Fiore Posts Strong Q1 Performance as Restructuring Pays Off
April 30th, 2021
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The cannabis industry reached US$22.9 billion in 2020, according to ReportLinker, which projects that it will grow at an 18.1% compound annual growth rate through 2026. In the U.S., the Biden administration promised to pursue cannabis decriminalization as a number of new states have moved to legalize medical and/or recreational cannabis.
Fiore Cannabis Inc. (CSE: FIOR) (OTCQX: FIORF) is a global cannabis pioneer that has narrowed its focus to California and Nevada. After divesting its Washington and British Columbia assets, the company has accelerated its revenue growth and achieved a positive adjusted-EBITDA—a rare and significant achievement in a market that has struggled to mature.
Strong Q1 2021 Performance
Fiore Cannabis recently reported preliminary first-quarter financial results where management projected that revenue will rise 110% sequentially and 140% year-over-year to US$850,000. The team attributed the strong performance to new revenue contributions from its Apex cultivation and production facility in Las Vegas, Nevada beginning in 2021.
On the bottom line, the company expects a first-quarter profit margin of about 40 percent based on the cost of cannabis per gram during the fourth quarter of last year. The company’s products have achieved a premium position in Nevada due to its organic flower that boasts high THC levels, which continue to provide strong profit margins into 2021.
“We are very pleased with how our revenue has accelerated in 2021 and it appears we will exceed our own internal expectations for the quarter,” said President and CEO Erik Anderson in a press release announcing the results. “Our focused execution against the commitment to deliver positive adjusted EBITDA will continue each quarter this year.”
Full first-quarter financial results are expected on or before May 31, 2021.
Narrowing Focus to U.S. Assets
Fiore Cannabis also continues to make progress in refocusing its operations on core U.S. markets. In April, the company announced that it terminated a letter of intent with Indigenomix International and signed a memorandum of understanding with PECA Properties to transfer ownership of its British Columbia assets and two of its wholly-owned subsidiaries.
According to CEO Erik Anderson, the transaction cleans up the company’s balance sheet by eliminating $4.8 million in long-term liabilities and will enable the company to allocate additional funds to drive expansion in California and Nevada. The cancellation of the LOIs also frees up management to focus its efforts on generating attractive returns in these key markets.
“We are very pleased to have completed the sale of the Celista asset as it does not fit with the company’s strategic direction,” explained CEO Erik Anderson. “We continue to expand upon our operations in Las Vegas and the Coachella Valley and focus our energies on where we are generating revenues and profitability, producing top-quality cannabis products.”
The company’s core areas of focus—Las Vegas, Nevada and Palm Springs, California—are well known for their tourism and cannabis industries. Las Vegas attracts more than 40 million tourists each year as the country’s premier tourist destination. At the same time, Palm Springs is a tourism destination in its own right and is also strategically located near the Coachella Valley—the U.S. hub for cannabis innovation.
What It All Means for Investors
The cannabis industry has long been characterized by relentless expansion into new markets. When the industry experienced a downturn, many companies that stretched their balance sheets were forced to sell, shutdown or restructure. Today’s cannabis investors have become a lot more focused on revenue growth and profitability as the market matures.
Fiore Cannabis is one of the few companies to have successfully navigated the market’s transition from growth to stability. By selling non-core assets, the company’s management team raised non-dilutive capital that it has invested into core California and Nevada assets that are now generating strong revenue growth and a positive EBITDA.
The team has always been focused on producing top-quality products with attractive margins. At the same time, the Apex facility buildout in Nevada is expected to add approximately 50,000 sq. ft. of capacity over the coming year, which will meaningfully improve its revenue run rate. The combination of growing revenue and strong margins should grow long-term shareholder value.
Fiore Cannabis Inc. (CSE: FIOR) (OTCQX: FIORF) has made tremendous progress in refocusing its operations on core markets, driving revenue growth, and improving its bottom line. Cannabis investors may want to take a closer look at the stock as it ramps up revenue growth over the coming year with its new Apex facility in Nevada.
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