The Flowr Corporation

Q4 2020 gross revenue, net of excise, was approximately $2.1 million, up 30% from Q4 2019; net revenue was $1.6 million. Full-year 2020 gross revenue, excluding excise, was $9.4 million and net revenue was $7.5 million, up 45% from 2019. The company sold 311 kilograms in Q4 and approximately 1,405 kilograms for the full year. Canadian Q4 gross margin was breakeven on an adjusted basis and 22% on an adjusted cash basis; adjusted EBITDA was a loss of $5.4 million versus a loss of $3.5 million in Q3. Q4 also included an impairment charge of approximately $84 million, including $1.6 million tied to the Kelowna facility, $15 million to intangible assets, and $64 million to goodwill, plus $842,000 of product impairment. Looking ahead, management expects Q1 2021 to be its strongest sales quarter to date, with net sales of approximately $3.7 million.

Lance Emmanuel framed 2020 as a transition year in which Flowr completed major build-outs and commissioning across its facilities in Kelowna, Portugal, and the R&D site with Hawthorne/Scotts Miracle-Gro. He said the company is now focused on execution, new genetics, new product formats, and expanding into more provinces, with BC Black Cherry cited as an early success. His tone was cautious about Q4 but notably optimistic on Q1 2021, which he called the best quarter in the company’s history from a revenue perspective.

Irina Hossu emphasized that Q4 volumes were hurt by timing and product availability issues stemming from mother plant production problems, and she tied the lower quarter to a one-time SG&A increase and selling/marketing investment. She highlighted that Canadian Q4 gross margin was breakeven on an adjusted basis and 22% on an adjusted cash basis, with cash cost per gram sold at $3.84, and said cost per gram should keep falling as automation and fixed-cost dilution improve. She also noted the Terrace transaction added about $18.7 million in cash net of transaction costs, that Q1 2021 net sales are expected to be approximately $3.7 million, and that the company expects about $2 million in annualized SG&A savings from its strategic review.

Analysts asked about the economics of the R&D facility, and management said there should be no significant incremental capex because the site is already materially built out, while a large portion of the operating cost sits with the Scotts Miracle-Gro partnership rather than Flowr. Questions on Portugal focused on pricing, the timing and size of future harvests, and the 2,700 kilograms of biomass already available; management said it was negotiating sales, had multiple potential customers, and was evaluating future harvest strategy now that it has more capital. Management also addressed cost-cutting, saying it expects about $2 million in incremental annualized SG&A savings and is reviewing non-core assets and divesting operations, including Australia, to focus on Canada and Portugal. When asked about BC Tahoe and clones, management said BC Tahoe is being deemphasized in favor of higher-potency genetics, and that clone sales were not part of the planned answers on the call.