Executive Summary

Q1 2023 delivered record quarterly revenue of $20.1M (+307% YoY), driven by House of Brands ($14.2M) and the German pharmaceutical distribution subsidiary in Commercial & Wholesale (~$8.0M), while gross margin compressed to 27% (from 54% in Q1 2022) due to lower-margin mix .
Adjusted EBITDA improved materially to a loss of $1.4M (margin -7.1%) from a $3.4M loss (margin -68.7%) in Q1 2022, reflecting operating discipline; net loss narrowed to $3.9M (EPS -$0.03) from $7.6M (EPS -$0.11) YoY .
Management flagged challenges: inventory shortfalls of premium cannabis material, export timing variability from Colombia, delayed OpEx reductions, and M&A-related liabilities—all pressuring liquidity and potentially necessitating debt/equity or strategic alternatives .
2023 revenue guidance of $90–$105M was reaffirmed on Mar 31 (FY22 release); the Q1 release did not update or reiterate guidance. FY23 mix outlook: ~45% House of Brands, ~45% Commercial & Wholesale, up to 10% Pharmaceutical .
Stock narrative catalysts: record revenue but margin compression; explicit liquidity caution and potential financing; execution risk on Colombian exports and premium inventory; new CEO prioritizing cost control and organic growth .

What Went Well and What Went Wrong

What Went Well

Record quarterly revenue: $20.1M (+307% YoY), largest quarter in company history; House of Brands contributed $14.2M; German-based distribution boosted Commercial & Wholesale (~$8.0M) .
Material profitability improvement: Adjusted EBITDA loss improved to $1.4M (margin -7.1%) vs. $3.4M (margin -68.7%) in Q1 2022; net loss narrowed to $3.9M vs. $7.6M YoY .
New CEO’s strategic focus: “strengthening operational performance, focusing on financial discipline, and optimizing the integrations of all our M&A transactions” .

What Went Wrong

Gross margin compression to 27% (from 54% YoY), primarily due to lower-margin sales mix from German pharmaceutical distribution .
Export execution and inventory issues: lack of premium cannabis inventory and longer/less consistent export timelines from Colombia delayed revenue capture from Cosechemos .
Liquidity pressure: cash declined to $5.3M (from $9.5M at Dec 31, 2022); management warned potential need for debt/equity/strategic alternatives if plans aren’t met .

Financial Results

Quarter-over-Quarter and Year-over-Year Comparison

Metric	Q3 2022	Q4 2022	Q1 2023
Revenue ($USD Millions)	$10.8	$11.5	$20.1
Gross Margin (%)	46.2%	n/a	27.0%
Adjusted EBITDA ($USD Millions)	$(3.9)	n/a	$(1.436)
Adjusted EBITDA Margin (%)	-36.5%	n/a	-7.1%
Net Loss ($USD Millions)	$(7.4)	n/a	$(3.905)
Diluted EPS ($USD)	n/a	n/a	$(0.03)

Q1 2023 vs Q1 2022

Metric	Q1 2022	Q1 2023
Revenue ($USD Millions)	$4.946	$20.107
Gross Profit ($USD Millions)	$2.670	$5.477
Gross Margin (%)	54%	27%
Operating Expenses ($USD Millions)	$10.332	$8.554
Adjusted EBITDA ($USD Millions)	$(3.400)	$(1.436)
Adjusted EBITDA Margin (%)	-68.7%	-7.1%
Net Loss ($USD Millions)	$(7.630)	$(3.905)
Net Loss Margin (%)	-154%	-19%
Diluted EPS ($USD)	$(0.11)	$(0.03)

Segment Breakdown (Q1 2023)

Segment	Revenue ($USD Millions)
House of Brands	$14.2
Commercial & Wholesale (German distribution)	~$8.0

Note: Segment contributions reflect management disclosures; totals may include rounding/other adjustments .

KPIs and Balance Sheet

KPI	Q4 2022	Q1 2023
Cash & Cash Equivalents ($USD Millions)	$9.537	$5.259
Trade Receivables (net) ($USD Millions)	$6.851	$6.729
Inventory ($USD Millions)	$10.089	$10.311
Total Operating Expenses ($USD Millions)	$10.332 (Q1 2022 comparator)	$8.554

Non-GAAP reconciliation methodology for Adjusted EBITDA provided in Exhibit 99.1 .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance (Q1 2023)	Change
Revenue ($USD Millions)	FY 2023	$90–$105	No update provided in Q1 release	Not reiterated
Revenue Mix	FY 2023	HoB ~45%; C&W ~45%; Pharma ≤10%	No update provided in Q1 release	Not reiterated

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2022)	Previous Mentions (Q4 2022)	Current Period (Q1 2023)	Trend
Export/Regulatory	First exports of CBD isolate; dried flower to Switzerland/Czech; EU GMP efforts	Product in Portugal for GMP; targeting Australia/Germany; conservative regulatory assumptions	Export timing variability; lack of premium inventory; longer/less consistent process from Colombia	More cautious execution risk
Segment Mix & Margin	House of Brands >80% of revenue; margin improvement YoY	German distribution expected to drive C&W; lower margin to be partially offset by higher-margin revenue streams	Gross margin down to 27% due to lower-margin German distribution mix	Mix shift to lower margin
Liquidity/Capital	Cash $5.9M (Sep 30); debt-free	Cash $9.5M (Dec 31); inventory build; December $5M raise; limited capex planned	Cash $5.3M; potential need for financing/strategic alternatives if business plans not met	Increasing liquidity caution
M&A Integration	Integration of JustCBD/Vessel/No Cap; synergies realized	FGH acquired; integration ongoing; ERP/process improvements	Focus on optimizing M&A integration under new CEO	Continued integration emphasis
Pharma/R&D	Flora Lab 4 completed; 8 prescription formulations; INVIMA approval pending	Manchester study preclinical done; awaiting NHS/MHRA approvals; revenue from Lab 4 expected Q2	Pharma initiatives “continued to progress”	Steady, approval-dependent

Management Commentary

“The first quarter was focused on strengthening our operational performance, focusing on financial discipline, and optimizing the integrations of all our M&A transactions.” – Hussein Rakine, CEO .
“We did not have the inventory of premium cannabis material required… the export process from Colombia has proven to take longer and operate with less consistency than we had anticipated.” – Hussein Rakine .
“My priority is to further optimize the organization, reduce spend and focus on organic growth in revenue areas which offer the highest margin contribution…” – Hussein Rakine .
FY22 context: “We… met our revenue guidance… closed Q4 with $11.5 million in revenue.” – Luis Merchan, Chairman & CEO .
“We officially moved to U.S. GAAP reporting standards… we look forward to providing updated growth and performance metrics.” – Elshad Garayev, CFO .

Q&A Highlights

EBITDA trajectory: CFO noted lower adjusted EBITDA in Q4 due to year-end adjustments and discounts in House of Brands; integration of FGH’s lower-margin business expected to be partially offset by higher-margin cannabis revenue streams in 2023 .
Export outlook: Management emphasized conservative regulatory assumptions; product undergoing GMP processes in Portugal with planned landing in Australia and Germany; Colombia nearing recreational legalization could open domestic market .
Capital position: Inventory build to support demand; cash ended 2022 at $9.5M with $5M December raise; reduced capex expected; confidence in inventory meeting demand .
M&A integration: FGH purchase price allocation (~$9.8M net assets and goodwill) and ERP/process synergies; leadership integration into operations .
Brand and partnership updates: Vessel integration progress and product innovation; Tonino Lamborghini product development pacing for brand alignment .

Estimates Context

Wall Street consensus (S&P Global) for Q1 2023 EPS and revenue was unavailable due to data access limitations at the time of retrieval; we could not obtain estimates for FLGC to compare actuals vs. consensus. As a result, beat/miss analysis vs. S&P Global consensus is not provided.
Where estimate comparisons are critical for your process, we recommend re-running S&P Global retrieval and updating this section prior to investment decisions.

Key Takeaways for Investors

Revenue scale-up is real, but margin compression reflects mix shift to lower-margin German distribution; watch for mix rebalancing and premium inventory restoration to support margins .
Liquidity is tight ($5.3M cash) with explicit willingness to pursue financing or strategic alternatives—expect potential capital raises and near-term dilution risk if operations don’t meet plan .
Export execution from Colombia is a swing factor; resolving premium inventory and stabilizing export timelines should unlock higher-margin cannabis revenues and reduce reliance on lower-margin distribution .
Operational discipline is improving (OpEx down 17% YoY; adjusted EBITDA margin -7.1%), but sustained cash generation depends on mix and export throughput .
2023 guidance ($90–$105M) stands from Mar 31 without Q1 reiteration; track cadence of updates and segment contributions vs. the ~45/45/≤10% mix framework .
Near-term trading: sensitivity to financing headlines and export updates; medium-term thesis hinges on integrated supply chain, German channel leverage, and lab/pharma approvals converting to revenue .

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Flora Growth Corp. (FLGC)·Q1 2023 Earnings Summary