Fire & Flower Announces Record 2020 Fiscal and Fourth Quarter Financial and Operational Results

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<br /> Fire & Flower Announces Record 2020 Fiscal and Fourth Quarter Financial and Operational Results<br />
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Fire & Flower Announces Record 2020 Fiscal and Fourth Quarter Financial and Operational Results

Canada NewsWire



Strong execution by

Canada’s

largest cannabis retailer leads to

$128.1 million

in annual revenue, an increase of 150%



Quarterly revenue increased 157% to

$43.2 million

year-over-year



Second consecutive quarter of positive Adjusted EBITDA was

$1.5 million

for fourth quarter of 2020; positive Adjusted EBITDA for the year



Hifyre Digital Retail and Analytics Platform delivered 110.4% sequential growth producing

$6.3 million

of revenue for the year


TORONTO

,

April 27, 2021

/CNW/ – Fire & Flower Holdings Corp. (“Fire & Flower” or the “Company”) (TSX: FAF) (OTCQX: FFLWF), today announced its financial and operational results for the fiscal year and quarter ended

January 30, 2021

.


Financial and Operational Highlights for the 2020 Fiscal Year Ended

January 30, 2021

  • Total revenue of

    $128.1 million

    at a gross profit of 35.5%, compared to revenue of

    $51.1 million

    at a gross profit of 36.4% for the 2019 fiscal year – representing a 150% increase in revenue;
  • Achieved positive Adjusted EBITDA of

    $0.02 million

    for the fiscal year 2020;
  • Cash balance of

    $30.6 million

    as compared to

    $22.9 million

    for fiscal year 2019;
  • Significant 110.4% sequential quarter over quarter growth of high margin revenue sources in the Hifyre™ Digital Retail and Analytics Platform (“Hifyre”), with

    $6.3 million

    for the fiscal year 2020;
  • Open Fields distribution business achieved 36.5% sequential quarter over quarter growth and produced

    $20.3 million

    in revenue for the fiscal year 2020;
  • Same store sales for the quarter increased 36.8% compared to the fourth quarter of 2019;
  • Closed the acquisition of Friendly Stranger Holdings Corp., a multi-store and multi-banner cannabis retail operator in

    Ontario

    . At the Company’s fiscal year end, it had 73 stores open and operating. In Q4 2020, thirteen stores commenced operations under Fire & Flower banners compared to three stores in Q3 2020;
  • Opened two co-located cannabis retail stores with Circle K as part of a pilot program;
  • Completed financings for aggregate gross proceeds of

    $28 million

    . Additionally, Alimentation Couche-Tard Inc., through an indirectly wholly-owned subsidiary, exercised its participation rights in respect of the financings;
  • Entered into a commitment letter for an aggregate amount of up to

    $10 million

    with an option for an additional

    $5 million

    for non-dilutive credit facilities with ATB Financial, a Canadian Schedule One bank;
  • Amended the provisions of certain debentures and forced conversion of all remaining principal amounts and accrued unpaid interest through the issuance of 12,223,638 common shares of the Company;
  • Maintained business continuity during the COVID-19 public health crisis through rapid innovation of the Hifyre Digital Retail and Analytics Platform including the Spark Fastlane™ click-and-collect service, curbside pickup and same-day home delivery in select provinces such as the 14 million person

    Ontario

    market;


Subsequent Financial and Operational Highlights post

January 31, 2021


  • Entered into strategic licensing partnership and acquisition option with American Acres, which intends to operate


    dispensaries in

    California

    ,

    Arizona

    and

    Nevada

    with the first Fire & Flower branded store expected in

    Palm Springs, California

    this year;
  • Submitted an initial application to list its common shares on the Nasdaq exchange;

  • The Company

    announced the milestone achievement of 250,000 Spark Perks

    TM

    members across the Fire & Flower retail network;
  • More than 80 retail stores under four banners across the provinces of

    Alberta

    ,

    Saskatchewan

    ,

    Manitoba

    and

    Ontario

    and the

    Yukon

    territory;

  • Completed a

    $15 million

    , low cost, at-the-market equity distribution offering

    which further strengthened the Company’s balance sheet and positions Fire & Flower for future growth;
  • Announced planned

    $53 million

    debt-to-equity conversion which significantly improved the Company’s balance sheet and further reduced interest costs. Circle K owner, Alimentation Couche-Tard’s debenture conversion was

    $23.6 million

    , which will bring their equity stake to 19.9%;
  • Hifyre entered into strategic agreement with leading U.S. analytics company BDSA.


Financial Results for the Fourth Quarter period ended

January 30, 2021

  • Total revenue of

    $43.2 million

    at a gross profit of 38.0%, compared to revenue of

    $16.8 million

    at a gross profit of 36.6% for the fourth quarter of 2019;
  • An increase in revenue of 30.5% and an increase of 42.8% in total gross profit dollars compared to the third quarter of 2020;
  • Second consecutive quarter of positive Adjusted EBITDA of

    $1.5 million

    as compared to

    $1.2 million

    of positive Adjusted EBITDA in the third quarter of 2020 and negative Adjusted EBITDA loss of

    $5.26 million

    for the fourth quarter of 2019.


Selected Summary of Financial Results



(in thousands of dollars, except per share amounts)



Thirteen Weeks Ended



Fiscal Year Ended



Statement of Loss and Comprehensive Loss



January 30,

2021 ($)



February 1,

2020 ($)



$ Change



January 30,

2021 ($)



February 1,

2020 ($)



$ Change



% Change



% Change



Revenue



43,219


16,788



128,053


51,106


26,431


76,947


157%


151%


Cost of goods sold



(26,790)


(10,640)



(82,634)


(32,499)


(16,150)


(50,135)


152%


154%



Gross profit



16,429


6,148


10,281



45,419


18,607


26,812


167%


144%



Expenses


General and administrative



12,417


10,023


2,394



39,403


30,259


9,144


24%


30%


Share-based payments



522


728


(206)



2,512


3,101


(589)


-28%


-19%


Marketing and promotion



1,032


387


645



1,709


1,679


30


167%


2%


Acquisition and business development costs



1,187


291


896



2,153


492


1,661


308%


338%


Depreciation & Amortization



3,419


2,145


1,274



12,345


7,653


4,692


59%


61%


Impairment expense, net



565


4,613


(3,462)



1,448


4,613


(1,302)


-75%


-28%


Impairment of ROU assets, net of lease liabilities remeasurement



586




586



1,863




1,863


100%


100%


Restructuring charges



1,548


6,469


(4,921)

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1,548


6,469


(4,921)


-76%


-76%



Total Expenses



21,276


24,656


(3,380)



62,981


54,266


8,715


-14%


16%



Loss from operations



(4,847)


(18,508)


13,661



(17,562)


(35,659)


18,097


-74%


-51%


Listing expense














(1,835)


1,835


NM


-100%


(Loss) gain on revaluation of derivative liability



(2,444)


1,710


(4,154)



18,638


31,193


(12,555)


-243%


-40%


Gain (loss) on debt extinguishment



710




710



(53,152)


(9,028)


(44,124)


100%


489%


Interest income



22


161


(139)



220


384


(164)


-86%


-43%


Finance costs



(4,077)



(5,651)


1,574



(25,104)


(17,650)


(7,454)


-28%


42%



Other (expenses) income



(5,789)



(3,780)


(2,009)



(59,398)


3,064


(62,462)


53%


-2039%



Total (loss) income before tax



(10,636)



(22,288)


11,652



(76,960)



(32,595)


(44,365)


-52%


136%


Income tax expense



(831)




(831)



(2,049)




(2,049)


100%


100%


Deferred tax recovery



50




50



50




50


100%


100%



Net (loss) income and comprehensive (loss) income



(11,417)


(22,288)


10,871



(78,959)


(32,595)


(46,364)


-49%


142%



Net (loss) income per share, basic


($0.05)


($0.16)


$0.11


($0.45)


($0.28)


($0.17)


-69%


61%



Net (loss) income per share, diluted


($0.05)


($0.15)


$0.10


($0.45)


($0.28)


($0.17)


-67%


61%



NM – Not Meaningful

“While 2020 was a challenging year due to the pandemic, it was also a transformative year for Fire & Flower as our strong fiscal 2020 financial and operational results demonstrate our ability to successfully execute on our aggressive growth strategy,” commented

Trevor Fencott

, Chief Executive Officer of Fire & Flower. “From an operating standpoint, we continued to make significant progress as we grew from 21 stores at the beginning of 2019 to 80 stores today, which includes the recent acquisition of Friendly Stranger. Building on top of our record growth is our recently signed strategic licensing partnership and acquisition option with American Acres, which provides us with an opportunity for considerably greater expansion as it serves as an entry point into the sizable U.S. cannabis market. Financially, fiscal 2020 was a banner year of growth for the Company as we increased revenues over 150% year-over-year and ended with positive Adjusted EBITDA. We also strengthened our balance sheet through the reduction of debt which provides us with greater financial flexibility to execute on our overall strategy.”

Fencott continued, “Our investment in technology and innovation has led our proprietary Hifyre digital platform to become the market-leading analytics and data-driven system, assisting our multi-banner retail stores understand consumer habits and behaviours which further positions us for growth and the challenges of competition.  Our cutting-edge retail platform is now being recognized as a key tool for growth in the cannabis retail industry. Recently, leading U.S. analytics company, BDSA, partnered with our Company to build their operations with our proprietary platform. In addition, the owners of Circle K, Alimentation Couche-Tard continued to support our strategy by bringing their ownership stake in us to 19.9% and deepening our operational relationship with initiatives like our Circle K co-located store pilot program which utilizes their existing real estate footprint or selling Fire & Flower gift cards in hundreds of Circle K stores across the country.”

“With the strong momentum we have entering 2021 and our path to US market entry, we felt that now is the right time to apply to list on the Nasdaq, which will give us increased exposure to the global investment community while we execute on our growth plan to cement our status as the leading data-driven international cannabis retailer,” concluded Fencott.


Fiscal Year 2020 and Fourth Quarter Financial Results

For the fiscal year ended

January 30, 2021

, the Company generated revenue of

$128.1 million

including sales of

$101.5 million

in the Retail Platform,

$20.3 million

in the Distribution Platform and sales of

$6.3 million

in the Digital Retail and Analytics Platform.

During the thirteen weeks ended

January 30, 2021

, the Company generated revenue of

$43.2 million

including sales of

$33.2 million

in the Retail Platform,

$7.0 million

in the Distribution Platform and sales of

$3.1 million

in the Digital Retail and Analytics Platform.

Total gross profit for the fiscal year 2020 ended

January 30, 2021

was

$45.4 million

or 35.5% of revenue with retail and wholesale operations delivering

$39.2 million

, or 86.2% of total gross profit, compared to the prior year’s

$18.6 million

with retail and distribution operations delivering

$16.0 million

, or 86.2% of total gross profit for the 52 weeks ended

February 1, 2020

.

Total gross profit for the fourth quarter ended

January 30, 2021

was

$16.4 million

or 38% of revenue with the Retail Platform delivering

$11.9 million

, or 72.6% of total gross profit, compared to

$4.7 million

with retail and wholesale operations delivering

$5.1 million

, or 83.5% of total gross profit for the fourth quarter ended

February 1, 2020

.

For the 2020 fiscal year, the Company recorded net comprehensive loss of

$79.0 million

, or net loss per share, and on a fully diluted basis of

$0.45

. The net comprehensive loss incurred during the year largely due to non-operating charges including debt extinguishment and finance costs, offset by a gain on revaluation of derivative liabilities, as well as operating losses as the Company continues to invest in the expansion of its business lines including the acquisition of Friendly Stranger Holdings Corp.


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.

Currently, the Company operates 80 cannabis retail stores with 40 located in

Alberta

, 29 stores in

Ontario

, 9 stores in

Saskatchewan

and 1 store in each of

Manitoba

and

Yukon

territory.

Retail revenue for the quarter ended

January 30, 2021

was

$33.2 million

, an increase of

$19.5 million

from the prior year and

$6.6 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 quarter ended

January 30, 2021

was

$11.9 million

, an increase of

$7.2 million

from the prior year and

$2.9 million

from the previous quarter. Gross profit dollars increased due to the expanded store network and the ability to run data-driven and technology enabled consumer initiatives. 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 initiatives that were intended to bring more customers into the Fire & Flower digital ecosystem.

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 quarter ended

January 30, 2021

, Open Fields revenue increased to

$7.0 million

from

$5.1 million

in Q3 2020, representing a 36.5% increase between Q3 2020 and Q4 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.


Hifyre™ Digital Retail and Analytics Update

During the quarter ended

January 30, 2021

, Hifyre continued to develop and commercialize products within the Digital Retail and Analytics Platform. Digital product subscription revenue increased 110.4% sequentially from

$1.5 million

at Q3 2020 to

$3.1 million

at Q4 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. 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 the pandemic.

Currently, the Spark Perks program has surpassed more than 250,000 members. Program members typically transact more frequently and spend more per transaction than non-member customers. During the fourth 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 many cannabis licensed producers, equity research analysts, consulting firms and investment banks. The platform provides clients with a comprehensive understanding of consumer purchase behaviours in the North American 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 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 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 fiscal year ended

January 30, 2021

was a gain of

$0.02 million

compared to a loss of

$16.3 million

for the fiscal year ended

February 1

, 2020. Adjusted EBITDA for the quarter ended

January 30, 2021

was

$1.5 million

compared to a

$5.3 million

loss for the thirteen weeks ended

February 1, 2020

.



Thirteen weeks ended



Fiscal Year ended



(in thousands of dollars)



January 30, 2021 ($)



February 1, 2020 ($)



January 30, 2021 ($)



February 1, 2020 ($)



Net loss and comprehensive loss – as reported



(11,417)


(22,288)



(78,959)


(32,595)


Other (income) expense



5,789


3,780



59,398


(3,064)


Income tax expense



831





2,049




Deferred tax recovery



(50)



(50)


Share-based payments



522


728



2,512


3,101


Acquisition and business development costs



1,187


291



2,153


492


Depreciation & Amortization



3,419


2,145



12,345


7,653


Professional fees related to financing activities



475


201



847


630


Impairment



565


4,613



1,448


4,613


Impairment of ROU assets, net of lease liabilities remeasurement



586





1,863




Restructuring charges



1,548


6,469



1,548


6,469


Lease liability payments

(1)



(1,938)


(1,198)



(5,132)


(3,613)



Adjusted EBITDA



1,517


(5,259)



22


(16,314)


(1)


Lease payments are made on the first of the calendar month.


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 a.m. EDT

on

April 27, 2021

. The conference call will discuss Fire & Flower’s fourth quarter and fiscal year 2020 financial and operational results and updates on the Company’s plans for 2021.


Dial-In Information


Toll-Free Dial-In Number: 1-888-390-0546


Replay Information (Available until

May 18, 2021

)


Toll-Free Dial-In Number: 1-888-390-0541; Replay Code: 27606#

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, technology-powered, adult-use cannabis retailer with more than 80 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 education-focused, best-in-class retailing while the Hifyre

TM

digital retail 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 American Acres Managers upon the occurrence of certain changes to the cannabis regulatory regime.

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.

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 heading “Risks and Uncertainties” in the management discussion and analysis for the thirteen and fifty-two weeks ended

January 30, 2021

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.

Cision
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