Earnings call transcript Q4 2022

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Operator

Good Day and welcome to the Lowell Farms Inc., Fourth Quarter and Year End 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Bill Mitoulas, Investor Relations. Please go ahead.

Bill Mitoulas

to financial call fourth results year of welcome Lowell discuss quarter and end Incorporated Farms for XXXX. afternoon, the to conference the and Good the fiscal

the section me Incorporated Farms may subject could from on make forward-looking in you let SEDAR. current call, These that uncertainties management statement cause please our statements. are begin, this Factors conference we that expectations. Before to the during statements risks course and forward-looking to listing materially expectations actual on of Lowell are risks remind based differ filed outlined These are Risk our EDGAR of Form-XX results and on filed that

in undertake into the forward-looking revise of is factors. of statements as these note any any and forward-looking we Any considered Please does management obligation present should today, statements to not light that be future. also any outlook

the call This Lowell appointed Person go Shure will as company's in the for insight of Lawrence analysts' Board to Officer, Officer, Executive the strategy. Brian go-forward well further the the financial operations Ainsworth, Chief Q&A newly includes into call performance, The open and quarter company's Ann detail results questions and Financial Chief provide of later to into as for Mark Chair Farms; the is portion Co-Founder about this call.

We will the not be answering transaction. any to questions that pending relate

happen may Relations conference before call Investor the you its be leave on of be will call this to recorded advised page. please those that who and For website our conclusion, archived

go over Ann. please hand ahead. call I'll the to now, And Ann,

Ann Lawrence

brands recent release, the intent the as letter to Lowell behind take approval, a well the of Farms Lowell joining announcing Lowell rationale insight wanted the and XX decision. and to intellectual of a into I thank execution the provide Bill, Thanks, for relating the sell call. the you moment as property to press to our binding earnings

assist review to maximize Corp. in shareholder of of Frein, strategic strategic of of and independent explore, available member its by retained Directors it to committee alternative. to myself year and Canaccord alternatives company of ongoing The committee Summer directors Directors. to that the evaluate had Board the On special value. January of special announced Board review this XX shared was Genuity a another The the independent company formed

committee issued special the the of approximately to The would interest secured reduction position, of special April comprised year of working strategic XXXX debentures maturity an time the XXXX, of principle mature payable. million a well and a The which $XX.XXX credits. range and considered company's as senior suppliers at company's in convertible as workforce, be in amount August undertook terms pending of contract aggregate enhance this activities committee the October, including renegotiating landlords, which also address to and company's and customers, trade alternatives with due later capital

During received company's the special committee, The offered obligations with ultimately this behalf Allen the settlement collateral which company. property debt process, together LOI. execution of then the the agent as terms, the for in proposal a proposal from in intellectual advisers, the and debenture of certain shares to Geronimo its of assets the special LLC, committee exchange the negotiated George This settle of Capital debentures. on Chairman, resulted

owing as the pursuant of concluded transaction, effect net proposed the the has be would committee special all terms likely amounts company no commercially more The of available will compared be that financial that reasonable to the situation to to debentures. are viable improve alternatives there eliminate on which to the

leading have LOI to the weeks. couple Farms and the The of Capital precise out in transaction, sets Geronimo in agreements parties negotiate agreed terms, Lowell the definitive and next between terms the general to the

the transaction. you like would of provide a few with I material details to

the company of debentures, facilities. our under First, Lowell essentially than existing amounts on free, other debt Farms licensed will leaving be property an one all the real outstanding relieved mortgage of

intellectual manufacturer exclusive minimum out sell relating well brands The agreements. the State the month of will Smokes Lowell out Lowell of company property Lowell as to and of the agreement be arising license and within the exclusive approval, distributor will and of the brand company the have Lowell Lowell state state. including Herb and or California existing XX license as within will of Lowell use continue The a Co Smokes the to XX XX’s products, for

formed company's an the is goal and evaluated and multiple benefit for of thorough from received the the of interest more employees and diligence many The aggregate amount the of reach no of Capital million parties, voting the Geronimo [ph], our team than issued will prospective shares our new to to XX% require with of shareholders. fielded number approximately shares. outcome subordinate Throughout equal representing voting by the then our entity from best subordinate structures. seaters due in XXX We shares, outstanding varying this company, process offers

specialty explore market. best LOI market existing for Lowell and an will transaction I capitalize the company within opportunities Lowell investors industry, Geronimo. this with wish believe sign continuing The to be work the ultimately opportunities Farms closes, Farms positioned uniquely on determined to and in When refocus offer Canaccord the the is to with to

results. fourth to ahead. it operation With who and Mark, that, go year over I'll end will quarter Mark, over please go our turn

Mark Ainsworth

our thank expanded XXX revenue Herb increased was revenue started the QX XX retail Lowell XXs with In in product stores. you Good the in and end of earnings XXXX, QX, and QX, stores and progress XXXX Ann. into $XX,XXX ’XX, pre-roll share in I to and afternoon, by Co. sales would XX’s approximately approvals. the $XXX,XXX. like in California, to retail QX of selling everyone, QX call XX Lowell jump had into

introduced a The excellent approximately six QX, with pre-roll XXXX. overall million period the bringing our accomplishment is use we During million This in $X.XX category revenue efficient and product of line had vertical quarter-over-quarter of infrastructure. our in $X.XX total execution XX.X% this for XXXX QX, to additional Lowell team, growth, XXs also of skews. skews great three demonstrating and an

overall employing brands, of the to partly in $X.X fell QX, with concentrated approximately revenue and effort revenue own Moving tightening contraction XXXX California, the the We integrity CPD sales customer and to to partly XXXX of in retail and of our payment cash and XX%, million. the of approximately revenues enforce our by on attribute flow to our million $X.X revenue to credit of remaining approximately terms portfolio arrangements. credit decline categories also improve QX,

safeguard an retailers. risks credit Our done excellent team against job new has potential policies from to and progresses establishing

economics. $XXX,XXX and approximately In distributed to reduced brands past agency the and in from due $XXX,XXX to our eliminated QX several XXXX. XXXX in distributed Lastly, revenue partners QX, we the have quarters, approximately agency unfavorable brand fell our

have However, in distributed brand with one brought client new QX new agreements under favorable terms. we on

sales Regarding terms. of of bulk our on in the prepare portion biomass year-end are sales sales, sales bulk divert as inventory our a for CPG lean the aims strategy for quarter shorten out Historically, strategy tend taxes. was as bulk from three off to credit to the cycle year tail retailers to COD they teams. to weeks to remaining the This

per XX% approximately finished average The period. revenue slight our quarter’s team $X.X to a approximately $X.X over of generating This in from increase the sold pounds pound of result increase flower X.X in million, price prior was million. of the positive the approximately a sequential thousand due cultivation,

operations pounds consistent XX,XXX have average flower. with In results, cultivation, of total our the the flower Moving to potency roughly cultivation demonstrated XX.X%. finished producing output our of an year-over-year approximately of X,XXX XXXX was

improve genetics in refining grow performance our team with align and to retail is channels. continuously and Our grow houses our bulk

approximately processed third and from party pounds we biomass coming and client. pounds approximately pounds services, the during XXX,XXX approximately Farms our weight wet of from Lowell Regarding site of cultivation XXX biomass XX,XXX Zabala period,

also Our in flower processing finished trimmed approximately team period. the of XX,XXX

XXX,XXX with During XXX,XXX Farms XX,XXX contributing the third a QX, weight pounds party wet coming cultivation and approximately flower biomass, weight previous delta Services of clients. of of wet period pounds from Zabala pounds approximately processed

out out revenues of revenues state $XXX,XXX this the and QX, was November. launched decline however, in X% New of Both of approximately revenue in in state periods of $XXX,XXX, of state previous Mexico of of licensing out was a approximately partnerships approximately $XXX,XXX. from Revenue licensing quarters the XXX% previous up from Total at licensing period Colorado approximate in $XXX,XXX. approximately farms XXXX; new the LFS

period, down from in the slightly which classic of of XX,XXX number the approximately the total cost to continue in response revenue. the Smokes QX, During Lowell sold XXXX the was into approximately XX,XXX, packs prior initiated consecutive period, in saving was the units sold end measures that decline we Toward period.

a impacted force of in resulting at annual savings part employees reduction effort an this varying we eight As levels, of approximately $XXX,XXX. implemented in that

turn over will it Brian. I that, With to

Brian Shure

everyone. afternoon good and Mark, you, Thank

a results financial are begin, I our commentary we please non-GAAP Before my and fiscal be XXXX will U.S. of a basis. reporting and that QX on year GAAP note portion in

to results. for So please earnings today's non-GAAP to GAAP a refer reconciliation release full of

unless figures CSC. all with these also in indicated. filed note that SEC report would report will presently results and audited, the Form annual that and We XX-K our are dollars U.S. I be otherwise

decline the brand to $X.X revenues year-over-year. prior to CPG in declined Lowell revenues X% XX% reporting the year, quarter, revenue, Lowell revenues were in and sequentially XX% XX% are sequentially represented XX% of revenue QX year CPG CPG Despite last revenue million. to down We X% revenues current the strong up brand quarter $XX.X year. million, the declined finishing CPG current CPG remained revenues year-over-year. compared of of of $X.X and at and compared in XX% in XX% the million

$X.X year-over-year. well Services in from to revenue as due to XX% $X.X increased compared million bulk The million increased flower $X.X sequentially is prior volume XX% increases. QX increase The quarter. the pricing and Lowell increase to Farms increases both revenue as million to

in million to million the XXXX decreased revenue Out licensing million. LFS to full X% year decreased was year. $X.X $X.X sequentially XXXX. licensing out compared and of revenues was the XXXX to year for state the $X.X million revenue prior of X% state $X.X comparing

negative was lower cost to was variances, write in and CPG reported sequentially In period XX.X% the in the to decline negative negative margin the sales. flower compared fourth downs, quarter, year-over-year. and XX.X% as volumes bulk aged XX.X% prior due fourth inventory selling Margin quarter, below

annual an X.X% year-to-date margin X.X% as basis, compared gross to prior positive negative was On the year. reported in

Excluding X.X% year. of would above, have identified the for the margins adjustments been effect gross the

this XX% reductions million $X.X sales year QX quarter fourth were of for XX% year-over-year. the of last quarter $X.X the cost in and or million expenses year, compared reflecting in of $X.X Operating or XX% sales realized sales to or million

of $XX of million a loss a for in was compared $X.X loss net fourth million, loss in lower was operating to and loss million of loss operating reflecting $X.X sequentially compared the $X.X in quarter. year-over-year, margins The quarter quarter the which last net loss to current an million $XX.X the of the year. $X.X Net million sequentially compares to quarter million fourth fourth operating an

the million million was EBITDA million $X.X quarter of compared adjusted $X.X million million of $X.X have negative to $X.X Adjusted the $XX.X year-over-year. the EBITDA EBITDA Adjusted year above, itemized negative fourth been in adjustments would was adjusted sequentially in the negative $X.X negative and Without EBITDA to million. impact adjusted XXXX. the of for EBITDA compared year negative negative for

Turning Included capital in the to $XX.X at end the million was of debentures. to compared the end million year $XX.X million XXXX negative capital working working $XX.X balance XXXX. at the is the net sheet, convertible of of

fourth were additional $X.X The in these primarily the the company incurred Capital at $X.X compared equipment third cash at and working of quarter. the purchase million expenditures is million there of million of XXs. the the million the from Excluding $X.X XXXX. for in capital of were end to used Lowell end for of capital, working quarter $X.X had

With the for turn I’ll operator questions. to over that, the call

Mark Ainsworth

our to call forward time on We Thank taking the on the you update earnings and talking look to business. our get next again joining to for call. you an

Operator

for This attending conference. concludes presentation. Thank our you today's

You may disconnect. all now

Lowell Farms (LOWLF) 30 Mar 232022 Q4 Earnings call transcript