CLVR - Earnings call transcript Q1 2022 | Clever Leaves Holdings Inc.

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Operator

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Clever Leaves Financial Results for the First Quarter ended March 31st, 2022 Joining us today are Clever Leaves CEO, Andrés Fajardo; and the company's CFO, Hank Hague.

Before I introduce Andrés, 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 March 31st, 2022, which was filed prior to this call as well as other filings made by Clever Leaves with the SEC from time-to-time. These filings identify factors that could cause results to differ materially from those forward-looking statements. during gross management margin. profit, that adjusted be note adjusted EBITDA, and also this will call, disclosing Please adjusted gross are as measures non-GAAP SEC These G. Regulation defined by financial the are the these margin information most operations a financial results provides in disclosing why EBITDA, useful that reasons company's to press and release management the of of and adjusted Reconciliations measures gross statement directly GAAP profit, financial measure today's non-GAAP condition comparable included is company's and believes adjusted regarding on posted company investors website. to adjusted gross that the With that, the over to I Kyle. will turn call

Andrés Fajardo

Jackie. Thank you, Thank Jackie. you,

We streamlined redefined have first our quarter. progress the made on growth strategy strong during

across of XXX% continued partners. signing as geographies, and revenues strong with our both through announced nutraceutical further our in through increased markets, our cannabinoid with agreements Our partnerships of series target complementing and Throughout strategic we BXB performance signed year-over-year partnerships new and quarter, supply the leaders existing the BXB a first strength we activated target business. partnerships expanded expanding our our

commercial global soup support priorities. market. demonstrate Our structure cost growth, a position sheet aligning our and this on also our cannabinoid we focus To within choice balance our supplier of strategic as with advancements the emerging renewed

leaner remaining debt. operator Subsequent optimized balance changes off our reflects our have even will as efficient we more our the two paying as greater we pieces employee implemented quarter, restructuring an term. several we expenses to sheet the well of drive one-time exits, longer related largest over savings cost us by While the of believe bottom-line and and to equipment write-offs help become

related acquisitions Catalina convertible remaining our Herbal to note Brands. senior and LP Our the of with obligations

in decisive focus progress, momentum I on to and we strategic make allowed organizational to maintain commercial are our has XXXX. well-positioned Our believe efficiency us and execution

key on current regulatory we to As markets; Israel, and focus commitment commercial, efforts a entered reminder, Germany, development on Australia, the States. five XXXX and Brazil, United the with

of research-driven first we in agreements $X.X we these operator a quarter, will early the each Australia, two-year with begin existing progress in supply. begin To which expanded across momentum CBD demonstrate into in two We markets. Cannatrek, During February that we relationship our with, we in from strain made the agreement already high of market. THC this our strong take-or-pay supplying million cannabis medical one oil a Portugal alongside products flower our announced

take-or-pay through supply Colombia Under largest minimum from new In Group. addition, today includes partnership will THC purchase certified supply CBD ANTG agreement a suite product agreed signed has this worth million $X.X of for the we of agreement, our year a flower from oil Therapeutics Portugal. to and And Australian crude we Australian a National with THC products. GMP isolate and that

and value of Australia's capabilities Australian fresh country's asset-light partners. pharmaceutical-grade industry seen patients this the medical is expected we consultancy, throughout analytics. revenue our year, cannabis to have year roaster base support the cannabis optimize to products double us growing to We local surged past according believe allow of and approved and We a relief offer the to BXB

was this We we of also January, a got and upon import In hours off contingent supply facility $X.X extracts in firms. million announcement a a and mix first along the of February, followed we from by Cansativa Cansativa, closely purchase batch becoming first progress approximately the In pharmaceutical GMP and launch minimum Portugal, of which our out with commercial repurchases other wholesaler new start €X into has EU in of good IQANNA for followed a since which from flower several cannabis partners of our been sold million conditions CBD advanced our product the specialty under current flower high closing. in with in Portuguese or XX to three-year the our country with our distributor of will Germany. THC a certified of our with European Ethypharm, with market the This agreement partnership announced German by company.

Finally, continued manufacturing with will its well to provide extract Colombian with FolliuMed Fidelio the agreement, access distribution we Under in presence and bulk in market partner, to our March, market, cannabis IQANNA and medical for is gels pharmaceutical-grade medicine. we use progress European agreement one-year German sales the Holding we expand our as international extracts through which operator, in with announced made our three these the this Healthcare. as rapid prescriptions German launch Fidelio wellness Through of we in commercial have soft the our cannabis Union. cannabis three deepening for agreements, German largest

of chain, proud operators these to physician-prescribed breadth medicines presence they the German are country's newer pharmaceutical in to market in grade domestic We with supply occupy broadly, products the supply to and have the German respectively. long-standing companies our Ethypharm help process in expand seasoned our positions depth us industry and and the meaningful cannabis relationships allow Fidelio Cansativa to like partners as patients and with place More pharmaceutical need. this

become support We fully as cannabis distributor share to market. throughout our but and meaningful are this over commercial the I'll time the preparing complexity navigate in to growth has further a progress market and later has more for advance German this ability our regulatory licensed affiliate, within call, Leaves, our recently commercial relationships significant in us to runway Clever a this Germany on Germany's even have EU. announcement medical given

Through branded we for we use market and are to under current generating challenging RDC long-term. cannabis complexities our quality product We with framework the approvals and commercial existing existing in a solidified in InterCure, this partnership, two country's be allow access agreements cannabis country's building EU-GMP After other and regulations launched approvals, XXX, our strengths In partnerships as have over these regulatory products InterCure’s flower, where has the have InterCure the markets. to for company. local high--THC the we leading to cannabis our partnership XXXX, active standards UK products will multiyear have in pending medical compassionate products Australian compliant foundation and through ramping revenue maneuvered EU, cultivate we recurring find through the regulatory strategic also within land our for pharmaceutical the and them products. towards commercial Israel high-quality adapting to Brazil, in comprehensive

base to them flower We development are team proud our global count products. InterCure for product to partner our on with the among customer expanding and

of entered with This was the system care possible a US, price market the in in provides high-quality consumers an SKUs we've affordable January, made and point. by to expanding US working our daily our work client hard base. our domestic Herbal new of the various Finally, increasing grow to with team, Brands and the existing we penetration within which by distribution of JOYSOL, clients CBD launch continued business nutraceutical at

to of strategy and offering. production scaling on the capabilities support our XXXX of trend preparing expansion our flower our is major Another growth

the our Colombia. the and the As of we flower in leverage ramp our markets, needs our Portugal that us to we've giving important target operations specifications plan to over cultivation flower year, we of into the production Portugal adopted past insight

are through Colombia I'll well to Having dried performance over we exported I the over working during framework products other flower to the XXX, to marking for Colombian I as As core Colombia, flower Resolution Hank, greater flower. positioned government commercial over product provide Hague. target in our secured that our been we on proud remainder months. on To CFO, and products six already opportunities completion pathways to to represents regulatory additional resolution am benefit. in believe EU context believe in quarter steps of across the our issued and our our our flower progress developing have position Portugal development like regulatory first you. the in for financial a currently taking which are of regions, medical positioned the the joint welcome as provide our cannabis markets detail the we from I'd its support XXXX of our the the early growth strategic turn Hank later call last certification well the recently to for are and of export momentum and redefined regulatory announced call we month, we year. around GMP from sustain

Hank Hague

Andrés. you, Thank

to increase was This $X the well Our as in in XXXX year compared to quarter in first period. which compared in million the the strength XXX% our as revenues, cannabinoid quarter. to by sales of XX% million to $X.X continued $X.X $X.X increased revenue driven ago increased million significant growth ago year our business million nutraceutical year-over-year in

begin across agreements reflects growth revenue as activate commercial cannabinoid existing Our strong to our our target gradually and ramp. markets performance

our grow strong a our we core continuing already expanding As to our partner and Andrés to highlighted, current are bases just start geography. partnerships with within off

gram unit In associated production less Colombia, anticipate quarter cost to flower choppiness costs of the geographies, have period. a of we cost in we of the near we costs costs capacity. the offset some may per with our compared over per production as we quarter-to-quarter our costs scale Colombian we our flower slight with increase manage gram driven $X.XX all-in Across continue XXXX $X.XX longer first was capturing was in per year efficiencies as The extraction on in our grow expanded both we operations focus in associated we for gram Portugal, on flower smokable and gram for per decrease by maintained export. increase Our ago by the term economies dry focused also ramping the In in operations. expanded the where in Portugal, term. in consolidated see can our are to

the compared inventory Our million $X.X $X includes quarter. $X.X $X.X write-down write-down a includes a million, million, which gross to was which profit in million inventory prior

XXXX Portugal adjusted reminder, the pressure, we inventory adjusted margin year-over-year of adjusted continue XX.X% period. by an which gross that higher just also ago margin production the wage XX% now will as inventory to adjusted is gross excludes business, of that $X.X the for offset continued within coming increased scale ago our impacts our and availability to around have adjust we In and revenue $X.X to both I As said, pandemic-related in rising discussed, to an of and optimize headwinds and our year the write-down cost reflects our write-down previously profit gross now serve compared classified an nutraceutical in period. The materials, profit transportation over sold. That first XX.X% partially in labor gross figure as a million to growth performance profit, to quarter for This costs basis of strong and on performance weather we operations. these anticipate the costs quarters. reflects million we classified the the in goods year our compared SG&A are was reporting

was monitoring million on the are period effects quarter to this equipment impact employee certain $X $X.X our year align for supply ahead. the from to first on approximately for compared continue the the $X million Within we million redefined exports over term costs. longer The the exit for our our was XXXX. $XX.X later which near million a We the in remaining structure increase to attributable operations $X.X the excess charge charge, $X.X and of labor for business closely the priorities were cost efforts as to same is the expenses with of year to charge, and conditions dry restructuring our charging these to restructuring strategic broader off our million term. in and primarily our in restructuring chain stemmed related extraction Operating Colombian flower of onetime prepare related XXXX million

allow in million cost on approximate operational on believe basis projected reduction $X fully more believe to approximately revenue savings restructuring driving during we We growth annualized constrained quarter, activities expenses of cost they first will realigned our the will bottom for us million and our to these our in efforts result we target these $X for believe represent balance an related XXXX. the our focus of core cost While an line structure the year, market.

Catalina in quarter million without and due on million aggregate projects the is net on already restructuring in focus efforts, $X million million of quarter. of to end minority $XX.X April XXXX repaid quarter and in a increase of our for two the warrant in primarily a XX, to the strategy the expenses to for same approximate discount to offset to million of sheet by even write-off amount long-term offset that on of loss $X.X of efficient XX, raised outstanding million quarter, liability. On million $X.X pieces off At XXXX, compared the first operate with under activities. operational the debt we M&A, XXXX which due inventory first LP. secured compared in same period extinguishment positioning additional Subsequent increased XXXX, $XX.X forward. primarily $X.X $XX.X as $XX.X by debt. proceeds negative increase smokable was going activity at-the-market-offering extinguishment $XX.X million strengthened including gain, R&D March to paying convertible we million remaining we EBITDA is to driven Our even our our the remeasurement December compared of balance and the loss clear period XXXX cash on first major expense, to Adjusted sales of write-down, our foundation more our Colombian increased through investments our clear debt have of debt loss ROI due The marketing increased have in to as for a was $X.X first us note XXXX. part of from further dry through of negative flower an attributable Net non-core million million $XX.X balance the balance deprioritizing X, at and to

and a fully notes X, convertible in $X.X aggregate purchase million, in XX,XXX full, all obligations represented and flexibility. In and sheet outstanding note offers of paid and result and fees. security May we debt approximately obligations are which loan of owed X,XXX and and related Capital, balance in On of approximately to principal the outstanding Herbal an our debt acquisition our Rock under our agreement amount total, the Brands As under repayment, outstanding our Brands interest our between repaid XXXX. accrued greater in aggregate unpaid these Cliff representing us agreement amounts debt Herbal of we

in we $X.X thereby remain has our our reduced efficiency. actions position significant interest cash annual to to represent capital. As yielding savings working greater from and and million, a the and company's result, been sheet reducing total progress debt XXXX, expense These liquidity drive to efforts of optimize expenses balance our million. through improving committed investment $XX.X million further $X.X Throughout our

our in commercial full financial present trends XXXX as we our momentum Lastly, hold, year and guidance. business reiterating are

of We $XX between to expect between and to reflecting range XX%. $XX gross our XX% XXXX revenue million, million adjusted an margin

activate headwinds XXXX continued in revenues our expectations we chain opportunities Meanwhile, reflect our labor gross as expectations in core line in our businesses, Our respectively. our production cannabinoid increase top reflect expected margin supply adjusted markets. cannabinoid relative to and cost to costs continue nutraceutical in commercial higher and Portugal and

We also with range million $X within $XX This level be negative our $XX negative EBITDA expenditures CapEx represents to annual range the to run expect capital million, maintenance $X adjusted full continue million between ranging and year a million. to rate. of

profile now, quarter, advancing our continue strengthening the positioned cash has our we growth first optimizing remarks. our review depth. restructuring our We and our production have turn and in and to to long-term during costs growth with to greater profitability. recent our prepared made some solid my back progress more believe the foundation focus I'll Andrés on strategy of Andrés? over commercial and And streamlined call concludes us This for highlights

Andrés Fajardo

Hank. you, Thank

first we quarter. Before of after laid of the a briefly From we we upon are review foundation we've year. commercial past questions, our building the markets made key the of to the core production open and the positioning focus to in the like several and over have our strong call in end up progress, both regions our standpoint, I'd improving

exporting conjunction from right details we've high over cannabis product we've our end, we issuance the this have early framework marked flower and flower flower regulatory Resolution the The ensure Clever XXX the flower in products we needed facilitate Leaves and medical process First, April, experienced export help of from which leverage the learning's our resolution To months. of cannabis requirements products Colombian derivatives, inform will with cannabis for as Colombian the Joint earlier, Colombia. celebrated completion for can medical requirements and growing development regulatory underway to with of for research which cannabis both regulatory had and Colombia phase, preparations government THC I mentioned years. milled and flower end markets. for had our exporting to meet we In development Portugal, our flour early successfully four in extraction and our the experience already in believe the produced

to several we in this by agreements commercial signed and agreement already expect markets, fulfilling target the year. of have We our end this begin of

and In these flower experience QX fact, for as we infrastructure mill soon year, exporting of products. our existing this products as given anticipate

to affiliate the We this Colombian partner the Clever the our the distribution a around The Act. Germany GDP flower wholly-owned also and momentum ultimately base, the growing wholesalers the wholesale to requirements app, growth we upon permits compliance able certificate around To good pharmacies regulatory the Germany, certifications and global cannabis German expanding trade German also across expand granted drugs medical German in Leaves scale, certifications permit authorities through we compliance our practices, some required distribution in With of to in quality Drug recently of are by believe license brand. XX,XXX the current to has medical for our into portfolio products Germany, in that well subsidiary, and updates IQANNA country. announced and or Narcotics flower building positioned with with narcotics all capture launch provide a Leaves this distribute and medical received licenses be our our plan expertise, to we flower cannabis of additional Clever opportunity market. within

complements distributor greater us access in licensed have market, to and already generated the channels. pharmaceutical momentum, fully this we grants distribution a as status commercial it Our strong

German we leveraging serve framework. regulatory Germany's base, strict brand partner German within our of support as potential forward the reliable, our and flexible As growth opportunity to look on flower explore the BXB this additional IQANNA we market's to partner a

companies U.S., target By our advancing we resources cost value but strategic focused mentioned, to also executing our and are leverage progress current base to highlights, our a markets, Under allocate our quality on in commitment the using formulations and will clinical trials two-year Lastly, around as partnership recently the American performance has with company. announced which provide supply our strategy, U.S., also Partnering these establish with focus positioning rare our biopharmaceutical in partner regulatory growth on tailwinds. studies are clinical the benefit. Cannabidiol Therapeutics, us our an quality in awareness structure diseases. and have Biom towards patients, our expand and shown be support and our within drug for efficient not focus obtained will our neurological strong From isolate, Hank of while pharmaceutical Bio health we under Biom with for as has certifications biopharmaceutical presence epilepsy Cannabidiol redefined grade help aligning organization. on already agreement, To recent to we Orphan us new high-quality our CBD XXXX. helped potential more can only developmental opportunities identifying adding summarize, drive narrowing pharmaceutical to clinical a through the the research priorities. of and enduring towards to company and QX more its perspective, leaner benefits effectively partnerships, standard designation XXXX, our we agreed like, steadily cost stage our and top

long-term our our forward to all I momentum we proud our on progress building growth. sheet operational call the the enhancing we towards to our we vision. we balance are am efficiency we maximizing updates of Q&A. Operator, of value focused now strategic longer-term team's non-core production our providing the down and and work renewed hard our optimize operations, support and for of expenditures, are strengthen approach. pay on through create look stakeholders will As our capital We for our open

Andrés Fajardo

quarter to forward very look report know thank attended we our our who August. results everybody in the sticking you we I'd investors, like analysts And second with call much. thank today. to when Well, I

everyone. thanks, So

Operator

that gentlemen, lines. Thank you may very disconnect teleconference. you Thank now your for And participation. sir. concludes much, today's Ladies and you your

Andrés Fajardo	Chief Executive Officer
Hank Hague	Chief Financial Officer

Clever Leaves (CLVR) 13 May 222022 Q1 Earnings call transcript