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Fire & Flower Announces 2021 Fiscal and Fourth Quarter Financial and Operational Results

26 April 2022
Fiscal 2021 Highlights:
  • Consolidated revenue for fiscal year 2021 increased 37% to a record $175.5 million
  • Consolidated Adjusted EBITDA for fiscal 2021 was $5.1 million, consistent with the prior year
  • Hifyre™ cannabis consumer technology platform generated a record $14.3 million for the fiscal year, an increase of 129% year-over-year
  • Retail revenue increased 29% to a record $130.8 million for fiscal 2021, with more than 100 retail stores opened and operating at January 29, 2022 
  • Acquired Pineapple Express Delivery, PotGuide and Wikileaf to expand logistics capabilities and web traffic as part of the asset light e-commerce strategy
Fourth Quarter 2021 and Recent Highlights:
  • Consolidated revenue and Adjusted EBITDA for the fourth quarter of fiscal 2021 was $42.7 million and negative $2.4 million, respectively
  • Hifyre™ revenue for the fourth quarter generated a record of $4.1 million representing a 7% sequential increase quarter-over-quarter
  • Completed one of the final steps in preparation for listing on the NASDAQ including filing of the 40-F registration statement and DTC eligibility for common shares
  • Announced intent to exercise Series B warrants by strategic partner Alimentation Couche-Tard, owner of Circle K convenience stores
  • Announced an expansion of the industry-first Spark Select program, a new highly competitive product and pricing strategy to drive an expanded customer base, in a proactive response to the fast growing value-oriented cannabis consumer segment

Fire & Flower Holdings Corp. ("Fire & Flower" or the "Company") (TSX: FAF) (OTCQX: FFLWD), today announced its financial and operational results for the fiscal year and fourth quarter ended January 29, 2022.

Fire & Flower logo (CNW Group/Fire & Flower Holdings Corp.)

"Fiscal 2021 has been a year of significant advancement and growth for Fire & Flower and we have delivered meaningful year-over-year revenue growth. The Hifyre Digital Platform has exhibited impressive 129% annual and 7% quarterly sequential growth and is the core value proposition of our business. This year, we have refined our vision to, 'Deliver Cannabis to the World' positioning our business as a consumer e-commerce platform, supported by a distributed retail network enhanced by our Circle K store co-location program. This position is enabled through the acquisition of Pineapple Express Delivery, one of the largest cannabis delivery platforms in the world," shared Trevor Fencott, Chief Executive Officer of Fire & Flower.

"In the fourth quarter of fiscal 2021, while we have continued to see growth in our Hifyre digital business segment, we saw a decline in our retail revenue due to increased competitive pressures within the Canadian cannabis retail landscape. We announced a further competitive price and product strategy aimed at continuing to build an expanded consumer base. As we look out to  fiscal 2022, we anticipate continued growth in our digital business and driving further revenue opportunities in the U.S. We look forward to greater continued alignment with our partners at Alimentation Couche-Tard through the retail store co-location program which will be important in delivering a clear, convenience-oriented value proposition to our customers in brick-and-mortar retail and e-commerce."

Consolidated Financial Highlights
 

Thirteen weeks ended

Fifty-two weeks ended

(In thousands of Canadian dollars,

29-Jan-22

30-Jan-21

29-Jan-22

30-Jan-21

except per share amounts)

       

Total Revenue

42,697

43,219

175,499

128,053

Gross Profit

13,705

16,429

62,094

45,419

Gross Profit Percentage

32.1%

38.0%

35.4%

35.5%

Adjusted EBITDA

(2,410)

3,455

5,120

5,154

Net loss

(19,461)

(11,417)

(63,592)

(78,959)

Basic loss per share

(0.54)

(0.55)

(1.89)

(4.54)

Financial and Operational Highlights for the 2021 Fiscal Year and for the Fourth Quarter Period Ended January 29, 2022
  • Revenue of $42.7 million and $175.5 million for the fourth quarter and fiscal year ended January 29, 2022, representing a modest decrease of 1% for the comparable quarter (from $43.2 million) and a 37% increase year-over-year (from $128.1 million).
  • While all business segments contributed to the year-over-year revenue increase, the quarter-over-quarter revenue decrease was primarily due to increasing competition from new licences issued and pricing pressures in the retail market.
  • Gross profit of $13.7 million and $62.1 million for the fourth quarter and fiscal year ended January 29, 2022 represented a decrease of 17% for the comparable quarter (from $16.4 million) and a 37% increase year-over-year (from $45.4 million).
  • Adjusted EBITDA of negative $2.4 million for the fourth quarter and positive $5.1 million for the fiscal year ended January 29, 2022.
  • Net loss of $19.5 million for the quarter and $63.6 million for the fiscal year ended January 29, 2022, compared to a net loss of $11.4 million for the comparable quarter and $79.0 million for the fiscal year ended January 30, 2021.
  • An increase of 32 stores during the fiscal year, with 105 stores open and operating at the fiscal year end.
  • Alimentation Couche-Tard increased its equity ownership to 20.8% with $20 million outstanding on the ACT Loan and $2.4 million in convertible debentures outstanding.
  • As part of the Company's continued digital strategy, completed the acquisitions of Pineapple Express Delivery, PotGuide and Wikileaf.
  • Amended the strategic licensing agreement with Fire & Flower U.S. Holdings (formerly American Acres Managers) to derive additional U.S. based digital revenue.
Segment Revenue
 

Thirteen weeks ended

Fifty-two weeks ended

(In thousands of Canadian dollars unaudited)

29-Jan-22

30-Jan-21

29-Jan-22

30-Jan-21

Revenue

       

Retail

31,670

33,156

130,823

101,497

Wholesale

6,969

7,002

30,336

20,300

Digital Platform

4,058

3,061

14,340

6,256

Total Revenue

42,697

43,219

175,499

128,053

Segment Adjusted EBITDA 
 

Thirteen weeks ended

Fifty-two weeks ended

(In thousands of Canadian dollars unaudited)

29-Jan-22

30-Jan-21

29-Jan-22

30-Jan-21

Adjusted EBITDA

       

Retail

(2,077)

1,930

1,223

7,539

Wholesale

1,010

1,126

4,725

2,905

Digital Platform

1,885

1,581

7,708

1,767

Corporate

(3,228)

(1,182)

(8,536)

(7,057)

Total Adjusted EBITDA

(2,410)

3,455

5,120

5,154

Retail
  • Retail revenue for the 2021 fiscal year increased 29% to $130.8 million from $101.5 million in fiscal year 2020.
  • Retail revenue for the fourth quarter, decreased 5% to $31.7 million from $33.2 million in the prior year comparative period. Revenue decreased $2.0 million or 6% sequentially from Q3 fiscal 2021.
  • Gross profit for the 2021 fiscal year was $41.5 million compared to $35.1 million in 2020 fiscal year.
  • Gross profit for the fourth quarter was $8.2 million, a decrease of 31% compared to $11.9 million for the prior year comparative period.
  • Gross profit margin was 25.8% for the fourth quarter ended January 29, 2022 and 31.7% for the 2021 fiscal year.
  • Segment Adjusted EBITDA for the 2021 fiscal year was $1.2 million compared to $7.5 million in fiscal year 2020. Segment Adjusted EBITDA decreased to negative $2.1 million in the fourth quarter 2021 from positive $1.9 million in the same quarter the prior year.
  • The Company had 105 stores open and in operation at the end of January 29, 2022, compared to 73 stores at the end of January 30, 2021.
Wholesale
  • Wholesale distribution revenue for the 2021 fiscal year increased 49% to $30.3 million compared to $20.3 million in 2020 fiscal year.
  • Wholesale distribution revenue in Q4 fiscal 2021 of $7.0 million was approximately flat compared to the same quarter of the prior year.
  • Gross profit was $6.4 million for the 2021 fiscal year compared to $4.1 million in 2020 fiscal year.
  • Gross profit in Q4 fiscal 2021 increased to $1.6 million year-over-year from $1.4 million in the same quarter of the prior year.
  • Segment Adjusted EBITDA for the 2021 fiscal year was $4.7 million compared to $2.9 million in 2020 fiscal year. Segment Adjusted EBITDA decreased to $1.0 million in Q4 2021 from $1.1 million in the same quarter of the prior year.
Hifyre™ Digital Platform
  • Hifyre Digital Platform revenue for the 2021 fiscal year increased 129% to $14.3 million compared to $6.3 million in 2020 fiscal year.
  • Q4 2021 Hifyre revenue was $4.1 million compared to $3.1 million in the same quarter of the prior year.
  • Gross profit margin was 97.3% for the fourth quarter ended January 29, 2022 and 99.2% for the 2021 fiscal year.
  • Adjusted EBITDA for the 2021 fiscal year was $7.7 million compared to $1.8 million in 2020 fiscal year. Adjusted EBITDA increased to $1.9 million in Q4 2021 from $1.6 million in the same quarter the prior year.
Subsequent Operational Highlights Post January 29, 2022
  • Amended the Strategic Licensing Partnership and Option to Acquire Fire & Flower U.S. Holdings (formerly American Acres Managers) and the creation of an additional high margin U.S. digital revenue stream on January 31, 2022.
  • Pineapple Express Delivery launched next-day delivery services with BC Cannabis Stores in the Vancouver region on February 24, 2022.
  • Completed one of the last remaining steps in the Company's NASDAQ listing through obtaining DTC Eligibility for the Company's common shares on April 13, 2022.
  • Expanded logistics and delivery services through a cross-docking Distribution Agreement with Manitoba Liquor & Lotteries on April 14, 2022.
  • Announced a highly competitive product and pricing strategy to drive an expanded customer base on April 21, 2022.
  • On April 20, 2022, announced intent to exercise Series B warrants by strategic partner Alimentation Couche-Tard, owner of Circle K convenience stores, resulting in a post exercise ownership stake of approximately 35%.
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 fourth quarter ended January 29, 2022 and 2021 fiscal year was negative $2.4 million and a positive $5.1 million compared to positive Adjusted EBITDA of $3.5 million for the comparable quarter and $5.2 million for the 2020 fiscal year respectively.

Adjusted EBITDA
 

Thirteen Weeks ended

Fiscal Year ended

(in thousands of dollars)

January 29, 2022 ($)

January 30, 2021 ($)

January 29, 2022 ($)

January 30, 2021 ($)

Net loss – as reported

(19,461)

(11,417)

(63,592)

(78,959)

(Gain) loss on revaluation of derivative liability

(7,558)

2,444

8,545

(18,638)

Loss on extinguishment and revaluation of debentures

-

(710)

-

53,152

Finance costs, net

1,505

4,055

7,245

24,884

Income taxes, net

1,330

781

2,452

1,999

Share-based compensation

468

522

3,174

2,512

Acquisition and strategic initiative professional fees

1,306

1,662

3,094

3,000

Depreciation & amortization

5,495

3,419

19,080

12,345

Restructuring, impairment and other costs, net

14,505

2,699

25,122

4,859

Adjusted EBITDA

(2,410)

3,455

5,120

5,154

Lease liability cash payments for the thirteen weeks and fiscal year ended January 29, 2022 were $2.4 million and $9 million, respectively (January 30, 2021: $0.8 million and $3.2 million, respectively).

Webcast & Conference Call

Fire & Flower will host a webcast and conference call with Trevor Fencott, Chief Executive Officer, and Judy Adam, Chief Financial Officer at 8:30 a.m. EDT on April 26, 2022. The webcast will discuss Fire & Flower's fiscal year 2021 and fourth quarter financial and operational results.

Dial-In Information

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

All other locations: +1-929-526-1599

Access code:  013467

Webcast Sign-Up 
https://event.on24.com/wcc/r/3755300/8C01528CC241A5D03166AC3EAE5D8F7D

Replay Information (Available until May 17, 2022)

Toll-Free (Canada): 1-226-828-7578
Toll-Free (United States): 1-866-813-9403
All other locations: +44-204-525-0658

Replay Code: 348644

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 January 29, 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.

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