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Flora Growth Corp. (FLGC)·Q4 2022 Earnings Summary

Executive Summary

  • Record Q4 revenue of $11.5M, up 7% sequentially vs Q3; FY2022 revenue reached $37.2M (+314% YoY) with gross margin expanding to 39% (from 27% in FY2021) .
  • Management reaffirmed FY2023 revenue guidance of $90–$105M and indicated roughly equal revenue contributions from House of Brands and Commercial & Wholesale, with Pharmaceutical “up to 10%” .
  • Strategic execution advanced: closed acquisition of Franchise Global Health (FGH) in late Dec-2022 (1,200-pharmacy network in Germany), initiated export flows with Q4 product in Portugal for GMP sterilization/stabilization and follow-on shipments earmarked for Australia and Germany .
  • Profitability headwinds persist: FY2022 net loss was $52.6M (including $26.2M impairment); CFO noted Q4 adjusted EBITDA was lower vs earlier quarters due to year-end adjustments and discounts; cash ended at $9.5M .

What Went Well and What Went Wrong

What Went Well

  • Record top line: “We…closed Q4 with $11.5 million in revenue, making it the highest revenue-generating quarter and year for the company to date.” — CEO Luis Merchan .
  • Margin expansion and scale: FY2022 gross margin improved to 39% (from 27%) and gross profit rose to $14.4M, aided by higher-margin acquired businesses (JustCBD, Vessel) .
  • International progress and distribution reach: Q4 product processed in Portugal with shipments to Australia and Germany; FGH acquisition adds German distribution with 1,200 pharmacies and multi-country network .

What Went Wrong

  • Losses and non-cash charges: FY2022 net loss of $52.6M (vs $21.4M in 2021) driven by $67.7M in OpEx including ~$26.2M impairment; adjusted EBITDA loss was $18.3M .
  • Q4 profitability pressure: CFO said Q4 adjusted EBITDA was lower due to year-end adjustments and discounting in House of Brands; company did not publish stand-alone Q4 P&L metrics beyond revenue .
  • Liquidity compression: Cash and equivalents declined to $9.5M at 12/31/22 (from $37.6M at 12/31/21), with uses including ~$16M cash paid for JustCBD and working capital/inventory build .

Financial Results

Quarterly performance vs prior two quarters (oldest → newest):

MetricQ2 2022Q3 2022Q4 2022
Revenue ($USD Millions)N/A (company reported H1 only) $10.8 $11.5
Sequential Change (%)N/A N/A +7%
Gross Margin (%)N/A (not disclosed) 46.2% N/A (not disclosed; CFO noted lower gross profit due to discounts)
Adjusted EBITDA ($USD Millions)N/A (not disclosed) $(3.9) N/A (not disclosed; lower vs earlier)
Operating Expenses ($USD Millions)N/A (not disclosed) $10.0 N/A (not disclosed)
Net Income ($USD Millions)N/A (not disclosed) $(7.4) N/A (not disclosed)
EPS (Diluted, $)N/A (not disclosed) N/A (not disclosed) N/A (not disclosed)

Full-year YoY (context for magnitude of change):

MetricFY 2021FY 2022
Revenue ($USD Millions)$8.98 $37.17
Gross Profit ($USD Millions)$2.43 $14.41
Gross Margin (%)27% 39%
Adjusted EBITDA ($USD Millions)$(16.54) $(18.31)
Net Loss ($USD Millions)$(21.36) $(52.63)
Total Operating Expenses ($USD Millions)$21.43 $67.72
Capital Expenditure ($USD Millions)$3.98 $1.29
Cash & Equivalents ($USD Millions, end period)$37.61 $9.54

KPIs and operating context:

KPIValue
House of Brands customer base~500,000 consumers
Distribution reach>14,000 doors
Colombian THC export quota43,600 kg
Q4 House of Brands eventJustCBD record Black Friday sales

Notes:

  • Management explicitly stated they did not publish separate Q4 profitability metrics beyond revenue; CFO indicated lower Q4 adjusted EBITDA due to year-end discounts and adjustments .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2022$35M–$45M (reiterated during Q2/Q3) Met ($37.2M actual) N/A (actual met guidance)
RevenueFY 2023$90M–$105M (earlier in 2023) $90M–$105M (reaffirmed Mar 31, 2023) Maintained
Revenue mix (qualitative)FY 2023N/AHouse of Brands ≈50%; Commercial & Wholesale ≈50%; Pharmaceutical up to 10% New detail
Profitability/OpEx/TaxFY 2023N/ANot provided N/A

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2022)Previous Mentions (Q3 2022)Current Period (Q4 2022)Trend
Exports & regulatoryColombia legalized export of dry flower; 43-ton THC quota; infrastructure build-out Exported CBD isolate to U.S. and flower to Switzerland/Czech; EU GMP pathway focus Q4 product in Portugal for GMP sterilization; follow-on shipments planned for Australia and Germany Accelerating execution
M&A (FGH/Germany)Announced definitive agreement to acquire FGH Expected close mid-Dec; positioning for EU via FGH Closed late Dec; integration underway; 1,200 pharmacies, 28-country distribution From announcement to integration
House of Brands performancePortfolio growth; new products (alt-cannabinoids, Vessel dry herb) >80% of revenue; margin gains; inventory build for Q4 Record Black Friday for JustCBD; new all-in-one vape line; Vessel co-branded success Sustained strength
Cost structure/OpExStreamlining OpEx; impairments taken; no major remaining capex in 2022 Q3 OpEx $10M; adjusted EBITDA -$3.9M FY OpEx $67.7M incl. $26.2M impairment; CFO focused on efficiencies; Q4 EBITDA lower on discounts Efficiency push vs elevated OpEx
Outlook & guidanceReiterated FY2022 rev $35–$45M Reiterated FY2022 rev $35–$45M; 2023 path to ~$100M with FGH Reaffirmed FY2023 rev $90–$105M; mix detail by pillar Maintained outlook

Management Commentary

  • “We…closed Q4 with $11.5 million in revenue, making it the highest revenue-generating quarter and year for the company to date.” — CEO Luis Merchan .
  • “Gross margin…increased from 27% to 39%…primarily due to the integration and revenue recognition of high-margin acquired businesses.” — CFO Elshad Garayev .
  • “Product harvested and processed in Q4 is now in our partner facility in Portugal…with follow-on product shipments…to Australia and Germany.” — CEO Luis Merchan .
  • “Adjusted EBITDA…for the quarter…was impacted…lower…due to year-end adjustments…discounts…primarily driven by our House of Brands division.” — CFO Elshad Garayev .
  • “I…reaffirm the 2023 revenue guidance…between $90 million and $105 million.” — CEO Luis Merchan .

Q&A Highlights

  • Q4 EBITDA and profitability: Management did not publish separate Q4 P&L beyond revenue; CFO indicated Q4 adjusted EBITDA was lower due to year-end adjustments and discounting; FGH’s lower gross margins expected to be partially offset by higher-margin cannabis revenue streams in 2023 .
  • Exports and Germany: Guidance assumes current regulations; active exports of derivatives and flower from Colombia; Q4 products processed in Portugal with destinations including Australia and Germany; monitoring phased German rollout; Colombia nearing adult-use legalization could be a domestic catalyst .
  • Capital position and inventory: Year-end cash ~$9.5M; 2022 cash uses included ~$16M for JustCBD, capex ~$1–1.5M, inventory build to support growth; Q4 saw robust finished goods and raw materials positioning for 2023 demand .
  • FGH integration: All-stock deal; ~43.5M shares issued; purchase price allocation recorded ~$6.1M net identifiable assets and ~$3.7M goodwill; integration ongoing with ERP leverage and leadership continuity .

Estimates Context

  • Consensus (S&P Global) for Q4 2022 revenue/EPS was unavailable at the time of writing due to request-limit constraints; management did not disclose Q4 EPS or full quarterly P&L. We therefore cannot assess beats/misses versus Street for Q4. Revenue reported: $11.5M; sequential +7% .

Key Takeaways for Investors

  • Execution on international strategy is visible: Q4 product processed in EU with follow-on shipments to Australia and Germany; FGH adds immediate German distribution footprint—catalysts for 2023 revenue mix shift toward Commercial & Wholesale .
  • House of Brands remains the cash engine: Record Q4 campaign (Black Friday) and new vape line underpin organic growth; continued product innovation and cross-brand synergies should support gross margin resilience .
  • Profitability remains the swing factor: Elevated FY OpEx (non-cash-heavy) and Q4 discounting pressure EBITDA; integration synergies and higher-margin export ramp are key to inflect margins in 2023 .
  • Liquidity monitoring warranted: Year-end cash $9.5M with working capital tied in inventory; management expects limited capex needs but continued inventory investment aligned to fast-turning SKUs .
  • Guidance credibility improved by Q4/FY print: FY2022 revenue met guidance; FY2023 revenue guide reaffirmed at $90–$105M with defined pillar mix, offering clearer milestones to track .
  • Regulatory optionality: Colombia’s potential adult-use legalization and evolving German framework could expand TAM; management budgets conservatively against current rules, limiting downside from delays .
  • Near-term focus: Track EU export conversion to recognized revenue, FGH integration milestones, and signs of margin improvement amid disciplined promotions.