Irwin Naturals Files Q1 2022 Financials


Ryan Allway

May 30th, 2022

News, Top News


Cannabis Licensing and Ketamine Clinic
Rollup Strategy Accelerating Growth

Company to host conference call Tuesday, May 31, 2022 at 2:00 pm EST

LOS ANGELES, May 30, 2022 (GLOBE NEWSWIRE) — Irwin Naturals Inc. (CSE: IWIN) (OTC: IWINF) (FRA: 97X) (“Irwin” or the “Company”) announced the Company filed results for its first quarter of fiscal 2022, the period ended March 31, 2022 on www.sedar.com.

 

Philippe Faraut, CFO, stated, “Revenues were slightly impacted by supply chain issues related to a fire at a key supplier producing our CBD product line. These issues were resolved and, subsequent to the quarter, CBD sales are trending back to normal. Further impacts came from product transitions and order timing. Profitability remained strong with an 11.2% operating margin  despite start-up expenses related to building our cannabis licensing and psychedelic clinics businesses. Overall, with little debt on our balance sheet, positive cash flow, a rapidly growing network of profitable clinics and an expanding network of brand licensees for THC enhanced products, we remain in very robust financial health to fuel profitable expansion.”

Financial Summary

(US$ ‘000s)   Q1 2022 Change Q1 2021
 Operating Revenue   $22,594 -6.4% $24,135
Income from operations   $2,526 -33.6% $3,803
Margin   11.2% -25.6% 15.8%
EBITDA1   $2,931 -29.5% $4,157
Net Cash generated from Operating Activities   $5,518 -26.6% $7,514

 

 

1EBITDA is a non IFRS metric that management believes provides a metric for rapid analysis of the underlying strength of the business. A reconciliation from IFRS to EBITDA is provided in the accompanying tables at the end of this release.

 

Klee Irwin, CEO, commented, “As mentioned in this 2-page overview document and my keynote talk last week at Davos ‘22, brand is king. I strongly believe that in order to increase adoption rates of these amazingly effective treatments we need to build a national footprint of clinics, offering treatments at price points accessible to those who need them, not just those who can afford them. This is a natural extension of the Irwin Naturals brand promise, one known and trusted by over 100 million North Americans**.

 

Mr. Irwin continued, “We hit the ground running with deals involving seven clinics in the last several weeks. While only the beginning, our pace shows that clinics want to join our rollup  and that our brand promise resonates with them. We will continue to expand our pipeline, currently at over 100 target clinics, and will continue to add profitable acquisitions, expand our international footprint and accelerate profitable growth.”

 

Financial Highlights

  • The 6.4% decline in overall operating revenues were due largely to supply issues in the CBD segment related to a fire at a key supplier. The decline in sales is believed to be temporary as production of CBD products has restarted at the Company’s manufacturer. According to market data from Nielsen, the Company is outpacing the market in the CBD ingestible and topical area year-over-year. New non-CBD sales continue to perform due to the brand status and customer loyalty of Irwin’s traditional products. Other factors impacting sales related to order timing and the losses and gains of distribution of certain non-CBD mass market products
  • Income from operations in Q1 2022 came in at $2.5 million, down by 33.6%, driven primarily by the aforementioned decrease in business volume and startup costs related to Emergence by Irwin Naturals (ketamine clinics) and Irwin Naturals Cannabis (brand licensing to the cannabis industry).
  • The overall decrease in business volume paired with startup costs related to the Company’s initiatives in cannabis and the aforementioned startup costs resulted in a 29.5% decrease in EBITDA to $2.9 million.
  • The Company recorded positive cash flow from operations of $3.2 million. While down from the same period in the prior year, in part due to the aforementioned startup costs, the Company continues to be financially strong and consistently generates cash to fuel accelerated growth.
  • Positive cash flow from operations, combined with a largely undrawn line of credit, provides the Company with the financial resources to drive execution of its strategy.

 

Operational Highlights & Subsequent Events

Irwin Naturals has commenced its expansion into the high-growth cannabis and psychedelics sectors. The Company intends to leverage its household name brand status to drive an aggressive rollup of mental health clinics (the Company is focused on ketamine clinics, as this is currently the only FDA-approved psychedelic substance). Furthermore, the Company has begun executing on its brand licensing strategy throughout the US. To date, the Company has announced the acquisition of seven clinics (New England Ketamine has a binding Asset Purchase Agreement but is subject to closing conditions) as well as the signing of four brand licensing deals that will see Irwin Naturals products enhanced with THC offered in California, Colorado, Ohio and New Mexico.

 

State Psychedelic Clinic Acquisitions
Florida Ketamine Health Centers (5 clinics)
Iowa Midwest Ketafusion
New Hampshire New England Ketamine (Asset Purchase Agreement subject to closing conditions)
State Cannabis Licensees
California The Hive
Colorado Larsen Group II
New Mexico Assurance Laboratories
Ohio BeneLeaves

 

 

Clinics acquired and brand license deals announced to date

 

 

Conference Call Details

CEO Klee Irwin and CFO Philippe Faraut will be hosting a conference call on Tuesday, May 31, 2022 to discuss the results, as well as the Company’s strategy and execution going forward. Details for participants to listen to the call are as follows:

Date & time: May 31, 2022 at 2:00 pm EST, via zoom
   
Meeting URL: https://us02web.zoom.us/j/87935465330?pwd=ymntNIeINBwhHZajU3RQFsBnkt0-DN.1
   
Meeting ID: 879 3546 5330
   
By telephone: Canada: 1-647-558-0588
  North America: 1-646-558-8656

About Irwin Naturals

Irwin Naturals has been a household name and best-in-class nutraceutical company since 1994. It is now leveraging its brand into both the cannabis and psychedelic sectors. On a mission to heal the world with plant medicine, Irwin has operated profitably for over 27 years*. The growing portfolio of products is available in more than 100,000 retail doors across North America, where 80% of households know the Irwin Naturals brand**. In 2018, the Company first leveraged its brand to expand into the cannabis industry by launching hemp-based CBD products into the mass market. The Company is now leveraging its famous halo of brand trust to become, perhaps, the first household name brand to offer THC-based products. Its rapidly growing national chain of psychedelic mental health clinics is called Irwin Naturals Emergence.

 

*Under several corporate structures, Klee Irwin has operated the Irwin brand profitably since 1994, as measured by EBITDA adjusted for extraordinary costs.

 

**Based on a formal Company survey with a sample size of 500 randomly selected adults.

 

For investor-related information about the Company, please visit ir.irwinnaturals.com/

To contact the Company’s Investor Relations department, please call toll-free at (800) 883-4851 or send an email to [email protected].

 

Klee Irwin
______________
Klee Irwin
Chief Executive Officer
T: 310-306-3636
[email protected]

Regulatory Overview

The following is a brief summary of regulatory matters concerning ketamine in the United States (“US”). Under the Controlled Substances Act (21 U.S.C. § 811) (the “CSA”), ketamine is currently a Schedule III drug as well as being listed under the associated Narcotic Control Regulations, and psilocybin is currently a Schedule I drug.

 

Most US States have enacted Controlled Substances Acts (“State CSAs”) which regulate the possession, use, sale, distribution, and manufacture of specified drugs or categories of drugs and establish penalties for State CSA violations and form the basis for much state and local drug laws enforcement activity. State CSAs have either adopted drug schedules identical or similar to the federal CSA schedules or, in some instances, have incorporated the federal scheduling mechanism. Among other requirements, some US States have established a prescription drug monitoring or review programs collect information about prescription and dispensing of controlled substances for the purposes of monitoring, analysis and education.

 

In the United States, facilities holding or administering controlled substances must be registered with the US Drug Enforcement Agency (“DEA“) to perform this activity. As such, medical professionals and/or the clinics in which they operate, as applicable, are also required to have a DEA license to obtain and administer ketamine (a “DEA License“).  While ketamine is a controlled substance in the United States, it is approved for general anesthetic induction under the US Food, Drug, and Cosmetic Act. Once a drug is approved for use, physicians may prescribe that drug for uses that are not described in the product’s labelling or that differ from those tested by the manufacturer and approved by the Food and Drug Administration (the “FDA“).  Licensed medical practitioners may prescribe ketamine legally in Canada or the United States where they believe it will be an effective treatment in their professional judgment.

 

Please see Irwin’s filing statement on its SEDAR profile for more information on the regulatory environment and regulations surrounding the US THC industry.

 

Forward-Looking Information

This news release contains certain forward-looking statements that reflect the current views and/or expectations of management of the Company with respect to performance, business and future events. Forward-looking statements can often be identified by words such as “may”, “will”, “would”, “could”, “should”, “believes”, “estimates”, “projects”, “potential”, “expects”, “plans”, “intends”, “anticipates”, “targeted”, “continues”, “forecasts”, “designed”, “goal”, or the negative of those words or other similar or comparable words. Forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about the business and the industry and markets in which the Company operates. The Company does not undertake any obligation to release publicly any revisions for updating any voluntary forward-looking statements, except as required by applicable securities law.

 

Neither the CSE nor its Market Regulator (as that term is defined in policies of the CSE) accepts responsibility for the adequacy or accuracy of this release.

SOURCE: Irwin Naturals Inc.

 

EBITDA and Adjusted EBITDA – Reconciliation

The Company defines EBITDA and Adjusted EBITDA as per the table below. It should be noted that these performance measures are not defined under IFRS and may not be comparable to similar measures used by other entities. The Company believes that these measures are useful financial metrics as they assist in determining the ability to generate cash from operations. Investors should be cautioned that EBITDA and Adjusted EBITDA should not be construed as an alternative to net earnings or cash flows as determined under IFRS. The reconciling items between net earnings, EBITDA, and Adjusted EBITDA are as follows:

 

  Three months ended            
(in thousands) March 31,   $     %  
2022   2021   Change     Change  
Net Profit $ 2,235   $ 3,715   $ (1,480 )   -39.8 %
Interest Expense 249   28   221     789.3 %
Income Tax (Recovery) / Expense 42   60     (18 )   -30.0 %
Depreciation and Amortization 405   354   51     14.4 %
EBITDA $        2,931   $        4,157   $      (1,226 )   -29.5 %

 

 

 

Irwin Naturals Consolidated Audited Balance Sheet

        March 31, December 31,
    Notes   2022   2021
ASSETS            
Current Assets:            
Cash       $ 853   $ 625
Other Financial Assets       1   1
Trade Receivables   15   16,273   16,394
Inventory   6   20,003   18,652
Prepaid Expenses and Other Current Assets   5   1,237   1,469
Total Current Assets       38,367   37,141
             
Non-Current Assets:            
Property and Equipment   7   203   190
Right-of-Use Assets   9   3,552   3,722
Notes Receivable from Shareholders   18   3,272   3,264
Notes Receivable from Related Parties   11   100  
Goodwill   4   6,114  
Intangible Assets   11   87   87
Other Non-Current Assets       165   165
Deferred Tax Asset   20   2,337   2,650
Total Non-Current Assets       15,830   10,078
             
TOTAL ASSETS $    54,197 $           47,219
             
LIABILITIES            
Current Liabilities:            
Trade and Other Payables   10   $ 15,476   $ 13,310
Reserve for Returns       491   814
Lease Liability – Current   9   1,488   1,366
Note Payable – Current   14   7  
Line of Credit   8   3,636   6,178
Total Current Liabilities       21,098   21,668
             
Non-Current Liabilities:            
Lease Liability – Non Current   9   2,101   2,434
Note Payable – Non Current   14   109  
Contingent Consideration   4   3,910  
Deferred Tax Liability   20   20   1
TOTAL LIABILITIES       27,238   24,103
             
EQUITY            
Multiple Voting Shares   12   59   59
Subordinate Voting Shares   12   0   0
Class B Non Voting Shares   12   13,750   13,750
Accumulated Other Comprehensive Income       4     (9)
Retained Earnings       2,024   681
Total Controlling Interest       15,837   14,481
Non-Controlling Interest   19   11,122   8,635
Total Equity       26,959   23,116
TOTAL LIABILITIES & EQUITY       $    54,197   $           47,219

 

 

 

Irwin Naturals Consolidated Audited Statement of Profit and Loss

  For the Three Months Ended
  March 31,   March 31,
  2022   2021
Operating Revenue $ 22,594     $ 24,135  
Cost of Sales (11,548 )   (12,388 )
Gross Profit         11,046          11,747  
           
Operating Expenses:          
Selling, General and Administrative Expenses 8,520     7,944  
Income from Operations           2,526           3,803  
           
Other Expense:          
Interest Expense (249 )   (28 )
Total Other Expense (249 )   (28 )
           
Profit before Income Taxes           2,277           3,775  
           
Income Tax Expense (Note 20) (696 )   (60 )
     
Net Profit           1,581           3,715  
Less: Net Profit Attributable to Non-Controlling Interest (237 )    
Net Profit Attributable to Controlling Interest $ 1,344     $ 3,715  
     
Foreign Currency Translation Differences 4      
     
Total Comprehensive Income           1,585           3,715  
Less: Comprehensive Income Attributable to Non-Controlling Interest (237 )    
Comprehensive Income Attributable to Controlling Interest $ 1,348     $ 3,715  
     
Earnings per share – basic $ 1.32     $ 3.72  
Earnings per share – diluted $ 0.00     $ 3.72  
Weighted average number of shares outstanding- basic 1,200,001     1,000,000  
Weighted average number of shares outstanding – diluted 321,368,241     1,000,000  

 

 

 

Irwin Naturals Consolidated Audited Statements of Cash Flows

  For the Three Months Ended
  March 31,     March 31,  
  2022     2021  
           
Net Profit $ 1,581     $ 3,715  
Adjustments to Reconcile Net Profit to Net Cash Provided by Operating Activities:          
Depreciation and Amortization 405     354  
Change in Allowance for Doubtful Accounts 58     69  
Change in Inventory Reserve (355 )    
Deferred Tax Asset 332      
Non-Cash Share Capital from Ketafusion Acquisition 2,248      
Interest Income (8 )    
Interest Expense 38     28  
Income Taxes Expense 696     60  
Changes in Working Capital:          
Trade Receivables 63     192  
Inventory (996 )   (766 )
Prepaid Expenses and Other Assets 231     242  
Trade and Other Payables 1,548     3,656  
Reserve for Returns (323 )   (7 )
Changes in Other Non-Current Assets     (29 )
Net Cash Provided by Operating Activities 5,518     7,514  
           
Cash Flow from Investing Activities:          
Purchases of Property and Equipment (40 )    
Contingent Consideration 3,910      
Goodwill (6,114 )    
Net Cash Used in Investing Activities (2,244 )    
           
Cash Flow from Financing Activities:          
Proceeds from Line of Credit 13,338     622  
Payments of Line of Credit (15,880 )   (7,122 )
Notes Receivable from Related Parties (100 )    
Distributions to Shareholders     (1,097 )
Payments on Lease Liability (419 )   (325 )
Net Cash Used in Financing Activities (3,061 )   (7,922 )
Effect of Foreign Exchange on Cash 16      
Net Increase in Cash 229     (408 )
Cash at Beginning of the Year 625     442  
Cash at End of the Year $ 854     $ 34  

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.


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