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First Quarter Fiscal 2022 and Recent Highlights:
- Appointment of Alimentation Couche-Tard executive, Stéphane Trudel as Chief Executive Officer on June 1, 2022
- Consolidated Adjusted EBITDA of negative $2.3 million for the quarter, an improvement of 4% from the previous quarter
- Consolidated revenue for the quarter of $40.9 million, representing a 4% decrease from the previous quarter and a 7% decrease from the prior year comparative quarter
- Cash and cash equivalents balance of $28.4 million at the end of the quarter, an increase of $8.6 million from the fiscal year end
- Free Cash Flow improved by 24% from the previous quarter and remains a priority for the Company
- Hifyre™ cannabis consumer technology platform revenue of $2.9 million, a 3% increase year-over-year
- Re-classification of revenue from Pineapple Express Delivery to the newly created Wholesale and Logistics segment with revenue of $8.5 million for the quarter
- New Spark Perks Member Pricing on best selling cannabis products launched May 11, 2022 in key markets
- Completed the exercise of Series B Warrants by an indirect wholly-owned subsidiary of Alimentation Couche-Tard Inc., in the total aggregate amount of $37.8 million, with net proceeds of $17.3 million
- Elects to postpone NASDAQ listing to focus capital on business growth in challenging public and capital market conditions
TORONTO, June 14, 2022 /CNW/ – Fire & Flower Holdings Corp. (“Fire & Flower” or the “Company”) (TSX: FAF) (OTCQX: FFLWF), today announced its financial and operational results for the fiscal 2022 first quarter ended April 30, 2022.
Fire & Flower has delivered impressive growth in the early stages of our business and now we are moving forward to focus on the next phase of our evolution. As we evolve, our goal is to deliver positive Adjusted EBITDA and free cash flow.
Stéphane Trudel, Chief Executive Officer of Fire & Flower
These goals will be achieved through a focus on operational excellence in all our business segments, continual growth in our Hifyre cannabis consumer technology platform, and expansion of our Pineapple Express Delivery service, now integrated in our Wholesale and Logistics segment.
He continued, “Deep retail expertise and our close partnership with Alimentation Couche-Tard, combined with our industry leading cannabis consumer technology platform and competitive pricing strategy, are key drivers of value for the Company”.
“Competitive pressures, licence expansion outpacing market growth, and a growing value-oriented customer base have created challenging market conditions for the industry as a whole. With these market conditions, we look to optimize our retail network and have already seen favourable indications on our expanded Spark Perks Member Pricing program. As the market continues to grow, novel offerings such as the Firebird Rapid Delivery service, which brings cannabis products to consumers’ doors within hours, will become important service differentiators for our customers. We remain focused on improving near term financial performance and remain steadfastly focused on our ultimate goal of financial sustainability through driving towards positive free cash flow.”
- Revenue of $40.9 million for Q1 fiscal 2022, representing a decrease of 7% from $44.1 million in the prior year comparative period, primarily due to increasing competition from new licences issued and pricing pressures in the cannabis retail market.
- Gross profit of $12.2 million for Q1 fiscal 2022, representing a decrease of 26% from $16.5 million in the prior year comparative period.
- Adjusted EBITDA of negative $2.3 million for Q1 fiscal 2022.
- Net loss of $9.9 million for Q1 fiscal 2022, compared to a net loss of $61.6 million in the prior year comparative period.
- Cash and cash equivalents balance of $28.4 million as of April 30, 2022, an increase of $8.6 million from the fiscal year ended January 29, 2022.
- Free Cash Flow for the thirteen weeks ended April 30, 2022 was negative $8.7M, an improvement from negative $11.6M in the previous fiscal quarter ended January 29, 2022 as a result of lower SG&A expense and reduction in capital expenditures.
- On April 28, 2022, 2707031 Ontario Inc. exercised 8,298,067 series B common share purchase warrants for an aggregate exercise price of $37.8 million. Pursuant to the terms of a secured loan agreement dated December 13, 2021 between the Company and 2707031 Ontario Inc. (the “Secured Loan Agreement“), a portion of the aggregate warrant exercise amount of $37.8 million was used to repay the principal of $20.0 million and interest of $0.5 million to 2707031 Ontario Inc. as prescribed by the Secured Loan Agreement. There are no further amounts owing under the Secured Loan Agreement.
- Retail revenue for Q1 fiscal 2022 decreased 12% to $29.6 million from $33.6 million in the prior year comparative period.
- Gross profit Q1 fiscal 2022 was $8.2 million, a decrease of 33% compared to $12.2 million for the prior year comparative period.
- Gross profit margin was 27.8% for the quarter ended April 30, 2022.
- Segment Adjusted EBITDA decreased to negative $2.7 million in Q1 fiscal 2022 from positive $0.9 million in the same quarter of the prior year.
- The Company had 101 stores open and in operation at the end of Q1 fiscal 2022, compared to 79 stores at the end of Q1 fiscal 2021.
Wholesale and Logistics
- Re-classified operating results from the wholly-owned subsidiary, Pineapple Express Delivery Inc. from the Digital segment to the newly created Wholesale and Logistics segment.
- Wholesale and Logistics revenue in Q1 fiscal 2022 of $8.5 million was an increase of $0.8 million or 11% compared to the same quarter of the prior year.
- Gross profit in Q1 fiscal 2022 decreased to $1.3 million from $1.5 million in the same quarter of the prior year.
- Segment Adjusted EBITDA decreased to negative $0.1 million Q1 fiscal 2022 from $1.0 million in the same quarter of the prior year.
Hifyre™ Digital Platform
- Digital revenue of $2.9 million in Q1 fiscal 2022 compared to $2.8 million in the same quarter of the prior year.
- Gross profit margin was 89.7% for Q1 fiscal 2022 compared to 100% for the prior year comparative period.
- Adjusted EBITDA decreased to $1.7 million in Q1 fiscal 2022 from $2.5 million in the prior year comparative period.
Subsequent Operational Highlights Post April 30, 2022
- Appointed Stéphane Trudel as Chief Executive Officer on June 1, 2022. Prior to joining Fire & Flower, Mr. Trudel held the position of Senior Vice President of Operations for Alimentation Couche-Tard Inc., and member of its Executive Leadership Team.
- Announced the launch of Firebird Delivery, including a rush delivery service, in Ontario on May 19, 2022.
- Launched an expanded Spark Perks Member Pricing program on the best selling cannabis products on May 11, 2022.
- Announced an exclusive agreement with Zonetail Inc. (TSXV: ZONE) to offer cannabis delivery to residential high rise buildings and hotels on May 10, 2022.
- Pineapple Express Delivery expanded its medical delivery base through an agreement to offer same-day delivery to Entourage Health Corp. patients (TSXV: ETNG), on May 4, 2022.
Non-IFRS Measures – Adjusted EBITDA
“Adjusted EBITDA” is a non-IFRS metric used by management that does not have any standardized meaning prescribed by IFRS and may not be fully comparable to similar measures presented by other companies. Management defines the Adjusted EBITDA as the Income (loss) for the period, as reported, before income taxes and other expense (income) items such as finance costs, finance income, gains and losses related to derivative liability revaluations and debt extinguishments, and adjusted for share-based compensation, depreciation and amortization, impairment expense, impairment of right-of-use (“ROU”) assets net of lease liabilities remeasurement, restructuring charges, professional fees associated with acquisitions, financing and strategic initiatives.
Adjusted EBITDA has been calculated differently than in periods prior to Q1 2021, where the Company previously included lease liability cash payments as disclosed in accordance with IFRS 16 “Leases” accounting standards. The updated measure reflects the Company’s new approach to analyzing the consolidated operating performance across the business lines. The Company believes the updated definition is an alternative measure to assess performance as it provides meaningful operating results and facilitates period-to-period operating comparisons. As other companies may calculate this non-IFRS measure differently than the Company, this metric may not be comparable to similarly titled measures reported by other companies. We caution readers that Adjusted EBITDA should not be substituted for determining net income (loss) as an indicator of operating results, or as a substitute for cash flows from operating activities. A reconciliation of net income (loss) to Adjusted EBITDA is presented below.
Adjusted EBITDA for the first quarter ended April 30, 2022 was negative $2.3 million compared to positive Adjusted EBITDA of $2.3 million for the comparable quarter for 2021 fiscal year.
“Free Cash Flow” is a non-IFRS metric used by management that does not have any standardized meaning prescribed by IFRS and may not be fully comparable to similar measures presented by other companies. Management defines Free Cash Flow as cash provided by operating activities less cash used to purchase property and equipment and less lease liability payments. Free Cash Flow is a key metric that measures the Company’s ability to repay debt, finance strategic business acquisitions and investments, pay dividends and repurchase shares. As other companies may calculate this non-IFRS measure differently than the Company, this metric may not be comparable to similarly titled measures reported by other companies.
Fire & Flower will host a webcast and conference call with Stéphane Trudel, Chief Executive Officer, and Judy Adam, Chief Financial Officer at 8:30 a.m. EDT on June 14, 2022. The webcast will discuss Fire & Flower’s first quarter financial and operational.
Toll-Free (Canada): 1-833-950-0062
Toll-Free (United States): 1-844-200-6205
Access code: 818860
Replay Information (Available until June 21, 2022)
Toll-Free (Canada): 1-226-828-7578
Toll-Free (United States): 1-866-813-9403
Replay Code: 553526
Upon completion of the live conference call, a replay of the conference call will be accessible on Fire & Flower’s website at https://investors.fireandflower.com/.
Fire & Flower’s financial statements and management discussion and analysis for the period are available on Fire & Flower’s SEDAR profile at www.sedar.com and on Fire & Flower’s website at https://investors.fireandflower.com.
About Fire & Flower
Fire & Flower is a cannabis consumer retail and technology platform with more than 100 corporate-owned stores in its network. The Company leverages its wholly-owned technology development subsidiary, Hifyre Inc., to continually advance its proprietary retail operations model while also providing additional independent high-margin revenue streams. Fire & Flower guides consumers through the complex world of cannabis through best-in-class retailing while the HifyreTM digital and analytics platform empowers retailers to optimize their connections with consumers. The Company’s leadership team combines extensive experience in the technology, cannabis and retail industries.
Through the strategic investment of Alimentation Couche-Tard Inc. (owner of Circle K convenience stores), the Company has set its sights on global expansion as new cannabis markets emerge and is poised to expand into the United States when permitted through its strategic licensing agreement with Fire & Flower U.S. Holdings upon the occurrence of certain changes to the cannabis regulatory regime.
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