we of market companies there's on Colombia. also is where its the regulatory that top open course, tremendous the a in up which of Germany, part a evaluating legalizing meaningful

Thanks, Aaron, Aaron. questions, those Luis. It but looks lost like we we appreciate

of going Silver I'm move Good morning, So Steve. to Steve to rGuest. [ph]

Thanks taking of My company's a couple XXXX. months that question view we're the just for into the now surrounds main questions.

position. know late company Just to your company's going be over it the up inventory was in thoughts months. about I built you guys that coming with the the sold capital expectation the mentioned XXXX had that through that

is color much. any whether that, Just more of the terms so that stands will you position? the provide XXXX can there company's capital just overall where company on the could about be hoping there that across an on provide any you goal? was Or views color of in Thanks

I'm Elshad then provide I'll commentary, give a to going and it to of to Yes, couple complement.

much would you capital question. here terms that there's I in elements of couple usage. morning, and so Steve, for good say, a first, So of thank

acquisition in to was cash that JustCBD, of outflows that the the were most Of one. course, there XXXX was of meaningful the related

were deployed completed $X that and in the worth next about And only to that is $X.X position had we for inventory reasons. an increase CapEx the North number from for increase one America infrastructure ensure of of Colombia. there million that to to a inventory but also also not investments then was million We year position in

have The high companies, of in we terms and a biggest they these that acquired standpoint, turn capital well. inventory. working needs have one inventory as is high positive From they

we in growth we we our ensure can that [ph] place have ensure to need inventory revenue meet to So that that

of - cash then completed $X.X perspective, at question closed a in million a for from number the That cash. with was that around And a year was we reasons.

Of course, and we're of working that continue also that we a the CapEx, had well. Brands standpoint inventory December Jessie we House expect but one well, vape on the will like the incredibly this CapEx in really I And for beginning the of raise invest to line working mentioned like but of fast, the we there turning going deployment mentioned, of of capital usage cash that a is $X in product that our inventory capital working year, plus be is significant our working not our outflows that to from on know that million. is line really

core invest performing to of Elshad, in and else? in in dollars an to our us continue some we're going with is are margin. Accessories high level, at accessories is turning and exceptional Vessels inventory that providing anything

in we didn't in as raw want increase in supplies but more to inventory materials, indicate the didn't in investment that strong XQ highlights. sales formally Notable in revenue. highlight it results, quarter I experienced relates to support as of inventory. noted, I increase we Yes. a publish A few we even -

effectively up in for was So built XXXX. preparation it

as position base in robust in capacity a cannabis more and [ph] in robust 'XX, more cultivation data, well indicative to efficiency opportunities. of inventory products, as customer Growth quickly a gross maintain substantial well decision cannabis a position, in contributing change higher customer also for to our also harvest strategic inventory remarkable implies inventory indicates and increase to capitalize market finished demand as larger production our improved fulfill on data, goods, as orders,

customer existing needs very confident businesses well to an meet ultimately both ability our are acquired as have to In we base new fulfill we able feel as to our closing, that that demand. we for positions support as us inventory

in full luck much. so XXXX. the best of year And Thanks Okay.

Thank you, Steve.

Okay.

the want to questions have I that So our from here. attendees of come through to move some

So Luis, of of look us can how completed XXXX? the the outlook on you that results was in your November you Vessel give at acquisition

cannabis are in in that mainstream, experience as we for had will believe Casner consumers you a reinforce And say related directly Thank why our also to product. to how are [indiscernible] by going that firmly and evidenced the the acquired accessories would They here cannabis I question. company that once an Yes. again company. of to the today. move as Jessie first hardware we base to The own important incredible place. be it's adoption talent

organic integrated of out And about today. ahead brand company operation team the of Vessel growth step the is a there. product in the is We Fort operation innovation. We our into Lauderdale. is Vessel future JustBrands where brand, any experiencing other fully the of going in feel The confident meaningful terms

months. we that Jessie will going weeks present exciting expanding a feel unlock to consumers As mentioned, and aggregate the in market to for confident years. the upcoming launched industry total to there's our launching products and the dry-herb and incredibly Vessel key that be in cannabis upcoming we the more be will that are be And line, going

quick Lamborghini can partnership? a Tonino Great. And on the Thanks, Luis. you update give

we're in passionate product project as line Tonino Italian the the but take And we We a about have is This passionate will is house taken we with time that brand. be project. that the our Lamborghini well. Lamborghini very of have ensured very bring that seriously the Yes. about, expectations a Tonino very to

continue iterate not we have XXXX. that for to that to going we're evaluated consumers we the incredible some second launch, half only with believe are believe going that And the that and in suited surprises brand. for of consumers that most We're for reason, coffee the categories we are product but to aligned our also have

was of XXXX. deep just acquisition can Thank Franchise give of very then at completed of It a as and Elshad more you, Health. on And well, Great. dive Luis, integration a us end and the bit Global you. the little

XXrd December. of I the think around

year, information, price So we the of that perhaps last XXst reporting up bit helpful. would was of to are the a of but a be little just really more as update days, recapture and early bit an obviously, total purchase

Germany Yes. the provide And you're the to in the the up and course. well has into that decades as then it distribution I'll completed ability the supply as and European set but and a some cannabis absolutely strongly the We number market financials. We pharmaceutical part of globe. to of in chain. the the I'll They distribute distribution that not mechanics team latter integration cannabis only know-how provide of this to December. have move and has across strategic is a the that countries still have top that allow acquisition across of XX But about ongoing, network and for company update, what right. team done Elshad that of experience our brings terms in a feel

the this we that the Elshad? Clifford of to the and Starke. and internationally. chain meaningful see across us, quarters. to for the Board he's in of the and name clock company. is supply course, our and a cannabis he also now results His of move instrumental our now long is we're of upcoming going is of in months [ph] joined ensure I supporting commercial it wholesale operation Founder He President can acquisition Their Flora. Directors, believe is integration been CEO, And

in assets, close value And that [ph] quick We breakdown our million. reminder $X.X million Flora represents million allocation what of terms discount a million stock. with this $X.X by issued as of sheet, balance sure. was turned terms acquisition marketability. $X.X in million of books X.X to XX,XXX,XXX in million - and booked of We to was Yes, purchase net maybe price between in in shares complement for stock be identifiable a paid $X.X net terms exact. well asset to to I goodwill. recorded as want which

X days our one, operation, but X As from team I'm into Luis, operations. fully very integrated it's that day that happy to

of stepped which best I leveraging. and our like integrating well leadership applying Daniel also have working, with in a been deputies, into can network. - practices are the one and senior We're operation our sport [ph] ERP finance they Germany-based For of more operating as actively and robust part my organization, example, Ramon system, of has believe we FGH we as our

So forward synergies. has - as go through New capitalizing been those it's Year, look ongoing we a still on process we

Thanks, Luis. Thanks, Elshad.

question bit Zack, little Marla just just a time, quickly I We get answer from did over wanted on that. from Marin are but we and a to

So she talked about of research and around doing. the clinical time we're trials that some the line

And there? so just an update

any As pharmaceutical update. I had mentioned, pillar

are the the NHS well from MHRA. as awaiting We just approval as

paperwork so in, has preclinical done. is all all the required our of work And of been

the As many only a of within approve health you clinical governing all would country. NHS might they be administer that aware, the care body the is but not trial, also

so And things as to tend time. a these government agencies take happen to little bit of

reporting, a to pillar-by-pillar I and updates we moving our are be able provide with so on and transparency, as update. and everybody new give that a would we'll filings basis more we'll to everybody bit continue to mentioned, quarterly Elshad So remind little more structure.

like I bit again, said, with a So time. on over we little that, are

the year for close attending. Thank XXXX, everybody full Thank that earnings for Luis. call you, So appreciate we you, and our to draws a Elshad.

Thank you.

Good day, everyone.