Avant Brands Reports Fiscal 2022 Audited Results
Q4 2022 record gross revenues of $8.9 million (+219% vs. Q4 2021)
Q4 2022 record Adjusted EBITDA¹ of $1.6 million (+208% vs. Q4 2021)
Q4 2022 record Cash Flow from Operations² of $1.6 million (+229% vs. Q4 2021)
Q4 2022 record Adjusted Net Loss⁵ of $0.4 million (+95% vs. Q4 2021)
Fiscal 2022 record gross revenues of $22.6 million (+105% from vs. FY 2021)
Second consecutive quarter of positive Adjusted EBITDA¹ and positive Cash Flow from Operations²
Achieved the strongest year-over-year growth amongst all publicly traded LPs in Canada¹⁰
Kelowna, BC – February 27, 2023 – Avant Brands Inc (TSX: AVNT) (OTCQX: AVTBF) (FRA: 1BUP) (“Avant” or the “Company”), a leading producer of innovative and award-winning cannabis products, today announced its audited financial results for the fourth quarter and fiscal year ended November 30, 2022 (“Q4 2022” and “Fiscal 2022” respectively).
“The results from Q4 and Fiscal 2022 illustrate a robust growth profile for Avant Brands, along with record Adjusted EBITDA and Cash Flow from Operations. This was a result of our ongoing dedication to consistently producing high quality cannabis flower,” said Norton Singhavon, Founder and CEO of Avant. “The strong sales momentum that we have established during Fiscal 2022, augmented by the recent acquisition of the Flowr Okanagan, will allow Avant to continue pursuing its mission to become a global leader for premium cannabis products.”
Fourth Quarter 2022 Financial Highlights
Gross Revenue was a record of $8.9 million (+219% vs. Q4 2021 | +88% vs. Q3 2022)
Net Revenue was a record of $7.9 million (+238% vs. Q4 2021 | +100% vs. Q3 2022)
Recreational Net Revenue was a record of $5.1 million (+145% vs. Q4 2021 | +37% vs. Q3 2022)
Export Revenue was a record of $2.7 million (+5,064% vs. Q4 2021 | +22% vs. Q3 2022)
Overall gross margin³ of 38% (+4% vs. Q4 2021 | +1% vs. Q3 2022)
Recreational gross margin of 49% (+15% vs. Q4 2021 | +11% vs. Q3 2022)
Export gross margin of 47% (+11% vs. Q4 2021 | +19% vs. Q3 2022)
Total of 1,439kg of cannabis sold (+92% vs. Q4 2021 | +122% vs. Q3 2022)
Cash Flow from Operations was a record of $1.9 million (+192% vs. Q4 2021 | +127% vs. Q3 2022)
Adjusted EBITDA¹ was a record of $1.6 million (208% vs. Q4 2021 | +124% vs. Q3 2022)
Adjusted EBITDA Margin¹ (% of Net Revenue) of 20% (+83% vs. Q4 2021 | +2% vs. Q3 2022)
Net loss from operations of $2.5 million (primarily due to fair value changes to biological assets, which are non-cash items) (+5% vs. Q4 2021 | -427% vs. Q3 2022)
Adjusted Net Loss⁵ of $0.3 million (+95% vs. Q4 2021 | +41% vs. Q3 2022)
Fiscal 2022 Financial Highlights
Gross Revenue was a record of $22.6 million (+105% vs. FY2021)
Net Revenue was a record of $20.2 million (+112% vs. FY2021)
Recreational Net Revenue was a record of $14.4 million (+85% vs. FY2021)
Export Revenue was a record of $5.0 million (+519% vs. FY2021)
Overall gross margin³ of 32%, (-7% vs. FY2021), the decrease was a result of increased bulk export sales, which have a lower average selling price than domestic packaged recreational cannabis sales.
Recreational gross margin of 41% (+6% vs. FY2021)
Export gross margin of 36% (+0% vs. FY2021)
Total of 3,934kg of cannabis sold (+96% vs. FY2021)
Overall weighted average selling price (for flower) of $5.67 per gram ($6.34 per gram in FY2021), with recreational cannabis average selling price (for flower net of excise) being $7.18 ($7.26 per gram in FY2021). The overall weighted average price decreased as a result of increased bulk export sales.
Cash Flow from Operations² was a record of positive $2.2 million (+310% vs. FY2021)
Adjusted EBITDA¹ was a record of $1.9 million (+221% vs. FY2021)
Adjusted EBITDA Margin¹ (of Net Revenue) of 9%
Selling, General and Administrative Expenses and Corporate Expenses⁵ of $7.0 million (+18% vs. FY2021)
Net loss from operations of $8.5 million, compared to a loss of $5.4 million in FY2021 (primarily due to fair value changes to biological assets and share based payments, which are non-cash items).
Adjusted Net Loss⁵ of $3.2 million, compared to a loss of $10.3 million in FY2021.
Three of four quarters in Fiscal 2022 were positive Adjusted EBITDA¹ and positive Cash Flow² from Operations
Achieved the strongest year-over-year growth amongst all publicly traded Canadian LPs¹⁰
Fiscal 2022 Corporate Highlights
The Company produced approximately 1,752 kilograms of cannabis in the fourth quarter of 2022 and approximately 5,729 kilograms of cannabis for the year-ended November 30, 2022. The Company sold approximately 1,471 kilograms of cannabis in the fourth quarter of 2022 and approximately 3,951 kilograms for the year-ended November 30, 2022, which included the following highlights:
Entered into a Debtor-In-Possession loan and Stalking Horse Bid, through Avant Brands K1 Inc. (“AK1”), an entity of which Avant owns 50% of the issued and outstanding shares, pursuant to which AK1 was bidding to purchase all of the issued and outstanding shares of The Flowr Group (Okanagan) Inc. (“Flowr Okanagan”). Following the end of Fiscal 2022, AK1 was the successful bidder at the auction and subsequently entered into a definitive purchase agreement to purchase all of the issued and outstanding shares of Flowr Okanagan. The acquisition of Flowr Okanagan was completed on February 2, 2023, and is expected to increase Avant’s annual production capabilities by 60%⁶, making Avant one of the largest indoor ultra-premium producers in Canada⁷.
Ramped up 3PL Ventures Inc. (“3PL”) to be fully staffed and operational in a single year (with the first harvest having occurred in December 2021; and five harvests having occurred during the month of November 2022). Subsequent to the end of Fiscal 2022, Avant, through its wholly owned subsidiary GreenTec Holdings Ltd., entered into a purchase agreement to acquire the remaining 50% of the issued and outstanding shares of 3PL from F-20 Developments Corp. (“F-20”). The acquisition of 3PL was completed on February 1, 2023. Prior to closing of the acquisition, Avant owned 50% of the issued and outstanding shares of 3PL, as a joint venture with F-20. Avant now owns 100% of the issued and outstanding shares of 3PL.
Low credit risk on accounts receivable with no significant uncollectible balances during the year ended November 30, 2022.
Fiscal 2022 Sales & Marketing Highlights
BLK MKT was voted 2022 #1 cannabis brand of the year
BLK MKT was the #1 seller of Premium 1G Pre-Rolls in Ontario, with over 62% of market share⁸
BLK MKT was the #1 seller of 1G Blunts in Ontario, with 32% of market share (units sold)⁸
BLK MKT went from a 3.9% market share in Q1 2022 to a 12.2% market share in Q4 2022 for all Premium Flower⁸ (3.5G) in Ontario, with BLK MKT being the #2 best-selling Premium Flower⁸ (3.5G)
Launched the BLK MKT brand in Israel via a licensing agreement with IMC Holdings Ltd
Launched direct-to-retail store sales in B.C. and completed approximately $100,000 in sales in the first two months of shipments.
As a result of Sales and Marketing initiatives in the Fiscal 2022 year, the Company currently (as of February 2, 2023) has over 92% distribution in B.C. and Ontario and is currently selling in 9 of the 13 provincial / territorial markets, with 37 SKUs listed in Ontario and 24 listed in B.C.
Completed 9 export shipments of cannabis to Israel and Australia, generating approximately $5 million in sales.
Launched direct-to-retail store sales in B.C. and completed approximately $100,000 in sales in the first two months of shipments.
Launched new and innovative products under our BLK MKT™ Treehugger™, Cognōscente™ and Tenzo™ brands.
Entered new provincial markets (i.e. Newfoundland & Labrador and Prince Edward Island)
Key Subsequent Events
Completed the purchase of Flowr Okanagan, including Flowr Okanagan’s Kelowna facility (the “Flowr Facility”). Subsequent to the completion of the transaction, Avant has implemented cost-saving initiatives that will generate annualized savings in excess of $1 million (over and above the immediate elimination of The Flowr Corporation’s corporate overheads – achieved by purchasing a subsidiary of The Flowr Corporation, as opposed to the parent company). Avant currently also has approximately 11 rooms of its cultivars in production and is expected to commence its first harvest at the Flowr Facility on March 9, 2023.
Completed the purchase of the remaining 50% of 3PL, which included seller-financing with terms favourable to Avant, below the industry standards on interest rate and security.
BLK MKT currently has the highest total brand distribution for Premium Pre-Rolls (single units) with 4 SKUs in the Top 10 in Ontario⁹.
Fiscal 2023 Outlook
Fiscal 2022 was a transformational year for the Company, as during Q4 2022 it achieved its first quarter of Adjusted EBITDA¹ in excess of $1 million. Management anticipates that with the addition of the Flowr Facility and the remaining 50% of 3PL it will achieve another fiscal year of revenue growth, with Sales, General and Administrative costs and Corporate overhead costs expected to remain relatively flat in comparison to Fiscal 2022.
Some key strategic initiatives that Avant’s management expects to focus on for Fiscal 2023 are:
Continue capturing synergies and costs savings at the Flowr Facility, while transitioning cultivation to Avant cultivars.
With the addition of the Flowr Facility, Avant anticipates that it will be able to fulfil its domestic recreational demand, as in Q4 2022 the Company’s domestic recreational sales were approximately 65% of the actual purchase orders (each a “PO”) it had received as it did not have enough product to complete all POs received by Provincial buyers.
Further expand global exports by diversifying its clientele, and exploring other countries which allow for the importation of dried cannabis from Canada.
Continue to explore opportunistic acquisition or contract grow opportunities
Continue to launch new and innovative products to satisfy consumer demands
Complete the construction of its GT-Bio facility which would be expected to increase the Company’s production by approximately 2,000kg per year, which would result in a total annual production capacity of approximately 18,600 KG.
Increase the Company’s capacity utilization rate, as during Fiscal 2022 the Company had achieved only a 52% utilization rate, with 46% at 3PL. Management believes that during the course of Fiscal 2023, that the utilization rate will increase significantly, particularly at its 3PL facility.
Download the Company’s Updated Corporate Presentation:
https://avantbrands.ca/investor/#presentation
Conference Call
Management will host a conference call to discuss the financial results on February 28, at 4:00PM Eastern Time / 1:00PM Pacific Time.
Conference Call Dial Details:
Canada/USA TF: +1-800-319-4610
International Toll: +1-604-638-5340
A transcript of the call will be posted on the Company’s website at www.avantbrands.ca within 48 hours of the call.
A copy of the audited financial statements for the year ended November 30, 2022 (the “Audited Financial Statements”) and the related management discussion & analysis (the “MD&A”) will be available for download on the Company’s SEDAR profile, or on its website at www.avantbrands.ca.
About Avant Brands Inc.
Avant is an innovative, market-leading premium cannabis company. Avant has multiple operational production facilities across Canada, which produce high-quality, handcrafted cannabis products, based on unique and exceptional cultivars. Avant's products are distributed via three complementary sales channels: recreational, medical and export. Avant's recreational consumer brands include: BLK MKT™, Tenzo™, Cognōscente™ and Treehugger™, which are sold in British Columbia, Saskatchewan, Manitoba, Ontario, Atlantic Canada, Québec and the territories. The Company's medical cannabis brand, GreenTec™, is distributed nationwide, directly to qualified patients through its GreenTec Medical portal and through various medical cannabis partners.
Avant is a publicly traded corporation listed on the Toronto Stock Exchange (TSX: AVNT), and cross-trades on the OTCQX Best Market (OTCQX: AVTBF) and Frankfurt Stock Exchange (FRA: 1BU0). The Company is headquartered in Kelowna, British Columbia and has operations in British Columbia, Alberta and Ontario.
To learn more about Avant, access the investor presentation, or learn more about its consumer brands, please visit www.avantbrands.ca.
For additional information, please contact:
Investor Relations at Avant Brands Inc.
1-800-351-6358
ir@avantbrands.ca
Note 1 – Adjusted EBITDA and Adjusted EBITDA Margin are non-IFRS measures. The Company calculates Adjusted EBITDA from continuing operations as net income (loss) before interest expense, income taxes, depreciation and amortization, unrealized gain (loss) on changes in fair value of biological assets, equity loss on investment in associate, loss on sale of assets, investment loss and share based payments The Company calculates Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of Net Revenue. Management determined that the exclusion of the fair value adjustment is an alternative representation of performance. The fair value adjustment is a non-cash gain (loss) and is based on fair market value less cost to sell. The most directly comparable measure to Adjusted EBITDA (excluding fair value adjustment to biological assets and inventory) calculated in accordance with IFRS is net income (loss) from continuing operations. For more information on the reconciliation of Adjusted EBITDA to net income (loss), please refer to the MD&A or view the reconciliation table at the end of this news release.
Note 2 – Cash Flows from Operations before changes in net-working capital is a non-IFRS performance measure and is calculated by adjusting the net loss from continuing operations for items not affecting cash, but before applying changes in non-cash operating working capital.
Note 3 – Gross margin before fair value adjustments. Please refer to the Audited Financial Statements and MD&A for definitions and a reconciliation to IFRS.
Note 4 – Operating expenses exclude non-cash items, such as depreciation and amortization and share based payments. Please refer to the Audited Financial Statements and MD&A for definitions and a reconciliation to IFRS.
Note 5 – Adjusted Net Income is a non-IFRS performance measure and is calculated by adjusting the net income for items not affecting cash such as; equity loss on investment in associate, share based payments, fair value gain on acquisition, and fair value changes on biological assets. The Company has elected to report Adjusted Net Income, which is a non-IFRS measure, as it believes this metric provides more accurate results of the Company’s financial performance to readers, as it removes the fair value changes on biological assets (amongst other minor adjustments). For more information on the reconciliation of Adjusted Net Income, please refer to the MD&A or view the reconciliation table at the end of this news release.
Note 6 – This estimate is based on the assumption that the output at the Flowr Facility and GT-Bio facility will be consistent with the production output at Avant’s existing facilities.
Note 7 – This estimate is based on publicly available information on other Licensed Producers, with products for sale on OCS.ca, that are either priced in-line with Avant’s flagship brand, BLK MKT, or higher.
Note 8 – This estimate is based on available data from the Ontario Cannabis Store. Analysis to competitors used all products price +/- 10% of BLK MKT pricing.
Note 9 – This estimate is based on available data from Trellis. Analysis to competitors used all products price +/- 10% of BLK MKT pricing.
Note 10 – This is based on analyzing publicly listed licensed producers in Canada (with businesses that are solely focused on cannabis in Canada), as of February 21, 2023, which reported fiscal 2021 gross revenues $10 million or greater. An analysis was run comparing audited fiscal 2022 net revenues to fiscal 2021 net revenues. For companies that have not yet filed their fiscal 2022 results, a run rate of currently reported quarters for fiscal 2022 was used. Based on this, Avant achieved the highest net revenue growth percentage amongst all publicly listed licensed producers in Canada, which met the criteria.
RECONCILIATION OF NET INCOME TO EBITDA, ADJUSTED EBITDA AND ADJUSTED NET INCOME (LOSS)
ADJUSTED EBITDA (NON-IFRS PERFORMANCE MEASUREMENT)
The Company has identified Adjusted EBITDA and Adjusted EBITDA Margin as relevant industry performance indicators. Adjusted EBITDA and Adjusted EBITDA Margin are non-IFRS financial measures used by management that do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies.
Management defines Adjusted EBITDA as income (loss) from continuing operations, as reported, adjusted for depreciation and amortization, equity (gain) loss on investment in associate, financing costs, gains and losses on sale of marketable securities, Canadian emergency wage subsidy, interest and accretion, share-based payments, fair value gain on acquisition, impairment of inventory, change in fair value of biological assets realized through inventory sold, and unrealized gains and losses on changes in fair value of biological assets. Management calculates Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of Net Revenue. Management believes these measures provide useful information as commonly used measures in the capital markets to approximate operating earnings. See table below for determination of specific components of Adjusted EBITDA and Adjusted EBITDA Margin.
ADJUSTED NET INCOME (NON-IFRS PERFORMANCE MEASUREMENT)
The Company has identified Adjusted Net Income as a relevant industry performance indicator. Adjusted Net Income is a non-IFRS financial measure used by management that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies.
Management defines Adjusted Net Income as income (loss) from continuing operations, as reported, adjusted for equity (gain) loss on investment in associate, Canadian emergency wage subsidy, share-based payments, fair value gain on acquisition, change in fair value of biological assets realized through inventory sold, and unrealized gains and losses on changes in fair value of biological assets. Management believes this measure provides useful information as it is a commonly used measure in the capital markets to approximate operating earnings. See table below for determination of specific components of Adjusted Net Income.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION:
This news release includes certain “forward-looking information” as defined under applicable Canadian securities legislation, including statements regarding the plans, intentions, beliefs and current expectations of the Company with respect to future business activities and operating performance. Forward-looking information is often identified by the words "may", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" or similar expressions and includes information regarding: the Company’s mission to become a global leader for premium cannabis products; the expected increase to Avant’s annual production capabilities; the Company’s expectation that they will become one of the largest indoor producers of premium cannabis products in Canada; the Company’s expected annualized cost savings at the Flowr Facility; the Company’s anticipated timeline for the first harvest at the Flowr Facility; the Company’s expectations regarding Fiscal 2022 revenue growth and costs; the Company’s continued focus on capturing synergies and cost savings at the Flowr Facility, while transitioning cultivation to Avant cultivars; the Company’s ability to fulfill its domestic recreational demand; the Company’s ability to further expand global exports by diversifying its clientele and exploring other countries for export of dried cannabis; the Company’s continued exploration of acquisition and contract growth opportunities; the Company’s ability to launch new and innovative products; the completion of the construction at the GT-Bio facility and the Company’s expectations regarding the related increase to the Company’s production capacity; the anticipated increases to the Company’s capacity utilization rate; the availability of the Audited Financial Statements and the MD&A on the Company’s SEDAR profile and on its website; and expectations for other economic, business, and/or competitive factors. To the extent any forward-looking information in this news release constitutes “financial outlooks” within the meaning of applicable Canadian securities laws, such information is being provided as preliminary financial results and the reader is cautioned that this information may not be appropriate for any other purpose and the reader should not place undue reliance on such financial outlooks. Forward-looking information is necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking information. Financial outlooks, as with forward-looking information generally, are, without limitation, based on the assumptions and subject to various risks as set out herein. The Company’s actual financial position and results of operations may differ materially from management’s current expectations and, as a result, the Company’s financial results may differ materially. Examples include statements that the Company will build long-term shareholder value and reduce operational expenses; or that the Company will increase its revenue and maintain stable costs.
Investors are cautioned that forward-looking information is not based on historical fact but instead reflects management’s expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although the Company believes that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of the Company. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: regulatory and licensing risks; changes in consumer demand and preferences; changes in general economic, business and political conditions, including changes in the financial markets; the global regulatory landscape and enforcement related to cannabis, including political risks and risks relating to regulatory change; compliance with extensive government regulation; public opinion and perception of the cannabis industry; the impact of COVID-19; and the risk factors set out in the Company’s annual information form dated February 27, 2023, filed with Canadian securities regulators and available on the Company’s profile on SEDAR at www.sedar.com.
Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors that could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking information, which speak only as of the date of this news release. The Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.
This news release refers to certain financial performance measures that are not defined by and do not have a standardized meaning under International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. These non-IFRS financial performance measures are defined in the MD&A. Non-IFRS financial measures are used by management to assess the financial and operational performance of the Company. The Company believes that these non-IFRS financial measures, in addition to conventional measures prepared in accordance with IFRS, enable investors to evaluate the Company’s operating results, underlying performance and prospects in a similar manner to the Company’s management. As there are no standardized methods of calculating these non-IFRS measures, the Company’s approaches may differ from those used by others, and accordingly, the use of these measures may not be directly comparable. Accordingly, these non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.