LF
Lowell Farms Inc. (LOWLF)·Q2 2024 Earnings Summary
Executive Summary
- Net revenue declined to $3.54M, down 27% sequentially and 50% YoY, primarily due to exiting cultivation; gross margin improved modestly to -15.7% from -17.0% in Q1 but remained negative .
- Operating loss narrowed to $2.2M vs $2.9M in Q1; net loss was $0.8M aided by ~$2.3M other income from reversal of a cultivation lease accrual following a judicial ruling; adjusted EBITDA deteriorated to -$1.9M (vs -$1.1M Q1) .
- CPG revenue fell 15% QoQ; bulk product revenue collapsed to $0.05M as cultivation exit took full effect; owned brands were $2.6M vs $3.1M in Q1; third‑party brands revenue was $0.78M vs $0.95M in Q1 .
- No formal revenue/margin guidance provided; a strategic alternatives process and service expansion to leverage assets, reduce overhead, and strengthen the financial position were highlighted as near‑term catalysts .
- S&P Global consensus estimates unavailable for LOWLF; comparisons to Street estimates could not be made (S&P Global data unavailable via CIQ mapping).
What Went Well and What Went Wrong
What Went Well
- Gross margin improved modestly to -15.7% from -17.0% in Q1, reflecting progress absorbing impacts from the cultivation exit .
- Operating loss narrowed to $2.2M vs $2.9M in Q1, supported by cost controls and other income tied to lease accrual reversal after a judicial ruling (~$2.3M) .
- Management articulated a focused plan: “By expanding our services, we aim to better leverage our existing assets, reduce operational overhead, and strengthen our financial position” (CEO Mark Ainsworth) .
What Went Wrong
- Net revenue decreased 27% QoQ to $3.54M and 50% YoY due to the full‑quarter impact of cultivation exit and weaker California purchasing trends/flower price instability .
- Adjusted EBITDA worsened to -$1.9M from -$1.1M in Q1; CPG revenue fell 15% QoQ and average delivery drop value decreased to $3,735 from $4,082, indicating softer sell‑through .
- Bulk product revenue collapsed to $0.05M (from $0.68M in Q1 and $2.26M in Q2’23), highlighting the discontinuity from ceasing cultivation .
Financial Results
Consolidated Performance vs Prior Periods and YoY
Note: “n/a” where quarterly detail not disclosed in the cited documents.
Segment Revenue Breakdown
KPIs and Operational Metrics
Guidance Changes
Management emphasized strategic alternatives and service expansion to leverage assets and reduce overhead but did not issue quantitative guidance ranges .
Earnings Call Themes & Trends
Transcript was not available in our document system; the company announced call logistics, but a full transcript could not be retrieved; we searched both internal documents and the internet for a full transcript without success .
Management Commentary
- “By expanding our services, we aim to better leverage our existing assets, reduce operational overhead, and strengthen our financial position” — Mark Ainsworth, CEO .
- “Our strategic decisions have now positioned us favorably and we expect to see a positive impact on the company in the quarters ahead” — Mark Ainsworth (Q4 2023 release) .
- “Our recent strategic decisions have thoughtfully bolstered our manufacturing and distribution capabilities… we’re poised for steady growth and positive impact” — Mark Ainsworth (Q1 2024 release) .
- On leadership: Thanks extended to outgoing CFO; CEO now serving as Interim CFO .
Q&A Highlights
A full earnings call transcript was not available in the document system; we searched for a transcript internally and externally but could not retrieve the full Q&A. Therefore, specific analyst questions, guidance clarifications, and tone shifts cannot be summarized at this time .
Estimates Context
- S&P Global consensus estimates for Q2 2024 (EPS, revenue, EBITDA) were unavailable for LOWLF due to missing Capital IQ mapping; as a result, we cannot provide a results‑vs‑consensus comparison (S&P Global data unavailable via CIQ mapping).
- Implication: Sell‑side may be limited or non‑existent; investors should focus on sequential/YoY trends and management’s qualitative framework pending availability of formal coverage.
Key Takeaways for Investors
- Revenue trajectory remains under pressure as the cultivation exit fully impacts bulk sales; focus shifts to CPG and third‑party brand distribution as primary revenue drivers .
- Margins are improving modestly but remain negative; further cost actions and service expansion are needed to reach breakeven .
- Adjusted EBITDA deterioration QoQ underscores near‑term profitability challenges despite narrower operating loss; one‑time other income aided net loss optics .
- Owned brands and third‑party brands both declined QoQ; average delivery drop value deterioration signals soft retail sell‑through in California .
- Leadership transition (Interim CFO) and active strategic alternatives review suggest potential corporate actions; monitor catalysts from service expansion and any strategic transactions .
- Liquidity compressed with cash at $0.64M at quarter‑end; working capital down sharply vs year‑end, elevating execution and financing risk .
- Near‑term trading: stock likely sensitive to updates on strategic alternatives, service revenue scaling, and any evidence of margin stabilization; medium‑term thesis depends on CPG growth, distribution efficiency, and cost discipline in the post‑cultivation model .