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Lowell Farms Inc. (LOWLF)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 revenue declined to $3.24M, down 8% sequentially and 48% YoY; gross margin deteriorated to -29.0% on higher-cost inventory sell-through, driving operating loss of $2.78M and net loss of $3.63M; diluted EPS was $(0.19) .
  • Adjusted EBITDA was $(2.1)M vs $(1.9)M in Q2 and $(1.4)M in Q3’23; management emphasized retail expansion via two Southern California dispensary management agreements and re-engagement of third-party brand strategy .
  • No formal financial guidance ranges provided; call commentary focused on cost actions (including staffing cuts) and retail entry intended to improve margins; consensus estimates from S&P Global were unavailable for LOWLF, so beat/miss vs Street cannot be assessed .
  • Near-term stock narrative hinges on liquidity (cash $0.32M), inventory mix normalization, AR collections, and execution of retail integration to stabilize CPG revenue and gross margin trajectory .

What Went Well and What Went Wrong

  • What Went Well

    • Strategic retail entry: management services agreements and LOI option to purchase two LA retail locations, aiming for vertical integration and margin capture .
    • Third-party brands re-engaged: revenue rose to ~$827k in Q3 from $778k in Q2 as three brands were added to broaden portfolio offerings .
    • Lowell Herb Co 35’s resilience: 35’s preroll line held steady sequentially at ~$686k vs $682k in Q2, supporting core brand stability .
    • Quote: “As we focus on strategic, selective growth, we’re confident that this expansion will solidify Lowell’s position in the market…” — CEO Mark Ainsworth .

  • What Went Wrong

    • Revenue contraction: net revenue fell to $3.24M, down 8% QoQ and 48% YoY as bulk product revenue dropped to $0 following cultivation exit .
    • Margin pressure: gross margin declined to -29.0% (vs -15.7% in Q2), driven by sell-through of higher-cost cultivation-related inventory (~$0.6M cost impact) .
    • Liquidity constraints: cash fell to $0.32M; operating loss widened QoQ to $2.78M, highlighting need for improved collections and working capital management .
    • Management noted California market demand softness and delayed product rollouts/promotions weighing on owned brands revenue ($2.2M in Q3 vs ~$2.6M in Q2) .

Financial Results

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Revenue ($USD Millions)$6.212 $4.874 $3.538 $3.244
Gross Margin %N/A-17.0% -15.7% -29.0%
Operating Loss ($USD Millions)$(2.867) $(2.886) $(2.2) $(2.776)
Net Loss ($USD Millions)$(20.170) $(2.889) $(0.8) $(3.629)
Adjusted EBITDA ($USD Millions)$(1.4) $(1.082) $(1.9) $(2.1)
Diluted EPS ($USD)$(1.66) $(0.15) N/A$(0.19)

Segment and product detail (Q3 2024):

  • Owned brands revenue: $2.2M .
  • Third-party brands revenue: ~$0.827M .
  • Lowell Herb Co 35’s: ~$0.686M; Infused 35’s: ~$0.134M .
  • Bulk product revenue: $0.0M (cultivation exit) .
  • LFS revenue: $0.0M .
KPIQ3 2023Q1 2024Q2 2024Q3 2024
CPG Revenues ($USD Millions)$4.659 $4.125 $3.489 $N/A
Third-Party Brands Revenue ($USD Thousands)$N/A~$952 ~$778 ~$827
LFS Revenue ($USD Millions)$0.5 ~$0.068 ~$0.094 $0.0
LFS Processed Pounds (wet weight)N/A6,173 1,855 N/A
Cash and Equivalents ($USD Thousands)N/A$1,175 $642 $320
Accounts Receivable ($USD Thousands)N/A$2,067 $1,844 $2,256
Inventory ($USD Thousands)N/A$4,224 $2,926 $1,935
Total Assets ($USD Thousands)N/A$34,346 $30,952 $28,438
Total Liabilities ($USD Thousands)N/A$25,731 $23,125 $24,293
Shareholders’ Equity ($USD Thousands)N/A$8,615 $7,827 $4,205

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Financial guidance (Revenue, EPS, Margins)Q4 2024 / FYNone providedNone providedMaintained: No formal guidance
OpEx Savings (staff reduction)Q4 2024N/A~$0.546M savings targeted via staffing cutsNew qualitative guidance
Retail strategy (vertical integration)OngoingN/AManagement services agreements; option to acquire 2 LA dispensariesNew strategic initiative

Note: Company did not issue numeric revenue/EPS/margin guidance ranges in Q3 materials; commentary highlighted margin improvement goals via retail integration and cost actions .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1, Q2)Current Period (Q3)Trend
Retail expansion/vertical integrationExploring strategic alternatives; optimize efficiencies (Q1) . Re-engaged third-party brands; service expansion (Q2) .Entered retail via management services agreements; option to acquire 2 LA stores; aim to improve margins and brand presence .Accelerating toward vertical integration
Supply chain and market demandCalifornia demand softness; price instability (Q1) . Continued demand pressure (Q2) .Significant decrease in market purchasing trends; delayed rollouts/promotions impacted Q3 owned-brand revenue .Ongoing headwind
CPG product performance35’s stable; Infused 35’s growth in Q1 . 35’s $682k in Q2; infused declined QoQ .35’s ~$686k; infused 35’s ~$134k (down QoQ) .Mixed; core prerolls stable, infused softness
Third-party brand partnerships>20 brands added by end of Q1; ~$952k revenue Q1 . ~$778k revenue Q2 .~$827k revenue Q3 with three new brands (including highlighted partnerships) .Re-accelerating
Accounts receivable / collectionsNot emphasizedAssertive AR management and holds on delinquent accounts discussed in Q&A .Tightening credit/collections
Cost reductionsCultivation exit drove costs in Q1 .Staff reductions to trim OpEx; targeted savings in Q4 .More aggressive cost actions

Management Commentary

  • “We’re happy to share the progress Lowell Farms made towards expanding our footprint into the California retail market… As we focus on strategic, selective growth, we’re confident that this expansion will solidify Lowell’s position in the market…” — Mark Ainsworth, CEO .
  • “Lowell Farms Inc. announces unaudited revenue and operating results for the third quarter of 2024…” — Earnings release framing and highlights (margins, losses, adjusted EBITDA) .
  • Strategic intent: management reiterated focus on brand strength, retail footprint, and selective growth to pursue sustainable outcomes .
  • Prior context: “By expanding our services, we aim to better leverage our existing assets, reduce operational overhead, and strengthen our financial position.” — CEO (Q2 release) .

Q&A Highlights

  • Retail entry strategy: CEO detailed due diligence and rationale for LA retail locations to improve margins and brand control across the supply chain .
  • Accounts receivable discipline: Management prioritizing collections, placing accounts on hold where appropriate, and incentivizing sales to partner with finance for cash conversion .
  • Manufacturing partnerships: Added brands (e.g., Tyson 2.0, Marigold Sweets) to bolster co-manufacturing/CPG volume and margin mix .
  • CPG performance: 35’s preroll category saw QoQ sales improvement per call highlights; portfolio revenue overall fell due to timing and supply constraints (aligned with release commentary) .
  • Cost structure: Staff reductions (~45%) expected to save ~$0.546M in Q4, signaling urgency to address operating losses .

Estimates Context

  • S&P Global consensus estimates (EPS, Revenue) for LOWLF were unavailable due to missing mapping; therefore, we cannot provide beat/miss versus Street for Q3 2024. Expect sell-side coverage to be limited given OTC listing, and investors should focus on internal trajectories (gross margin normalization, AR collections, retail execution) until coverage expands [SpgiEstimatesError; attempted GetEstimates for Q3 2024].
  • Where estimates are needed for future periods, monitor MarketScreener/S&P CIQ transcript notes and company IR for any emerging guidance signals .

Key Takeaways for Investors

  • Liquidity and working capital are critical: cash at $0.32M and negative gross margin necessitate disciplined AR collections and inventory mix normalization; near-term risk skew if margin recovery lags .
  • Retail integration is the key strategic catalyst: successful execution at LA dispensaries could lift brand velocity and pricing power, supporting CPG margins over time .
  • Gross margin should improve as higher-cost cultivation inventory sells through; watch Q4 trajectory for margin inflection and the impact of cost cuts .
  • Third-party brand strategy is working at the margin: revenue uptick with new brands; expanding co-manufacturing can diversify volume—track partner adds and category mix .
  • California demand softness remains a headwind: delayed rollouts and promotions weighed on owned-brand revenue; execution on marketing cadence and supply reliability is essential .
  • No formal guidance and no Street consensus: trade on operational milestones (retail, margin, AR/cash trends) and event path (financing, asset monetization) rather than EPS beats/misses.
  • Short-term: focus on cash conversion and margin stabilization; Medium-term: evaluate whether retail verticalization materially improves unit economics and supports a path to break-even adjusted EBITDA .

Sources and supporting documents:

  • Q3 2024 earnings press release and financial tables .
  • Form 8-K (Item 2.02) with Exhibit 99.1, balance sheet and statements .
  • Pre-announcement press release (call details) .
  • Retail management services agreements press release (Oct 9, 2024) .
  • Prior quarters: Q2 press release and tables ; Q1 8-K press release and tables .
  • Earnings call transcript summaries and highlights .