Fluent Corp

Good afternoon, ladies and gentlemen, and welcome to Consortium's second quarter 2022 conference call. Joining us today are the company's CEO, Robert Beasley, and the company's CFO, Patricia Faveca. At this time, all participants are in a listen-only mode. After the company's prepared remarks, the management team will conduct a question and answer session, and conference call participants will be given instructions at that time. As a reminder, this conference call is being recorded and will be available for replay in the investor section of the company's website at www.getfluent.com. Please note that certain subjects discussed on this call, including answers the company may provide to questions, may include content that is forward-looking in nature and therefore subject to risks and uncertainties and other factors which would cause actual future results or performance to differ materially from any implied expectations. Such risks surrounding forward-looking statements are all outlined in detail within the company's regulatory filings, which can be found on CDAR.com. The company does not undertake to update or revise any forward-looking statements except to the extent required by applicable securities laws in Canada. In addition, during this call, the company will refer to supplemental non-IFRS accounting measures, including adjusted EBITDA, which do not have any standardized meaning prescribed by IFRS. As a final reminder on today's call, unless otherwise indicated, all dollar amounts are expressed in U.S. dollars. I would now like to turn the conference call over to Mr. Robert Beasley, the company's CEO. Sir, please go ahead.

Thank you, Charisse, and good afternoon, everyone. We generated exceptional results during the second quarter across all key financial metrics, including double-digit revenue growth, growth margin expansion, a near double in adjusted EBITDA and a material increase in cash flow generation. The investments we've made from 2021 forward to improve our cultivation and scale in Florida are now beginning to pay dividends. I encourage everyone to take a look at the revenue and adjusted EBITDA chart in our press release to see the phenomenal growth record that we're on at this time. As highlighted during our last quarterly update, we've been working diligently to refine our growth processes and environmental controls and our product quality has consistently improved with higher THC THC flower and significantly better yields per harvest. Our Sweetwater indoor cultivation facility is now fully operational and producing high quality products, while our yield per harvest in Tampa has more than doubled since the start of the year. All of this has culminated in better store economics across our 27 dispensary footprint in the state of Florida. where same-store sales were up 15% compared to Q1 and 21% year over year. In Tampa, the final phase of our cultivation expansion is nearly complete, which will add 5,000 square foot of canopy. We expect product from this new space to hit the shelves in the next couple of months, just in time for the fall season. Recall that Q3 is typically a slower part of the year for Florida, as many of our resident patients leave for the summer hot months. So this additional product coming into the fall when those residents return is well-timed. The benefit of our improved cultivation is also evident in our new patient acquisition, which continues to increase quarter after quarter. This has been supplemented by our community outreach program as well as the launch of several new branded products, including three different flavors of our agave line and now several high THC flower offerings. We expect to open an additional four to five new stores in Florida this year, which will bring our footprint up to more than 32 dispensaries by the year end. Looking at our other markets, in Pennsylvania, we opened our third dispensary in the state during the second quarter in Anvil, which brings us up to our three store cap in that state. In Michigan, as outlined in the earlier press release, we have discontinued operations in the state due to unfavorable market conditions. Over the last few quarters, I have referenced the many challenges in operating in Michigan, particularly with the illicit market and the lack of regulatory enforcement. Although we've consistently produced high-quality products in Michigan, contending with the illicit market has been a drag on margins, and we believe it's best to walk away as opposed to pouring more money into these operations. By exiting the state, we'll be eliminating the remaining amount due under the purchase agreement of approximately $7 million and expect to save approximately half a million per year in costs and expenses. Before I hand the call over to Patricia, I want to acknowledge the hard work and dedication of our team. Despite a challenging macroeconomic environment and inflationary pressure on the consumer wallets, we have continued to generate strong growth while improving profitability, which speaks to the quality of the products we're bringing to the market. It has not been an easy path of the last 18 months. However, I could not be more proud of the perseverance and hard work of our team. We still have ample room for growth as we continue to expand our footprint in Florida, and we look forward to executing our plan in the back half of the year. With that, I'll pass the call to Patricia, who can walk through the details of our financial results, and then we'll open the call for Q&A.

Thank you, Robert, and good afternoon, everyone. Please note that all figures are in US dollars, and all various commentary is going to be over your basis unless otherwise specified. So I'll jump right into results. Second quarter revenue increased 36% to 22.4 median compared to 16.5 median. The increase was largely driven by greater revenue from our 27 Florida dispensaries. Florida revenue increased 33% to 18.8 median compared to 14.2 median in the year goal period. Adjusted gross profit in Q2 increased 40% to 15 median or 67% of revenue compared to 10.7 median or 65.1% of revenues. in the year-go period. The increase was primarily driven by higher revenue for the quarter compared to the prior year. Second quarter operating expenses remained flat at 8.2 compared to the same period in 2021, but as a percentage of revenue, OPEX decreased significantly to 36.6% compared to 49.9% in 2021. Second quarter net loss totaled 12 million or 5 cents per share compared to net loss of 25 million or 11.5 11 cents per share in 2021 in the same quarter. Adjusted EBITDA increased 95% in the second quarter of 2022 to 10.2 million or 45.4% of revenue compared to 5.2 million or 31.7% of revenue due to 2021 with the increase due to improved productivity in our Florida and Pennsylvania dispensaries as well as two additional stores in each state compared to the prior period. Starting from the balance sheet, at June 30, 2022, we had $8.9 million in cash and a total debt of $69.3 million. That includes the debentures that were issued in the quarter. Regarding our outlook for 2022, we are reaffirming our previously issued guidance, and we continue to expect for the year revenues to range between $90 and $95 million. This reflects approximately a 42% increase from 2021 at the midpoint. In addition, we continue to expect adjusted EBITDA to range between 25 and 20 million, reflecting approximately 35% increase from 2021. Operator, we will now open the call for Q&A.