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

Published: September 14, 2022

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

Fire & Flower Holdings Corp. announced its financial and operational results for the fiscal 2022 second quarter ended July 30, 2022.

“Fire & Flower remains focused on the transformation of our business and strategic opportunities with a goal to deliver positive Adjusted EBITDA and Free Cash Flow. We are focusing on near-term initiatives such as the Spark Perks Member Pricing program and opportunities to generate additional consolidated gross profit dollars as competitive pressures, and license expansion outpacing market growth create challenging  market conditions across the industry. Our Member Pricing program has generated success by getting customers back in our stores and we will look to maximize the margin opportunities from all programs focused on driving gross profit dollars,” said Stéphane Trudel, Chief Executive Officer of Fire & Flower.

“We continue to invest in our end-to-end Hifyre cannabis consumer technology platform and integrate our Wholesale and Logistics segment to deliver greater sustainable value across our business as one of the leading cannabis retailers. Alongside our strategic partner, Alimentation Couche-Tard, Fire & Flower remains focused on our long term, global outlook on technology-enabled cannabis retail both through our Spark Perks member program and Firebird rapid delivery service, which brings cannabis products to consumers’ doors within hours. To deliver on our long term vision, we are focused on how we sustainably grow the business while also improving on near term financial performance and prudent use of capital.”

Consolidated Financial Highlights

Thirteen weeks ended

Twenty-Six weeks ended

(In thousands of Canadian dollars,

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

except per share amounts)

Total Revenue

40,742

43,306

81,686

87,390

Gross Profit

9,699

16,173

21,865

32,691

Gross Profit Percentage

23.8 %

37.3 %

26.8 %

37.4 %

Adjusted EBITDA

(6,037)

3,146

(8,348)

5,453

Net loss

(21,557)

19,450

(31,463)

(42,148)

Basic loss per share

(0.48)

0.58

(0.76)

(1.33)


Financial & Operational Highlights for the Second Quarter Fiscal 2022
  • Revenue of $40.7 million for Q2 fiscal 2022, representing a decrease of 6% from $43.3 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 $9.7 million (24% of revenue) for Q2 fiscal 2022, compared to $16.2 million (37% of revenue) in the prior year comparative period. The decline in gross profit dollars and margin reflects investment in the Spark Perks Member Pricing program, Firebird Delivery and Hifyre digital platform during the current fiscal quarter.
  • Adjusted EBITDA of negative $6.0 million for Q2 fiscal 2022.
  • Net loss of $21.6 million for Q2 fiscal 2022, compared to a net profit of $19.5 million in the prior year comparative period.
  • Cash and cash equivalents balance of $18.6 million as at July 30, 2022, a decrease of $1.3 million from the fiscal year ended January 29, 2022.

Segment Revenue

Thirteen weeks ended

Twenty-Six weeks ended

(In thousands of Canadian dollars unaudited)

July 30,

     2022

July 31,

    2021

July 30,

     2022

July 31,

     2021

Revenue

Retail

30,357

31,842

59,913

65,461

Wholesale

8,464

7,797

16,923

15,425

Digital Platform

1,921

3,667

4,850

6,504

Total Revenue

40,742

43,306

81,686

87,390


Segment Adjusted EBITDA

Thirteen weeks ended

Twenty-Six weeks ended

(In thousands of Canadian dollars unaudited)

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Adjusted EBITDA

Retail

(4,540)

(741)

(7,229)

361

Wholesale

(405)

1,323

(513)

2,339

Digital Platform

641

3,308

2,358

5,604

Corporate

(1,733)

(744)

(2,964)

(2,851)

Total Adjusted EBITDA

(6,037)

3,146

(8,348)

5,453


Retail
  • Retail revenue for Q2 fiscal 2022 decreased 5% to $30.4 million from $31.8 million in the prior year comparative period. Despite a reduction of nine retail stores during the current quarter, retail revenue increased 2.7% quarter-over-quarter as a result of the recent launch of the Spark Perks Member Pricing program.
  • The new Spark Perks Member Pricing program, which launched in mid-May 2022, drove increased traffic to stores, resulting in an increase of 18% in average annualized sales per store compared to Q1 2022 and same-store-sales improvement of 10% from June 2022 to July 2022.
  • Gross profit Q2 fiscal 2022 was $7.0 million (23.3% of revenue) compared to $10.9 million (34.1% of revenue) for the prior year comparative period. The year-over-year decline reflects the investment in launching the new Spark Perks Member Pricing program in the current quarter. Subsequent to quarter end, the Retail segment is already seeing improvement in both gross profit dollars and margin percentage, driven by increased number of transactions and units sold per store.
  • Segment Adjusted EBITDA decreased to negative $4.5 million in Q2 fiscal 2022 compared to negative $0.7 million in the same quarter of the prior year.
  • The Company had 92 stores open and in operation at the end of July 30, 2022, compared to 101 stores at the end of Q1 2022 and 91 stores at the end of Q2 fiscal 2021.

Wholesale and Logistics
  • The current fiscal year results include the operations of Open Fields Distribution wholesale business in the province of Saskatchewan and Pineapple Express Delivery, which was acquired on January 21, 2022.
  • Wholesale and Logistics revenue in Q2 fiscal 2022 of $8.5 million, an increase of $0.7 million or 9% compared to the same quarter of the prior year.
  • Gross profit in Q2 fiscal 2022 decreased to $0.9 million from $1.6 million in the same quarter of the prior year.
  • Segment Adjusted EBITDA decreased to negative $0.4 million Q2 fiscal 2022 from positive $1.3 million in the same quarter of the prior year.
  • The year-over-year decline in gross profit and Segment Adjusted EBITDA reflects increased cost of sales and launch of Firebird Delivery in the current fiscal quarter.

Hifyre™ Digital Platform
  • Digital revenue of $1.9 million in Q2 fiscal 2022 compared to $3.7 million in the same quarter of the prior year.
  • Gross profit margin was 89.5% for the quarter ended July 30, 2022 compared to 100% for the prior year comparative period.
  • Segment Adjusted EBITDA decreased to $0.6 million in Q2 fiscal 2022 from $3.3 million in the prior year comparative period.
  • The year-over-year decline in revenue and Segment Adjusted EBITDA is primarily due to a delay in renewals of data subscription agreements and reduced project-based data and analytics work in the current fiscal quarter, as the Company prioritized development of new products that have been launched in Q3 2022. Subsequent to quarter end, substantial renewal of data subscription agreements are anticipated to be completed through more favourable economics for data subscription customers, stabilizing monthly recurring revenues in future quarters.

Subsequent Operational Highlights Post July 30, 2022
  • Announcement of Change in Board of Directors with Ms. Suzanne Poirier, Alimentation Couche-Tard executive joining in replacement of Mr. Guillaume Léger on August 12, 2022.
  • Launch of Pineapple Express recreational cannabis delivery in the province of British Columbia on July 13, 2022.
  • Changed year end to December 31.

Adjusted EBITDA

Thirteen Weeks ended

Twenty-six Weeks ended

(in thousands of dollars)

July 30, 2022 ($)

July 31, 2021 ($)

July 30, 2022 ($)

July 31, 2021 ($)

Net loss – as reported

(21,557)

19,450

(31,463)

(42,148)

(Gain) loss on revaluation of derivative liability

(59)

(25,321)

(320)

28,789

Finance costs, net

1,355

1,096

3,096

4,407

Income taxes, net

607

1,368

1,226

2,055

Share-based compensation

678

1,319

1,310

1,851

Acquisition and strategic initiative professional fees

459

259

559

1,048

Depreciation & amortization

6,110

4,182

10,874

8,511

Restructuring, impairment and other costs, net

6,370

793

6,370

940

Adjusted EBITDA

(6,037)

3,146

(8,348)

5,453

Lease liability cash payments for the thirteen and twenty-six weeks ended July 30, 2022 was $2.5 million and $4.9 million, respectively (July 31, 2021: $2.1 million and $4.3 million, respectively).


About Fire & Flower
Fire & Flower is a cannabis consumer retail and technology platform with more than 90 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. To learn more about Fire & Flower, visit www.fireandflower.com.