Harborside

/NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTRIBUTION TO UNITED STATES WIRE SERVICES/

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 – Fire & Flower Holdings Corp. (“Fire & Flower” or the “Company”) (TSX: FAF) (OTCQX: FFLWD), today announced its financial and operational results for the fiscal 2022 first quarter ended April 30, 2022.


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“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. 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. 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,” said Stéphane Trudel, Chief Executive Officer of Fire & Flower.

“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.”

Consolidated Financial Highlights


Thirteen weeks ended

(In thousands of Canadian dollars,

30-Apr-22

1-May-21

except per share amounts)



Total Revenue

40,944

44,084

Gross Profit

12,166

16,518

Gross Profit Percentage

29.7 %

37.5 %

Free Cash Flow

(8,724)

(5,424)

Adjusted EBITDA

(2,311)

2,307

Net loss

(9,906)

(61,598)

Basic loss per share

(0.27)

(2.06)

Financial & Operational Highlights for the First Quarter Fiscal 2022

  • 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.

Segment Revenue


Thirteen weeks ended

(In thousands of Canadian dollars unaudited)

30-Apr-22

1-May-21

Revenue



Retail

29,556

33,619

Wholesale and Logistics

8,459

7,628

Digital Platform

2,929

2,837

Total Revenue

40,944

44,084

Segment Adjusted EBITDA 


Thirteen weeks ended

(In thousands of Canadian dollars unaudited)

30-Apr-22

1-May-21

Adjusted EBITDA



Retail

(2,686)

932

Wholesale and Logistics

(108)

1,016

Digital Platform

1,714

2,466

Corporate

(1,231)

(2,107)

Total Adjusted EBITDA

(2,311)

2,307

Retail

  • 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.

Adjusted EBITDA


Thirteen Weeks ended

(in thousands of dollars)

April 30, 2022 ($)

May 1, 2021 ($)

Net loss – as reported

(9,906)

(61,598)

(Gain) loss on revaluation of derivative liability

(261)

54,110

Finance costs, net

1,741

3,311

Income taxes, net

619

687

Share-based compensation

632

532

Acquisition and strategic initiative professional fees

100

789

Depreciation & amortization

4,764

4,329

Restructuring, impairment and other costs, net

147

Adjusted EBITDA

(2,311)

2,307

Lease liability cash payments for the thirteen weeks ended April 30, 2022 was $2.4 million (May 1, 2021: $2.2 million).

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.

Free Cash Flow


Thirteen weeks ended

(In thousands of Canadian dollars unaudited)

30-Apr-22

1-May-21

Cash from Operating Activities

(5,959)

52

Less: Lease liability payments

(2,401)

(2,413)

Less Capital Expenditures

(383)

(3,268)

Free Cash Flow (FCF)

(8,742)

(5,424)

Webcast & Conference Call

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.

Dial-In Information

Toll-Free (Canada): 1-833-950-0062
Toll-Free (United States): 1-844-200-6205

Access code:  818860

Webcast Sign-Up 
https://events.q4inc.com/attendee/697092776 

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.

To learn more about Fire & Flower, visit www.fireandflower.com

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 Fire & Flower.  Various factors and assumptions are applied in drawing conclusions or making the forecasts or projections set out in forward-looking statements.  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 headings “Risk Factors” in the Company’s Annual Information Form dated April 26, 2022 and “Risks and Uncertainties” in the management discussion and analysis for the thirteen weeks ended April 30, 2022 filed on its issuer profile on SEDAR at www.sedar.com.  The forward-looking statements contained in this press release are made as of the date of this press release, and the Company does not undertake to update any forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws.

No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.

SOURCE Fire & Flower Holdings Corp.

Fire & Flower Announces First Quarter Fiscal 2022 Financial and Operational Results

For further information: Investor Relations: [email protected] , 1-833-680-4948; Media Relations: [email protected] , 780-784-8859