Clever Leaves Holdings Inc. (NASDAQ: CLVR) slid in trading on Thursday as the missed revenue expectations — showing how softening sales and dried financing punches holes in the cannabis sector and pushes them toward opportunities abroad.
The multi-state cannabis operator reported its financial results for the first quarter ending June 30, 2022.
Clever Leaves delivered approximately $4.7 million in total revenue during the period, a gain of 27% versus the same period last year — missing the Yahoo Finance Average analyst estimate for revenues of $5.55 million.
The earnings were for a loss of three cents per share, below analysts’ loss estimates of $0.23 cents a share.
“Across our core markets, we welcomed several key developments that strengthened our overall footprint and positioning,” said CEO Andres Fajardo. “In April, the Colombian government issued Joint Resolution 539, the final regulatory piece needed to complete the country’s framework for dry flower exports. Our preparations for this expanded market opportunity are well underway, and we remain on track to begin dry flower exports in the fourth quarter of this year. We also enhanced our market pathways in Germany, where we became a fully licensed medical cannabis distributor and now have access to an expansive network of wholesalers and pharmacies across the country.
Clever Leaves reported revenues of $4.7 million for the second quarter of 2022 and is maintaining its guidance for 2022 revenue. Clever Leaves’ forecasted range for revenue is $20 million–$25 million, in line with the previous quarter. Adjusted EBITDA guidance is maintained to be a loss of $20 million–$23 million.
The increase was driven by “continued sales strength across the company’s non-cannabinoid and cannabinoid segments,” it said. Cannabinoid revenue increased 124% versus the same time last year, “primarily driven by Australia, Brazil, Germany, and Israel” — while non-cannabinoid revenue increased 9% compared to the same period last year.
The company also reported a second-quarter net loss of $1 million versus a net loss of $9 million in the same period last year, “driven primarily by a $6.9 million gain on investments following the company’s sale of a portion of its minority equity stake in Cansativa, as well as a $2.2 million decrease in stock-based compensation expense.”
Diluted loss per share in the fourth quarter was $0.03 versus diluted earnings per share of $0.90 cents in the same period last year.
Adjusted EBITDA was a loss of $6.3 million in the second quarter of 2022, versus a loss of $5.8 million in the same period last year, “primarily due to increased cost of sales, including increased inventory provision and additional sales and marketing expenses,” the company said.
“To further support our growth, we took significant steps to improve our balance sheet and align our expenses with our current revenue profile,” Fajardo added. “During the second quarter, we fully repaid our two largest debt obligations, which represents a near elimination of our total debt and gives us greater balance sheet flexibility for the coming quarters. In addition, we completed a global workforce reduction that is expected to yield approximately $2 million in cost savings this year and $4 million in annual cost savings thereafter. We believe these actions have meaningfully enhanced our capital efficiency and pathway to profitability.”
Clever Leaves said it had $19.5 million worth of cash and cash equivalents in the second quarter, versus $44.8 million in the previous quarter. The company expects approximately $2 million to $3 million of annual capital expenditures.
Recently, Cantor Fitzgerald analyst Pablo Zuanic — who asked about held up plans in Columbia due to a bad harvest during the earnings call — said in a new report that Clever Leaves could become one of the world’s top five cannabinoid exporters by the end of this year. The findings came a week ahead of the company’s second-quarter earnings release and half a year since CEO Andres Fajardo was tapped to lead the company out of a desperate cash burn and into new, more profitable markets overseas.
“Still, while we are positive on the company’s top-line growth outlook, profitability and cash burn are key investment risks,” the report said. “In fact, although the cost base has been rationalized, capex lowered, and debt mostly paid down, cash burn remains an issue.”
Cantor Fitzgerald assigned Clever Leaves an “Overweight” rating and a 12-month price target of $4.50. The stock was lately selling at barely over a dollar, but its 52-week high was $12.40. Zuanic wrote, “From a purely trading perspective, positive news flow about regulatory changes, especially in Colombia and Germany, could favorably impact sentiment,” as a reason the price could jump.
“As we look to the remainder of the year, we expect to drive our business forward on all fronts by further enhancing our operations and cost structure, as well as optimizing our positioning for new commercial opportunities within our target markets,” Fajardo added. “We remain committed to further executing on our refined growth strategy, with the goal of becoming a leader in the international cannabis industry and enhancing the value we create for our shareholders.”