Flora Growth(US:FLGC)2022-05-10 20:00Financial Performance - Audited revenues for fiscal year 2021 were approximately $9 million, up from just over $100,000 in 2020, primarily driven by the House of Brands pillar [10] - Revenue for the second half of 2021 increased over 329% compared to the first half, with Q4 up 229% over Q3, and Q1 2022 revenue increased approximately 450% year-over-year [11] - Gross profit totaled $2.4 million, resulting in a gross margin of 27%, which is expected to improve as higher margin businesses contribute more [12] - Operating expenses totaled $21.3 million, leading to an operating loss of $19 million, with a net loss of $22.5 million and an EPS loss of $0.48 [13] - As of December 31, 2021, the company had a cash balance of $37.6 million, up from $14.9 million in 2020, allowing for strategic acquisitions and infrastructure investments [14] Business Lines and Market Data - The House of Brands portfolio now reaches over 500,000 consumers and 16,000 distribution points globally, with significant growth in brands like JustCBD and Mind Naturals [8][20] - The Commercial and Wholesale operations include a cultivation facility in Colombia, which boasts one of the lowest production costs globally at $0.06 per gram of dried flower [28] - The Life Sciences pillar focuses on R&D for pharmaceutical-grade products, with plans to commercialize cannabinoid-based prescriptions and dietary supplements [58] Company Strategy and Industry Competition - The company aims to leverage its low-cost production in Colombia to gain market share in the global cannabis market, with a focus on vertical integration and supply chain mastery [19][34] - Flora Growth has established partnerships to enhance its distribution capabilities, including a strategic partnership with Hoshi International for the European market [18] - The company anticipates that 60% to 70% of its revenue in 2022 will come from the House of Brands, with the remainder from Wholesale and Commercial operations [65] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, emphasizing the importance of operational excellence and strategic acquisitions [62] - The company is optimistic about the regulatory environment in Colombia, with both presidential candidates supporting cannabis as a key economic growth element [76] - Management expects gross margins to improve significantly in 2022, driven by higher contributions from the House of Brands and the Commercial brand [77] Other Important Information - Flora Growth completed the acquisition of JustCBD, which is expected to enhance revenue and market share, particularly in Europe and Latin America [68] - The company has made significant investments in infrastructure and human capital to support its growth strategy [62] - Flora Growth is actively pursuing educational initiatives to promote the potential of cannabis, partnering with edX for online courses [60] Q&A Session Summary Question: Update on revenue guidance split across divisions - Management expects 2022 to see significant contributions from all three growth pillars, with the House of Brands contributing 60% to 70% of revenues [65] Question: Progress on finding partners for THC flower distribution - The company is projecting to recognize distribution opportunities for high-THC strains by Q3, with no issues in finding distribution partners [66][67] Question: JustCBD growth opportunity and margin profile - JustCBD is experiencing strong growth, particularly in Europe, with gross margins around 60% depending on the product category [68] Question: Update on outdoor cultivation and extraction capacity - The company is currently producing around 600 kilos per week, focusing on high-THC strains for Q3 and Q4 [71] Question: Status of preclinical and clinical trials with the University of Manchester - The company is in the final phases of approval for human trials, expecting to begin before the end of the year [73][74] Question: Impact of Colombian elections on business - Both presidential candidates support cannabis as a key economic growth element, providing confidence in continued government support [75][76] Question: Outlook for gross margins in 2022 - Management expects gross margins to improve significantly, with contributions from high-margin brands like JustCBD and Naturals [77][78]