Adam Jackson
Colombian multinational operator Clever Leaves Holdings Inc. (Nasdaq: CLVR) posted earnings on Friday that show the company carving out pathways to export its product overseas.
The pharmaceutical-grade cannabinoid producer released its financial report for the fourth quarter and full year ended Dec. 31, 2022.
The company reported some revenue growth and cost reductions, which helped it meet most of its financial goals despite ongoing revenue headwinds from macroeconomic pressures in its non-cannabinoid segment.
Revenue for the fourth quarter of 2022 rose by 10% to $4.6 million versus the same period in 2021, driven by strong growth in the company’s cannabinoid business, but partially offset by decreased sales in its non-cannabinoid segment “due to economic challenges faced by mass retailers and specialty channels.”
The revenue figure beat SeekingAlpha’s fourth quarter consensus estimate of $4.15 million by $450,000. The share loss of $0.66 missed by $0.51 cents.
During an investors call on Friday morning, CEO Andres Fajardo said that the company remains focused in 2023 on continuing some of the progress made.
“At the outset of 2022, we announced a refined strategic focus for Clever’s. In this new approach, we aligned our commercial efforts on a select set of international core markets with near-term catalysts, and we work diligently to optimize our cost structure and balance sheet to best support these pipeline opportunities,” he said.
The company also had higher expenses associated with winding down its Portugal operations – a $26.9 million restructuring charge to be exact – which was part of its restructuring plan aimed at optimizing production infrastructure and achieving greater cost savings.
To better compete in the global medicinal cannabis market, the company said that it intends to exclusively cultivate and produce its cannabinoid products in Colombia, where it can take advantage of existing cost efficiencies.
Clever Leaves is set to begin selling dry flower from Colombia later this quarter, with more than 1.8 million square feet of fully built-out cultivation capacity and EU-GMP certifications for cannabis extract and dry flower production.
The restructuring plan is expected to cost around $19 million-$21 million in the fourth quarter of 2022 but is projected to generate approximately $7 million in savings by the end of 2023.
Gross profit for the fourth quarter of 2022 was $700,000, including a $900,000 inventory provision. Adjusted gross profit, which excluded the provision, was $1.6 million.
Operating expenses were $29.5 million, which included a $23.1 million restructuring expense related to the wind-down in Portugal. Net loss for the fourth quarter was $28.8 million, primarily due to the restructuring charge.
Full-year results
For the full year 2022, Clever Leaves reported a 16% increase in revenue compared to 2021, driven by increased sales in its cannabinoid segment and a slight decrease in its non-cannabinoid segment. All-in cost per gram of dry flower increased to $0.87 in 2022, primarily due to reduced agricultural output and higher expenses associated with its Portugal facilities.
Gross profit for 2022 was $4.3 million, including a $4.7 million inventory provision, and net loss for the year was $66.2 million, primarily due to the $26.9 million restructuring charge and a $19 million intangible asset impairment charge related to its Colombian cannabis-related licenses.
Despite these challenges, Clever Leaves identified several growth objectives for 2023, including continuing to capitalize on its commercial traction in its core international markets, expanding its extract portfolio and launching its high-THC flower produced in Colombia, as well as optimizing its cash management.
The company received a second notice from Nasdaq indicating that it is eligible for an additional 180-day period to regain compliance with the minimum bid price requirement, which it is actively monitoring.
In an August 2022 report, Cantor Fitzgerald analyst Pablo Zuanic posited that Clever Leaves could become one of the world’s top cannabinoid exporters. Zuanic noted how the company has signed deals with players in overseas markets such as Germany and Israel, and is focused on capturing downstream margins in markets outside North America with higher barriers to entry and better economics.
However, the report warned that cash burn remains an issue, and additional shareholder dilution is a risk. The firm assigned the company an “overweight” rating and a 12-month price target of $4.50.
