/NOT FOR DISSEMINATION IN THE UNITED STATES OR
FOR DISTRIBUTION TO UNITED STATES
WIRE SERVICES/
This news release constitutes a "designated
news release" for the purposes of the Company's prospectus
supplement dated December 2, 2020 to
its short form base shelf prospectus and amended and restated base
shelf prospectus dated November 24,
2020.
142% increase in quarterly revenue to $33.1 million year-over-year and a 147% increase
in annual revenue to $84.8
million
TORONTO, Dec. 15, 2020 /CNW/ - Fire & Flower Holdings
Corp. ("Fire & Flower" or the "Company") (TSX: FAF) (OTCQX:
FFLWF), today announced its financial and operational results for
the thirteen-weeks ended October 31,
2020.
Financial and Operational Highlights for the Thirteen Weeks
Ended October 31, 2020.
- Milestone achievement of positive Adjusted EBITDA of
$1.2 million compared to a
$0.3 million negative Adjusted EBITDA
in Q2 2020.
- Total revenue of $33.1 million
at a gross profit of 34.7%, compared to revenue of $13.7 million in Q3 2019 at a gross profit of
34.7% - representing a 142% increase in year-over- year revenue.
Quarter-over-quarter revenue increased 15.8% sequentially from
$28.6 million in Q2 2020.
- Obtained shareholder approval of the amendment agreement for
the strategic investment of a wholly-owned subsidiary of
Alimentation Couche-Tard ("ACT") and received $10.3 million in proceeds from the exercise of
warrants by ACT.
- Expanded the presence of Fire & Flower stores in the key
market of the province of Ontario
through the completion the acquisitions for 2 retail store
locations.
- Significant sequential revenue growth in the wholesale
distribution business, Open Fields, contributing $1.0 million of gross profit, an increase of
22% compared to Q2 2020.
- Meaningful sequential growth of 55.8% in the Hifyre™ digital
retail and analytics platform, contributing $1.5 million of gross profit compared to Q2
2020.
- Continued to refine the Company's business practices in
response to the COVID-19 public health crisis as consumer
behaviours and preferences evolve through a digital customer
service model and a focus on customer and employee safety.
Subsequent Financial and Operational Highlights post
October 31, 2020
- Established the Company's market leadership with the largest
cannabis retail footprint in Canada with licences to 71 cannabis retail
stores including 67 open and operating cannabis retail stores and 4
accessory stores which are temporarily closed due to
COVID-19 restrictions in the province of Ontario.
- Became a multi-brand cannabis retail operator through the
acquisition of Friendly Stranger Holdings Corp. including the
Friendly Stranger™, Happy Dayz™ and Hotbox™ brands with 21
operating cannabis retail locations in the province of Ontario.
- Initiated an at-the-market equity program ("ATM Program") to
raise up to $15 million in equity
financing to further support growth opportunities.
- Completed acquisitions for 3 additional retail store locations
in the key urban market of Toronto.
- As the Toronto and Peel
regions moved towards home delivery and curbside pickup, the
Company rapidly responded and immediately deployed e-commerce
capabilities through the Hifyre platform.
- Hifyre's Spark Perks™ member program achieved an increase of
more than 38,000 members since the beginning of Q3 2020 and now has
more than 183,000 members in the program that typically visit
more frequently and transact with higher basket sizes, compared to
non-members.
- Launched industry-leading digital products including Hifyre
Reach and Hifyre Spark which deliver compliant marketing
solutions and tailor recommendations to individual consumer
preferences.
- Continued to realize positive financial and operational
results as a result of optimization of the retail store network
with a focus on maximizing the number of retail stores delivering
positive margin contribution.
"The achievement of positive Adjusted EBITDA is a significant
milestone and demonstrates our continued track record of delivering
on our corporate objectives," shared Trevor
Fencott, Chief Executive Officer of Fire & Flower.
"Despite the challenges presented by the COVID-19 public health
crisis, Fire & Flower has continued to grow and demonstrate
leadership as the largest cannabis retailer in Canada. We continue to work at maintaining
positive Adjusted EBITDA and aggressively pursue growth
opportunities for the Company."
Selected Summary of Financial Results
|
|
|
|
(in thousands of
dollars, except per share amounts)
|
|
Thirteen weeks
ended
|
Thirty-nine weeks
ended
|
Statement of Loss
and Comprehensive Loss
|
|
October 31,
2020 ($)
|
November 2,
2019 ($)
|
$
Change
|
October 31,
2020 ($)
|
November 2,
2019 ($)
|
$
Change
|
|
%
Change
|
%
Change
|
Revenue
|
|
33,119
|
13,700
|
19,419
|
84,834
|
34,318
|
50,516
|
|
142%
|
147%
|
Cost of goods
sold
|
|
(21,614)
|
(8,949)
|
(12,665)
|
(55,844)
|
(21,859)
|
(33,985)
|
|
142%
|
155%
|
Gross
profit
|
|
11,505
|
4,751
|
6,754
|
28,990
|
12,459
|
16,531
|
142%
|
133%
|
Expenses
|
|
|
|
|
|
|
|
General and
administrative
|
|
9,575
|
7,115
|
2,460
|
26,986
|
20,236
|
6,750
|
35%
|
33%
|
Share-based
payments
|
|
581
|
788
|
(207)
|
1,990
|
2,373
|
(383)
|
-26%
|
-16%
|
Marketing and
promotion
|
|
241
|
499
|
(258)
|
677
|
1,292
|
(615)
|
-52%
|
-48%
|
Acquisition and
business development costs
|
|
780
|
180
|
600
|
966
|
201
|
765
|
333%
|
381%
|
Depreciation &
Amortization
|
|
2,914
|
2,094
|
820
|
8,926
|
5,508
|
3,418
|
39%
|
62%
|
Impairment
|
|
-
|
-
|
-
|
4,279
|
-
|
4,279
|
NM
|
100%
|
Gain on remeasurement
of lease liabilities
|
|
(2,119)
|
-
|
(2,119)
|
(2,119)
|
-
|
(2,119)
|
100%
|
100%
|
Total
Expenses
|
|
11,972
|
10,676
|
1,296
|
41,705
|
29,610
|
12,095
|
12%
|
41%
|
Loss from
operations
|
|
(467)
|
(5,925)
|
5,458
|
(12,715)
|
(17,151)
|
4,436
|
-92%
|
-26%
|
Listing
expense
|
|
-
|
-
|
-
|
-
|
(1,835)
|
1,835
|
NM
|
-100%
|
Gain on revaluation
of derivative liability
|
|
35,796
|
23,089
|
12,707
|
21,082
|
29,483
|
(8,401)
|
55%
|
-28%
|
Loss on debt
extinguishment
|
|
(53,862)
|
-
|
(53,862)
|
(53,862)
|
(9,028)
|
(44,834)
|
100%
|
497%
|
Interest
income
|
|
110
|
53
|
57
|
198
|
223
|
(25)
|
108%
|
-11%
|
Finance
costs
|
|
(6,082)
|
(7,010)
|
928
|
(21,027)
|
(11,999)
|
(9,028)
|
-13%
|
75%
|
Other (expense)
income
|
|
(24,038)
|
16,132
|
(40,170)
|
(53,609)
|
6,844
|
(60,453)
|
-249%
|
-883%
|
Total (loss)
income before tax
|
|
(24,505)
|
10,207
|
(34,712)
|
(66,324)
|
(10,307)
|
(56,017)
|
-340%
|
543%
|
Income tax
expense
|
|
(1,218)
|
-
|
(1,218)
|
(1,218)
|
-
|
(1,218)
|
100%
|
100%
|
Net (loss) income
and comprehensive (loss) income
|
|
(25,723)
|
10,207
|
(35,930)
|
(67,542)
|
(10,307)
|
(57,235)
|
-352%
|
555%
|
Net (loss) income
per share, basic
|
|
($0.15)
|
$0.08
|
($0.23)
|
($0.42)
|
($0.09)
|
($0.33)
|
-288%
|
367%
|
Net (loss) income
per share, diluted
|
|
($0.15)
|
$0.07
|
($0.22)
|
($0.42)
|
($0.09)
|
($0.33)
|
-314%
|
367%
|
Q3 2020 Operational and Financial Highlights
During the thirteen weeks ended October
31, 2020, the Company generated revenue of $33.1 million including sales of $26.5 million in the Retail channel, $5.1 million in the Distribution channel and
$1.5 million in the Digital Retail
and Analytics channel.
Total gross profit for the thirteen weeks ended October 31, 2020 was $11.5
million including gross profit of $9.0 million in the Retail channel, $1.0 million in the Distribution channel and
$1.5 million in the Digital Retail
and Analytics channel, compared to $4.8
million or 34.7% for the thirteen weeks ended November 2, 2019.
For the thirteen weeks ended October 31,
2020, the Company recorded net comprehensive loss of
$25.7 million, or net loss per share,
and on a basic and fully diluted basis, of $0.15. The net comprehensive loss incurred during
the quarter was principally due to $53.9
million in extinguishment losses related to the amended of
debentures and warrants held by ACT, partially offset by
$35.8 million in revaluation gains on
derivative liabilities in Q3 2020 and a decrease in loss from
operations of $5.5 million in Q3 2020
as a result of increase in gross profit of $6.8 million in Q3 2020.
Growth Driving Positive Adjusted EBITDA
Fire & Flower achieved positive Adjusted EBITDA through a
number of factors across all revenue channels including
optimization and growth in our retail network and significant
growth in both revenue and contributing gross margin from our Open
Fields Distribution Business in the province of Saskatchewan and external independent revenue
from the Hifyre Digital Retail and Analytics Platform.
Retail Update
Fire & Flower's focus on "four-wall retail economics", the
optimization and expansion of its retail network was a contributing
factor in achieving positive Adjusted EBITDA. In addition, the
Company continues to monitor the COVID-19 public health crisis and
adapt its business model to optimally serve customers.
As of December 15, 2020, the
Company was operating a total 67 cannabis retail stores with 37
located in Alberta, 21 stores in
Ontario, 7 stores in Saskatchewan and 1 store in each of
Manitoba and Yukon territory.
Retail revenue for the thirteen weeks ended October 31, 2020 was $26.5
million, an increase of $14.7
million from the prior year and $3.2
million from the previous quarter. The increase in revenue
was driven by a larger number of operating retail stores during the
quarter and stronger sequential same store sales.
Gross profit for the thirteen weeks ended October 31, 2020 was $9
million, an increase of $5.2
million from the prior year and $0.9
million from the previous quarter. Gross profit dollars
increased due to the expanded store network and several successful
product promotions. The gross margin percentage improved over the
prior year with the addition of higher margin cannabis 2.0 products
into the sale mix, better product costing and reduced discounting
activity on slower moving product. Gross margin percentage was
lower over the second quarter as a result of planned traffic-
driving promotions.
At the initial outset of the COVID-19 pandemic lockdown in
mid-March 2020, the Company
experienced higher than normal sales, but sales have since
normalized and there was no material adverse impact to financial
results despite temporarily closing certain stores to ensure the
Company was sufficiently staffed and equipped to operate in the
best interests of customers, employees and the community.
Open Fields Distribution Update
During the thirteen weeks ended October
31, 2020, Open Fields revenue increased to $5.1 million from $4.3
million in Q2 2020, representing a 19.3% increase between Q2
2020 and Q3 2020. Wholesale distribution revenue increased as the
Saskatchewan market continued to
open up with more retailers sourcing inventory from Open Fields.
Improved supply from key distribution partners and the continued
growth of cannabis 2.0 products and legacy categories are key
drivers of this improvement.
In addition to creating an increased margin opportunity in the
province, the Distribution channel demonstrates how this supply
chain model can be adapted by the Company for use in other
jurisdictions where direct wholesale relationships with licensed
producers and accessory suppliers are permitted.
HifyreTM Digital Retail and
Analytics Update
During the thirteen weeks ended October
31, 2020, Hifyre continued to develop and commercialize
products within the Digital Retail and Analytics Platform. Digital
product subscription revenue increased 55.8% sequentially from
$0.9 million at Q2 2020 to
$1.5 million at Q3 2020, as the
Company increased commercial digital platform subscription and
recurring monthly services to external clients, which had slowed in
Q1 2020 during the onset of COVID-19. In Q1 2020 through Q3 2020,
the platform also played a key role in adapting the Company's
retail business model to meet the regulatory and operational
changes in response to COVID-19.
The Spark Perks program has surpassed more than 183,000 members.
Program members typically transact more frequently and spend more
per transaction than non-member customers. During the quarter, the
platform has provided the Company with an enhanced understanding of
its customers which allowed the Company to create a tailored
customer experience resulting in anticipated higher customer
lifetime value.
Customers using the Hifyre IQ platform now include the majority
of major cannabis licensed producers. Customers also include equity
research analysts, consulting firms and investment banks. The
platform provides clients with a comprehensive understanding of
consumer purchase behaviours in the Canadian adult-use cannabis
market.
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 comparable to similar measures presented by other companies.
Management defines the Adjusted EBITDA as the Income (loss) for the
period, as reported, before accretion and interest, tax, and
adjusted for removing the share-based compensation expense,
depreciation and amortization, gains and losses related to
derivative liability revaluations and debt extinguishments,
professional fees associated with financing and acquisition and
business development activities, impairment charges, restructuring
costs, and includes lease liability cash payments that would have
been excluded from profit and loss due to the application of IFRS
16 accounting standards. Management believes "Adjusted EBITDA" is a
useful financial metric to assess its operating performance on a
cash basis before the impact of non-cash items. As other companies
may calculate these non-IFRS measures differently than the Company,
these metrics 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 loss as an
indicator of operating results, or as a substitute for cash flows
from operating activities. A reconciliation of net income to
Adjusted EBITDA is presented below:
Adjusted EBITDA for the thirteen weeks ended October 31, 2020 was $1.2
million compared to $4.3
million negative Adjusted EBITDA for the thirteen weeks
ended November 2, 2019 and a
$0.3 million loss for the thirteen
weeks ended August 1, 2020.
|
Thirteen weeks
ended
|
Thirty-nine weeks
ended
|
(in thousands of
dollars)
|
October 31, 2020 ($)
|
November 2, 2019 ($)
|
October 31, 2020 ($)
|
November 2, 2019 ($)
|
Net (loss) income
and comprehensive (loss) income – as reported
|
(25,723)
|
10,207
|
(67,542)
|
(10,307)
|
Other (income)
expense
|
24,038
|
(16,132)
|
53,609
|
(6,844)
|
Income tax
expense
|
1,218
|
-
|
1,218
|
-
|
Share-based
payments
|
581
|
788
|
1,990
|
2,373
|
Acquisition and
business development costs
|
780
|
180
|
966
|
201
|
Depreciation &
Amortization
|
2,914
|
2,094
|
8,926
|
5,508
|
Professional fees
related to financing activities
|
280
|
-
|
372
|
168
|
Impairment
|
-
|
-
|
4,279
|
-
|
Gain on remeasurement
of lease liabilities
|
(2,119)
|
-
|
(2,119)
|
-
|
Lease liability
payments (1)
|
(750)
|
(1,409)
|
(3,194)
|
(3,523)
|
Adjusted
EBITDA
|
1,219
|
(4,272)
|
(1,495)
|
(12,424)
|
(1)
|
Q3 2020 amounts
represents two months of lease payments and is due to the timing of
the fiscal accounting period end. Lease payments are made on the
first of the calendar month. Payment for the calendar month of
August 2020 was included as part of the twenty-six weeks ended
August 1, 2020 financial results. In Q3
2019, amounts include lease payments
not reflected in occupancy costs
in the statement of income (loss).
|
Conference Call
Fire & Flower will host a conference call with Trevor Fencott, President and Chief Executive
Officer, and Nadia Vattovaz,
Executive Vice President, Operations and Chief Financial Officer at
8:30 AM Eastern Time on December 15, 2020. The conference call will
discuss Fire & Flower's third quarter financial and operational
results and updates on the Company's plans for the balance of the
current fiscal year.
Dial In Information
Toll-Free Dial In Number:
1-888-390-0546
Replay Information (Available until January 5, 2021)
Toll-Free Dial In Number:
1-888-390-0541
Replay Code: 610767#
Upon completion of the live conference call, a replay of the
conference call will be accessible on Fire & Flower's website
at https://fireandflower.com/investor-relations.
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 www.fireandflower.com/investor-relations/.
About Fire & Flower
Fire & Flower is a leading
purpose-built, independent adult-use cannabis retailer poised to
capture significant Canadian market share. The Company guides
consumers through the complex world of cannabis through
education-focused, best-in-class retailing while the
HifyreTM digital platform connects consumers with
cannabis products. The Company's leadership team combines extensive
experience in the cannabis industry with strong capabilities in
retail operations.
Fire & Flower is a multi-banner cannabis retail operator
that owns and operates the Fire & Flower, Friendly Stranger,
Happy Dayz and Hotbox brands.
Fire & Flower Holdings Corp. owns all issued and outstanding
shares in Fire & Flower Inc. and Friendly Stranger Holdings
Corp., licensed cannabis retailers that own and operate cannabis
retail stores in the provinces of Alberta, Saskatchewan, Manitoba and Ontario, and the Yukon territory.
Through the strategic investment of Alimentation Couche-Tard
Inc., the Company has set its sights on the global expansion as new
cannabis markets emerge.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
This news release contains certain forward-looking
information within the meaning of applicable Canadian securities
laws ("forward-looking statements"). All statements other than
statements of present or historical fact are forward-looking
statements. Forward-looking statements are often, but not always,
identified by the use of words such as "anticipate", "achieve",
"could", "believe", "plan", "intend", "objective", "continuous",
"ongoing", "estimate", "outlook", "expect", "project" and similar
words, including negatives thereof, suggesting future outcomes or
that certain events or conditions "may" or "will" occur. These
statements are only predictions.
Forward-looking statements are based on the opinions and
estimates of management of Fire & Flower at the date the
statements are made based on information then available to the Fire
& Flower. Various factors and assumptions are applied in
drawing conclusions or making the forecasts or projections set out
in forward-looking statements, including with respect to the
closing of the Transaction on the terms described herein or at all.
Forward-looking statements are subject to and involve a number of
known and unknown, variables, risks and uncertainties, many of
which are beyond the control of Fire & Flower, which may cause
Fire & Flower's actual performance and results to differ
materially from any projections of future performance or results
expressed or implied by such forward-looking statements. Such
factors, among other things, include: final regulatory and other
approvals or consents; fluctuations in general macroeconomic
conditions; fluctuations in securities markets; the impact of the
COVID-19 pandemic; the ability of the Company to successfully
achieve its business objectives and political and social
uncertainties.
No assurance can be given that the expectations reflected in
forward-looking statements will prove to be correct. Although the
forward-looking statements contained in this news release are based
upon what management of the Company believes, or believed at the
time, to be reasonable assumptions, the Company cannot assure
shareholders that actual results will be consistent with such
forward-looking statements, as there may be other factors that
cause results not to be as anticipated, estimated or intended.
Readers should not place undue reliance on the forward-looking
statements and information contained in this news release.
Additional information regarding risks and uncertainties relating
to the Company's business are contained under the heading "Risk
Factors" in the Company's annual information form dated
April 29, 2020 and the heading "Risks
and Uncertainties" in the management discussion and analysis for
the thirteen and thirty-nine weeks ended October 31, 2020 filed on its issuer profile on
SEDAR at www.sedar.com.
No stock exchange, securities commission or other regulatory authority has approved or disapproved
the information contained herein.
SOURCE Fire & Flower Holdings Corp.