Lowell Farms Inc. Announces Unaudited First Quarter 2022 Financial and Operational Results

Following a recent milestone, Lowell Farms enters the year as the largest combined seller of packaged flower and all-flower pre-rolls in California.

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SALINAS, Calif., May 10, 2022 (GLOBE NEWSWIRE) -- PRESS RELEASE -- Lowell Farms Inc. (CSE: LOWL; OTCQX: LOWLF), a California-born innovator in cannabis cultivation and maker of the brand Lowell Smokes, announces unaudited revenue and operating results for the first quarter and fiscal year (ended March 31, 2022). All figures stated are in US Dollars.

First Quarter Financial Highlights:

  • Revenue generated for the three-month period ended March 31, 2022 was $12.4 million; an increase of 13% from Q1 2021.
  • CPG revenue increased 10% sequentially, primarily due to increases in pre-roll and packaged flower revenue.
  • As expected, Lowell Farm Services (LFS) revenue declined $2.8 million from fourth quarter seasonal high levels.
  • Gross margin as reported was 12.7% in the first quarter compared to negative 12.3% sequentially and negative 13.4% year over year.
  • Operating expenses were $4.0 million or 33% of sales for the quarter, compared to $6.3 million or 42% of sales in the fourth quarter last year and $4.2 million or 38% of sales in the first quarter last year, reflecting cost reductions realized in the current quarter.
  • The operating loss in the first quarter was $2.5 million compared to an operating loss of $8.2 million sequentially and an operating loss of $5.7 million year over year, reflecting the favorable impact from increased sales, cost reductions and efficiencies.
  • Net loss for the first quarter was $4.1 million compared sequentially to a net loss of $10.0 million, which compares to a net loss of $6.7 million in the first quarter last year.
  • Adjusted EBITDA in the first quarter was negative $0.9 million compared sequentially to adjusted EBITDA of negative $3.6 million and negative adjusted EBITDA of $4.6 million year over year. Adjusted EBITDA is a non-GAAP financial measure. See “Use of Non-GAAP Financial Information” below for further information and a detailed reconciliation to Net Loss, the closest comparable GAAP measure.
Revenue Summary ($’s in ‘000)

 

          Q/Q Q/Q
    Dec 31, 2021 March 31, 2022   % Change $ Change
  CPG Revenues $ 8,219 $ 9,077   10 % 858  
  Bulk Product $ 2,609 $ 2,259   -13 % (350 )
  LFS $ 3,153 $ 350   -89 % (2,803 )
  Out-of-State Licensing $ 1,092 $ 723   -34 % (369 )
  Net revenue $ 15,073 $ 12,409   -18 % (2,664 )

“For the second quarter in a row, Lowell Farms has taken the lead as California’s largest combined seller of packaged flower and all-flower pre-rolls in California per Headset,” says Co-Founder and Chief Executive Officer Mark Ainsworth. “You get there by selling a consistent, quality product that consumers have learned to trust and that is exactly what we sell.

“We also continue to make great strides with our out-of-state licensing partnerships, rising to become one of the top players in both of those markets for pre-rolls. That is a strong statement about the power of that brand.”

Subsequent events to the first quarter ended March 31, 2022:

Operational Highlights and Ongoing Initiatives:
The company’s focus remains on key initiatives to drive sustainable profitable growth as well as working closely with governing bodies to ensure effective changes in the cannabis industry taxation system that would make higher profitability possible.

  • Lowell Farm Services:
    • Lowell Farm Services, a first-of-its-kind cannabis processing facility in Salinas Valley, continues to improve operational efficiencies with a stronger focus on new clients and scalability.
      • Lowell Farm Services processed over 98,604 pounds of wet weight product in the quarter.
      • LFS processed approximately 11,000 pounds of finished bulk flower.
      • The expected increase at LFS reflects the impact from seasonal spring harvests compared to minimal outdoor harvest activity during the first quarter. Spring outdoor harvest is small compared to the primary outdoor harvest yields in the fall.
      • To alleviate the impact that seasonality has on the industry, the company has signed multiple year-round greenhouse partners to ensure consistent processing revenues.
  • Portfolio Brands and Out-of-State Licensing:
    • The company saw an increase in CPG revenue of 10.4% due to higher pre-roll and packaged flower revenue and as a result of cost reductions and efficiency improvements.
    • For the second quarter in a row, Lowell Farms achieved a historic milestone of being the largest combined seller of packaged flower and all flower pre-rolls in California as measured by dollar volume by third party data aggregator Headset.
      • The first quarter results show Lowell Farms two premier flower brands – Lowell Herb Co. and House Weed – as surpassing more than 500 competing brands in the market.
    • Lowell Herb Co.
      • Sales of Lowell branded products generated revenue of $5.0 million in the first quarter, approximating the record sales level in the fourth quarter of 2021.
    • House Weed
      • House Weed, a portfolio brand, generated revenue of over $2.9 million in the first quarter of 2022, an increase of over $0.5 million from the fourth quarter of 2021.
    • Bulk Flower Sales
      • Bulk flower sales pricing increased 34% from the fourth quarter, rebounding from December low pricing.
      • Bulk flower sales declined 11% sequentially despite increasing selling prices due to seasonal lower flower yields during the winter months and declined 52% from the first quarter of 2021 due to lower pricing in the current quarter.
    • Out-of-state Licensing
      • Sales revenue for the quarter in Illinois totaled approximately $3.14 million.
      • Sales revenue for the quarter in Massachusetts totaled approximately $1.5 million.
        • The Massachusetts market specifically experienced supply disruptions during the quarter which contributed to sales declines
  • Cultivation Quality and Efficiency:
    • The company’s focus on refining its cultivation processes, genetics, and facilities continue to improve the yield, potencies, and increase margins quarter over quarter.
      • Lowell Farms saw its flower production at the greenhouse continue to steadily increase, with flower product totaling 8,356 lbs. during the first quarter of 2022 in comparison to 4,724 lbs. in the first quarter of 2021.
        • The company harvested 41 times in the first quarter of 2022; in contrast to 37 harvests in the first quarter of 2021.
        • The average turn time for the flowering rooms has seen continued improvement and is now at 58 days in the first quarter of 2022 compared to 74 days in the first quarter of 2021.
    • The portfolio of flower coming from the cultivation is becoming a standard for strains and genetics, which is generating an increase in consumer demand.
    • The company continues to evolve its licenses to increase its existing footprint and canopy for higher cultivation capacity.
  • Distribution and Sales Capabilities:
    • With the increased desirability of the Lowell brand, dispensary partners are continuing to add Lowell portfolio products to their orders.
      • The average delivery drop value has increased to approximately $5,362 in the first quarter of 2022 from $3,552 in the first quarter of 2021.

“To compete with the black market, we have to do it with price, quality, safety, and partnership with governing bodies that control our industry,” said Chairman of the Board George Allen. “We need three things: good quality cannabis, a brand that people trust, and automation. We are on the right path to having all three.”

Q1 Financial Results Earnings Conference Call Details:
The conference call with management at 5:30 p.m. EDT on Tuesday, May 10, can be accessed using the following dial-in information:

U.S. and Canadian Toll Free: 1-877-407-0789
International: 1-201-689-8562
Webcast: Lowell Farms Inc.
Conference ID: 13728978

Please dial-in at least 10 minutes before the call to register.

The conference call will be webcast live and archived on the investor relations section of the Lowell Farms website at https://ir.lowellfarms.com/.