CLVR - Earnings call transcript Q2 2021 | Clever Leaves Holdings Inc.

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Cody Slach

Good afternoon, everyone and thank you for participating in today’s Conference Call to discuss Clever Leaves’ Financial Results for the Second Quarter ended June 30, 2021.

Joining us today are Clever Leaves’ CEO, Kyle Detwiler and the company’s CFO, Hank Hague.

Before I introduce Kyle, I remind you that during today’s call, including the question-and-answer session statements that are not historical facts including any projections or guidance, statements regarding future events or future financial performance or statements of intent or belief are forward-looking statements and are covered by the Safe Harbor disclaimers contained in today’s press release and the company’s public filings with the SEC. Actual outcomes and results may differ materially from what is expressed in or implied by these forward-looking statements.

Specifically, please refer to the company’s Form 10-Q for the quarter ended June 30, 2021, which was filed prior to this call as well as other filings made by Clever Leaves with the SEC from time-to-time. that statements. results factors from differ identify forward-looking those filings could to cause materially These note during also EBITDA. Please that disclosing will adjusted be this call management is by as This financial G. Regulation defined non-GAAP a SEC measure GAAP press believes and this regarding of today’s the to included that the to directly statement financial A results EBITDA posted are on measure company provides in reconciliation a management non-GAAP and why investors condition of adjusted is the operations company’s measure company’s release most financial comparable that website. reasons information disclosing useful the With that, to I will over turn the Kyle. call Kyle?

Kyle Detwiler

you, Thank afternoon Cody good and everyone.

our agreements achieving near-term second leading improvements Cannabinoid drive development to toward year-over-year low in efficiencies progress partners our partnership shipments a leading new in revenue marked at cannabis geographies. robust a and growth, multinational our becoming network and and global to companies new of trajectory EBITDA. more distribution targets. and to The cost our standpoint, From quarter adjusted we continuation continue cultivation a long-term business Mexico, the meaningful widening in Portugal signed led market while of vision our facilities are achieve Australia we Colombia to

$XX million cannabis industry. to also Project Lives, research emerging of the Initiative, Clever this segment Change We support Leaves which allows advancing launched us the while research our help projects cannabis U.S. position in

momentum, leaves in expanding in Leaves. while confident footprint positive through us success our financial bright partnerships, Our for future new the Clever ahead attaining

future foundation are defined the call, last we success that I today. will establishing our reminded be our During everyone busy by

important our to innings. to company its operation remember several revenue our is that crops early we a but successful had to young, operations, which Portugal, in commercial is second we the although Portugal, to still continue like is ramp highlight journey still in In few for the It across the significant achievements markets. would have quarter. core during began generate Our I

into as need will pleased into well and evolving a to made preferences as period international profile optimization and expansion a processes strategies entry to our also This facility, resolving and which from undergo partnership to our our with commercial of progress optimize first IDT shipment That to along a Not flower also downstream Portuguese the from client’s pharmaceutical our export cannabis, manufacturing has new prescribed to signify adjust cost companies possibility continuing our cannabis-based said, are it We and in within refinement. shortage Australia the opportunities in to medicines. with only patients facility THC but their both grade of is of flower geographies. to our high team the certified towards The unable existing Australia’s a our commercial left late markets June became access by we are for reality medical entered this step Australia when Portugal Australia. being with directly ongoing pharmaceutical GACP does regulations.

of to the channel with pleased our to better demand and meet with are this are service IDT of Australian widen aiming and the We days distribution the arrangement early market.

with ingredient cannabis CBD supplier the or products. of line a in consumer that industry products, CBD and API and CBD through medical when manufacturing act quarter. expanded CBD the for that isolate. Life. during as further and also the now regulatory the developing market In an of America active offers emerging the of production the pharmaceutical for We Life commercial network commercialization our on leaders wellness a will Mexican cannabis development changes allow partnership were entry Latin into medical is CBD capitalize we Several to announced the leader quick Life’s distribution cannabis our into Mexico, we with beginning

deliver the experienced from of required step in on with Life’s manufacturing pleased facility important we partnered are APIs our have an GMP in as product opportunity, be distribution Colombia our EU a team growth ongoing what Mexico. to cannabinoid into view for to building In supplier purposes. products CBD pharmaceutical strategic with We we brand an certified to and aim

we the would in of cannabis medical estimated be Colombia, did end This Colombia, President with cultivation address represent Clever Duque to designated we Colombia’s Colombian subsequent was decree ministers the flower global if more not a that key export the occasion of historic to time. companies the of participate say market. such this project as operations have the the near later several was Turning of the as in Ivan of course to will as To gravity visit and and remiss Bogota, and I Leaves a our quarter country should facility in to to been much have interest first commercial the as strategic allow in addressable of flower for call, about production that signed to cannabis by contextualize government. our from the further this the but development double advancement potential has reform, celebrated regulatory half with cannabinoid licensed market. the our long-term this national

GMP forward the will exports is our across out high-quality milestones to to grown overnight, one this Colombia in flower regulatory globe. significant not facilities undoubtedly Clever patients history. in the most certified our Leaves turn We flower day While one EU from of look providing

we demonstrated expansion, to of about the have by momentum are that our as opened Further, our a strategy. our prospects on regulatory global execute we confident in are of the reforms. continued optimistic go-forward result positioning As

to proud during made are prospective Israel in now progress half as revenue. geographies, United States. in the and team all operational attuned exciting of our addition core hard into the Colombia work steps the changes we current evolving already out have efforts XXXX very legalization quarter. and other mentioned first major our the tailwinds in put In our of our we across including all the quality ongoing centers are of we as I by well the standards am of closely producing geographies, Australia, and as of Mexico to Within third the that I staying earlier,

on greater to to quarter. operational provide turn to second Hague detail CFO, discuss detail I to details the for accomplishments Before our Hank over like from provide our on recent these you? call the more over Hank, I’d performance our the and highlights greater quarter, financial in

Hank Hague

Thank you, Kyle.

growth Turning driven fourfold are sales Herbal in pursue XXXX revenue to our In a pandemic-related was markets recovery our financial healthy $X.X results, in have our Brands revenue lumpy. continued segment, segments, part second our new increased million compared and prior to opportunities to $X.X This global which by from ago development quarter XX% increased year period. the the with from cannabinoid to year of non-cannabinoid increase million the the nearly in business in continue as nutraceutical impacts. period enter business to shipments, we year’s which Pathfinder make last typically in

improve with of sustained to cannabinoid our momentum and further key On the parts had mix whole, revenue positioning the global diversifying we working our in our supply chains.

was due Portugal. dried with second This in associated to year all-in of flower gram per to XXXX operations the ramping in per $X.XX cost $X.XX compared production was in Our of early-stage period. quarter largely cost our gram the ago

to this of we As costs economies as grows, our drop we scale. market expect capture

share-based profit of operating remain in growth approach The XX, we in organization, cash we quarters, certified of June quarter pf our into XXXX our includes $X.X strong year aforementioned in production continues to the those XX% to cost Operating EU $X second the of including performance million largely the of XXXX in will quality a the expenses, to mainly prudent quarter that loss previously XXX% ago expenses throughout proceed million public year in net $X.X in our in to the balance quality closer and second organization, periods management margin $X.X as traceability. the loss driven the to in being public I The Net business $X.X we nutraceutical was primarily a gross Adjusted in quarter compared as of the of in million was insurance our Gross coming the maintaining year period track $XX.X was $XX.X in $X.X period, million million year. level relating million and cost anticipate negative of increased company. XX.X%. to to to of second resulting second margin increase due at a was in our gross year cultivation gross At million XXXX profit extraction, spite of cost chain-related compared and quarter all targets losses professional mentioned. all-in production of were $X half associated the company. million December in both to increase which attributed the a primarily year. associated cost which negative to GMP just is compared other a anticipated supply to future by million depreciation, the XXXX during compared EBITDA period. as and compared advised as expenses, capital a ongoing cannabinoid to expense compensation our operating revenue maintaining a assurance control cultivation with approximately $XX committed scale. second In ago general this improvement was at encompassed well investments million items, ago ago as increase the efficiencies. to to reminder, fees a to as an with and the XXXX, and improved XX, expense period. our attributable Across As of production including in million This non-cash in $X.X XXXX

$X represents balance the financing additional by from as in rate additional strategic well value. annum, per annum, secured rate result a principal $XX Growers per secured X% of reduction, reduction interest an this The This March full reduces announced prior we our XX% of our expansion efforts initiative while which XXXX continue the from maturity rate liquidity with note, of a position XXXX, will convertible million a July a with venture across X% discounted convertible the at As in a a due debt in update as over SunStream our sheet Sundial combined for of an capital XX, team repayment savings in action we X-year markets. as Bancorp, bolsters our commitments, core million sponsored service of and shareholders. providing notes working our financing and the form joint par

from developing of and further support stewards the the long-term. received partnership SunStream have to look capital grateful this disciplined over to forward and are remaining We

prepared to remain in the and have to we between our million Turning $XX track aforementioned progress reflects year-over-year guidance. and as of disclosed the are on far reiterate, remarks. guidance I to negative made full capital solid million approximately $XX of XX%, to revenue, million million Kyle. our thus approximately EBITDA outlook, $XX we gross my To margin with expenditures achieve This adjusted XXXX $XX to $XX million. Kyle? over negative our previously pleased as the turn range performance with year back will of concludes call in well

Kyle Detwiler

both reach pace Thank our customer international our the our In business within global base. ability regulatory you, in in reform of significant growing industry, cannabis role the plays broader expanding continue a to a Hank. products

medical thrilled While knowledge At recognize create quarter that means during world Leaves, with of problems, help around gaps communities change that we to value hope the particularly our still the prolonged and a success those geographies commercial to the usher mojo, for we key made involve with are measures and Clever for across cannabis. research of these to are we we the they this proactive the lives related prohibition the consequences will of prospects operate contending cultivate solve supply progress several mission taking cannabis. and in, and

supplying I better the take this over like have As time Australia the access to are we regulatory medicinal I our made IDT of global to would recent to operators limited should themselves believe found to on access firsthand our the greater reforms continue to the be patients We in to as patients who continent. from the that why shortages chronic to facility across they flower are causes witnessed treatments We from prescribed were we mission. able earlier, this months. flower execute cannabis prescribed, conditions to Portugal. these long-term cannabis-based been medicinal be to some Australia, prohibition callout which certified and progress affordable have gain unable suffering validations, supply trust address products the few partnership access In able country’s and to towards efforts due mentioned GACP is products. with products we proud as pharmaceutical grade past helps harm progress

more a cannabis to dried are access from Colombian medical additional region cultivation provide newly constructed effective flower including potential which half. we flower earlier a to this investment and up of cost I potential Portugal, to decree export million While cultivation. we flower total which within in presents, compete double already addressable great bit the our operating created facility requires new opportunity proud to our the European about from our operations, in spoke the market opportunities X.X cannabis medical makes market effectively of square financial feet the see and no global approximately

as In terms relationships market complements our Portugal our existing existing export client for solutions and operations, to cannabinoid our expands of flower opportunity production, of insights portfolio flower Colombia from and We learned in the strong this in us leverage as commence we capitalize can we these from flower in clients. production operations advantage on we Colombia, the Portugal lessons dried an our opportunity. giving operations additional

for in certification Latin look global operator dried offering only additional production. developing Colombia, today, for this we the government’s only network. We approval GMP are EU the operation applaud certified flower including EU the growing product in be GMP cannabis Colombian America our to and forward not may partners’ we While

addition share our with study which medical opportunities RNA exploration a rigorous of catalyze research will also cannabinoids. institution In we the in extraction commitment of sequencing, Change U.S pledged has and medical research of we focused which in this announced the forms created potential to potential three different research leveraging they to our have DNA benefits at medicines scientific of UC applications. Leaves of sequencing company, cultivars, PCL, Clever use export cannabis lifesaving medical partnership supplying our studies advance to cannabis, opportunity to with donate through to to we help new a announcing Projects In cannabinoid researchers of U.S $XX as to researchers eligible June, U.S. These partnership understanding well study help methods benefits scientific have into advance or as any cannabis. up first Lives, landmark to organizations Through already products of biopharmaceutical major Davis with to in million extraction. potentially DNA on initiative, research helped an

contribution and We we aware are that class to the institutions. proud of supporting am qualified spearheading kind industry, its of scientific U.S. teams to this researchers one be and to cannabis of look world at largest Davis other the forward of I UC

Finally, we to European continued operations. in also drive our progress have

end expansion Australia We currently we to new relatively am we and our post-harvest capitalize our on cultivation THC our In all developments in within a our construction partnerships be us our BXB dried by track. In and remain XXXX, will of geographies the and working IDT expect flower which on hard sending addition at partnership. network position of facility help by and to on work to very international our of from expand up facility to the choice shipment focus. and post-harvest regulatory completed focused remains XXXX. Portugal on I supply our team to in the commercial first year build achieve commercial proud end and running of of high these Construction put as with us through facility Portuguese the has accomplishments further global to further supplier distribution of the to in global support second our chain. half cannabinoid the tailwinds cultivation

I up am now making at Clever looking believe Q&A. the seeing strategy Leaves progress and in ramps monitor Colombia Our as we to our preparations our I done it our export will begin not working geographies. is and and open construction for through processes vision standards we efforts production to our towards flower call further approval quality long-term yet to changes Portugal of in on forward across for in work continue closely maturity.

Operator

Instructions] line sir. from Please And is the you, of Burleson first [Operation proceed. Bobby our question Canaccord. coming with Thank

Bobby Burleson

questions. great Hi, Thanks It’s Congratulations with to for everybody. talk you the taking my on continued afternoon. progress. this

to million revenue I’d that estimated start we and guys maturity, think million talking the wondering, footprint you target $XXX about I and So am talk million. an at $XX in But CapEx capital that current of get magnitude doing might given intensity decree reduced that operation. $XX shift model export but flower if be able outcome Colombian of right early also I I your know to the you revisit kind number callout too in order more am to are there with EBITDA, general are the we but to just happened it’s of in curious I to the Colombia, now about of how

Just you? is curious what the for kind there of optionality

Kyle Detwiler

definitely you. it’s we sort expand But to flower to we in of could develop. reduced. be previously I and we do to early. the foot thinking Colombia it questions main other and good if still already are cultivate the I hear will for slightly within think capacity help we expect that easier million export to anticipate for subsequent from decree scenario and Colombia our are have that nevertheless, of Thanks we around bit per were is able Bobby But from cost details are too is yes. any EU a facility facility, to young some new are to square at the Great, thinking in Nevertheless, Portuguese relatively in position to which don’t Colombia flower number GMP resolutions the and planning a a one question, we seamlessly. that there. are of are about that regulations, that lower substantially we able the come provide estimates think that through, constructed so clarify it down to we CapEx The if $XX you it exports. also are replicate much If definitely certified, makes waiting

Bobby Burleson

question, really I have quick then not it’s a another follow-up. – guess, And Fantastic. I

that’s the this is hood big on? healthy, your What terms maybe both there, – beneath your going additional how of for shelf terms business, you bit moving little it’s a nutraceutical seeing of more through momentum like maybe It trends opportunities there in in dynamic just volume guidance that in distribution kind sounds footprint there obviously, business are a on view? year. much what’s the On is of still, the How space.

Kyle Detwiler

by Yes, of One channel, forces retail, are in well, COVID-XX. think impacted by nutraceutical benefiting is major I significantly XXXX, definitely in from am here. We, results. sort was especially the the U.S. very encouraged two I

until better. business. So, when deemed had a stores things for were were our implication much like XXXX, closed getting being that as it non-essential in looks And negative recently

COVID, Delta up but or very variant, keep recently, are have our with, now. vigilance till the We we up to encouraged until

I think those in the upgraded we run gradually partners. family partners those XXXX for the and stores organization more expanded more we skews second that acquired new which retail within factor is, and this distribution, that means business And means have within partners. and XX was years,

I pleased very So, progress be over hopefully, come. will the we more And are with think there to time.

Bobby Burleson

outside of being to pipeline those which And Europe to or Great. gain nutraceutical ‘XX expect just, kind terms and one of not am mix of general you fact, we is biggest, geographies beyond the in in as out geographies look then that your of would highlighted, I you its whether overall four curious pipeline? of

Kyle Detwiler

are greater are Yes. statements about any made offering we comparing At potential. XXXX, to which more becoming there Nevertheless, are yet. if point, new you XXXX, haven’t geographies this XXXX,

how States. in Europe, into countries those like – Mexico, any we count be you it. in some United the might also But, of don’t those as whether on kind like the Some of Latin part comes America, Canada depending of depending classify UK again, on and Europe, are products assume the of you

I the across global we the geographies. shift. early too to So, bit on really mix geographic growth how it think depends say, But, will much are a different regulation. expecting, all probably But just all

Bobby Burleson

right just mix you expect expand to Are are of a terms going there that geographies pace? them of in making now any you on all kind or similar

Kyle Detwiler

a in are greater been around markets has cannabis than growth market years. for curve of certain their And steps Germany others. where several been has

earliest suppose. companies rather few innings, we are Brazil, are commercialize very look more the revolutionary, able we incremental, might products. than We at among there. very to Whereas past growth the are I believe So, early

square one. so, be kind will And building that of from

are you bit as early such likely markets, growth that. greater in a to So, again, it’s see to tell. too But

Bobby Burleson

for taking Thanks great. Okay, my questions.

Operator

Instructions] Azer from the is [Operator Please of Vivien your Cowen. with Our with next proceed question. line coming question

Vivien Azer

afternoon. Hi, good evening, good or

Kyle Detwiler

Hey, Vivian.

Vivien Azer

would kind focusing to sequentially of Thank your revenue you more dial-in questions. all and imply On is I to just XXXX, you a you were revenue more reiterating predict. guys But posted appreciated which half if aspirations hard commentary the kind taking just long-term of lot little it we in XXXX, – back for XQ. near-term, of perhaps versus the the XQ than around a bit guidance, incremental

that of So, on helpful? be, quarter, the color if you about third would Thank and quarter the could principal the and between that think should offer you. phasing that the drivers we some how fourth would what be of

Kyle Detwiler

Vivian. reiteration thanks, definitely, from very No, guidance. yes. that is conclusion of logical Great, the And

I looking think the business is good. and the pipeline

And we are good in the now, There still control, at feel the this initiatives, of many quality of the and that, always or of far. top company’s of a contracts, so lots bit sit that, have caused as As about of which feel be partnerships, turn half. hope be is with back sort lot year it to and our it. But predictable things of quarter-to-quarter. half significant further about could the or resurgences still road delays range down lumpiness towards do number in pathfinder, of the we registrations good get commercial expected pace lumpy standards, the is a these little to pharmaceutical largely in of pathfinder anticipation pretty relatively of COVID. we new our tricky the On more and something also subject of regulatory That’s that, back partnerships are the predict were repeatable. to of out drug And opportunities. business into by right But a wide that subject considerations to phase the our a we why shipments approvals, which there point. our to remains makes some we

Vivien Azer

understood. Okay,

headwinds heard suggest the guide Moving the scaling, XX% clear accelerating on an and loud in the degradation the half. incremental and on depreciation gross but just would margin the of margin, back around of full to year pace

think outsized about contemplating be as impact one in something XQ, quarter another? or flowing we on through that we have there would should So, that XQ, that evenly is an over

Hank Hague

the it’s you for Thank Hank. Hi, question. Vivian,

and reiterated driver it our this major performance The business, strong guidance have our quarter in herbal cannabinoid XX%. We disproportionately our was margin in larger where the brands business. was than

as anticipate, see our we bit would into we So lower basis. expect, forward, expect that pipeline, to as combined on we we going shipments, slowly And expect and greater in little it the as work greater quantities range. a cannabinoids or of to we glide a margin smoothly that

Vivien Azer

into like, And premature, does but would or continues at mix allow is that’s you asking XXXX normalization, to XXXX. am that guidance. revenue what – for I that not I kind offer of I anticipate gross of point know your margin? stabilization

Kyle Detwiler

our business When be business. business, would at flower a more more which than selling just started. non-cannabinoid We utilization cannabinoid our getting of excess, are expectation is Yes. fully we looking that Portuguese higher that is

As cost we obviously grow things for develop that’s margins expect But volumes new under are adjust. you higher forward-looking. also Colombia have And and timing know, sort as would to we would of driving And the well. it there. this a in gram there, lower is gross of we expansion per significant construction as expect to the when

Vivien Azer

did you good it second that expense you from the the should or deal interest addressing is that Sunscreen helpful. improve rate words run booked in and me. Is the that’s The little here? quarter? Understood, of that kind like with a bit one, a for Last

Kyle Detwiler

were is that note, Yes, I were expect costs it improve significantly our mainly We on new X%. and note X% our to large reduced. because at at interest

it do decline. I to expect So

Vivien Azer

that’s helpful. Thanks very much. the color. Okay, Appreciate

Kyle Detwiler

Thank you.

welcome. You’re

Operator

next Capital [Operator proceed question. it Please Instructions] from [indiscernible] Advisors. with of coming with is question, Our line your the ARGO

Unidentified Analyst

the I updates. all will appreciate

in As sort around, investment and your and progress clarity European market? it, questions Cansativa then additional little at of any around of any there if of Thank in be get breakouts broader sort a you. about into Brazil we more the highlights terms follow-up the made

Kyle Detwiler

thanks Great, yes and question. the for

a we registered. country’s Brazil, some innovation state of the first in on So, getting definitely with cannabinoid products are

are learning as Brazilian are as not authorities they only So, regulatory we learning but the go. go, we

So, which strong and of uniquely tackling progress a on pharmaceutical the remains European is as focus something at is Clever certification. certification by its both Leaves of exemplified that capable pace, a Colombian because quality GMP

So, things, we are smoothly. working through

true an not unregulated a competition are It or at able this of the market. good pop as point. matters we signs almost to normal warning we business is if But point knowing sort is other Cansativa at are this is almost important applied factor here which for do. a not a about into that, the unanticipated patient, that that’s through question sort up, increasing being sources – this is better. now And It’s we would are no about On product, of course, in think say gradually. So, patient everything that, medical broadened diversity the to points remember so, it the we patients, things data suppliers the is and/or that Cansativa, a greatly that see physicians access, of we opportunity, which say, top operators two more think probably kind really actually greater I the points first space. have think I German enter starting thing. or are We Cansativa producers. I product that, data seeing are number has help that to there see, companies the to the in through educate On that of entering of more other that, to

companies we system. on And cannabis specialty largest extracted of partnership us in new are players yes, pharma the entering there for nervous on great central the a of with have number the increasing there Ethypharm, product suppliers also are one So, is flower. as side, Europe of focused which

that market so, be relatively will product coming soon. And hopefully to

everything picture the so keep We of looks I Germany. pretty And think mind in good. big

with versus north X,XXX in the U.S. cannabis Germany one Canada, and of dealing people still both medical figures using in are We in XX XXXX people.

a So, evolving. the think is gradually market and healthily and potential I of lot

Unidentified Analyst

Thank you.

Operator

for Detwiler turn question-and-answer remarks. At would concludes our closing like back And call I session. to this Mr. this to the time, over

Kyle Detwiler

quarterly Thank we forward you to next all for look the and joining results.

Operator

teleconference. and this gentlemen, does conclude today’s Ladies

You time. at disconnect for your your you participation. this may Thank lines

Clever Leaves (CLVR) 13 Aug 212021 Q2 Earnings call transcript