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Avant Brands Reports Fiscal 2022 Audit
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Q4 2022 record gross revenues of $8.9 million (+219% vs. Q4 2021)
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Q4 2022 record Adjusted EBITDA1 of $1.6 million (+208% vs. Q4 2021)
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Q4 2022 record Cash Flow from Operations2 of $1.9 million (+192% vs. Q4 2021)
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Q4 2022 record Adjusted Net Loss5 of $0.4 million (+95% vs. Q4 2021)
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Fiscal 2022 record gross revenues of $22.6 million (+105% vs. FY 2021)
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Second consecutive quarter of positive Adjusted EBITDA1 and positive Cash Flow from Operations2
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Achieved the strongest year-over-year growth amongst all publicly traded LPs in Canada10
KELOWNA, BC / ACCESSWIRE / February 27, 2023 / Avant Brands Inc (TSX:AVNT)(OTCQX:AVTBF)(FRA:1BU0) ("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).
Fourth Quarter 2022 Financial Highlights
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Gross Revenue was a record of $8.9 million (+219% vs. Q4 2021 | +88% vs. Q3 2022)
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Net Revenue was a record of $7.9 million (+238% vs. Q4 2021 | +100% vs. Q3 2022)
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Recreational Net Revenue was a record of $5.1 million (+145% vs. Q4 2021 | +37% vs. Q3 2022)
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Export Revenue was a record of $2.7 million (+5,064% vs. Q4 2021 | +22% vs. Q3 2022)
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Overall gross margin3 of 38% (+4% vs. Q4 2021 | +1% vs. Q3 2022)
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Recreational gross margin of 49% (+15% vs. Q4 2021 | +11% vs. Q3 2022)
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Export gross margin of 47% (+11% vs. Q4 2021 | +19% vs. Q3 2022)
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Total of 1,439kg of cannabis sold (+92% vs. Q4 2021 | +122% vs. Q3 2022)
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Cash Flow from Operations was a record of $1.9 million (+192% vs. Q4 2021 | +127% vs. Q3 2022)
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Adjusted EBITDA1 was a record of $1.6 million (+208% vs. Q4 2021 | +124% vs. Q3 2022)
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Adjusted EBITDA Margin1 (% of Net Revenue) of 20% (+83% vs. Q4 2021 | +2% vs. Q3 2022)
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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)
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Adjusted Net Loss5 of $0.3 million (+95% vs. Q4 2021 | +41% vs. Q3 2022)
Fiscal 2022 Financial Highlights
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Gross Revenue was a record of $22.6 million (+105% vs. FY2021)
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Net Revenue was a record of $20.2 million (+112% vs. FY2021)
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Recreational Net Revenue was a record of $14.4 million (+85% vs. FY2021)
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Export Revenue was a record of $5.0 million (+519% vs. FY2021)
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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
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Recreational gross margin of 41% (+6% vs. FY2021)
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Export gross margin of 36% (+0% vs. FY2021)
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Total of 3,934kg of cannabis sold (+96% vs. FY2021)
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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
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Cash Flow from Operations2 was a record of positive $2.2 million (+310% vs. FY2021)
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Adjusted EBITDA1 was a record of $1.9 million (+221% vs. FY2021)
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Adjusted EBITDA Margin1 (of Net Revenue) of 9%
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Selling, General and Administrative Expenses and Corporate Expenses5 of $7.0 million (+18% vs. FY2021)
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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)
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Adjusted Net Loss5 of $3.2 million, compared to a loss of $10.3 million in FY2021
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Three of four quarters in Fiscal 2022 were positive Adjusted EBITDA1 and positive Cash Flow2 from Operations
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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:
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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.
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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.
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Low credit risk on accounts receivable with no significant uncollectible balances during the year ended November 30, 2022
Fiscal 2022 Sales & Marketing Highlights
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BLK MKT was voted 2022 #1 cannabis brand of the year
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BLK MKT was the #1 seller of Premium 1G Pre-Rolls in Ontario, with over 62% of market share8
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BLK MKT was the #1 seller of 1G Blunts in Ontario, with 32% of market share (units sold)8
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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)
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Launched the BLK MKT brand in Israel via a licensing agreement with IMC Holdings Ltd.
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Launched direct-to-retail store sales in B.C. and completed approximately $100,000 in sales in the first two months of shipments
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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.
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Completed 9 export shipments of cannabis to Israel and Australia, generating approximately $5 million in sales
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Launched new and innovative products under our BLK MKTᵀᴹ, Treehuggerᵀᴹ, Cognōscenteᵀᴹ and Tenzoᵀᴹ brands
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Entered new provincial markets (i.e. Newfoundland & Labrador and Prince Edward Island)
Key Subsequent Events
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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.
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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
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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:
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Continue capturing synergies and costs savings at the Flowr Facility, while transitioning cultivation to Avant cultivars
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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
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Further expand global exports by diversifying its clientele, and exploring other countries which allow for the importation of dried cannabis from Canada
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Continue to explore opportunistic acquisition or contract grow opportunities
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Continue to launch new and innovative products to satisfy consumer demands
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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 18,600kg
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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
I have always liked this company. They are getting it done. They started small instead of trying to be a behemoth. They continuously sell out of their product and are usually for more production space - they just picked up some out of BK. I'll try and do a video on these guys this week, probably tomorrow.
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