Farmers Edge Inc. (“Farmers Edge” or the “Company”) (TSX: FDGE), a pure-play digital agriculture company reports its unaudited financial results for the three months ended September 30, 2022. All amounts are expressed in Canadian dollars. Certain metrics are non-GAAP and other financial measures or key performance indicators. See “Key Performance Indicators and Non-GAAP and Other Financial Measures” below.
Business Highlights
- New Digital Agronomy acres added for the three months and the nine months ended September 30, 2022, were 0.4 million and 3.3 million acres, respectively, including 0.2 million new Progressive Grower Program (“PGP”) acres in Q3 2022 (YTD – 1.6 million PGP acres). Management made the decision in early July 2022 to pause the PGP program and no longer provide a free acre period to customers.
- Subscribed acres were 12.3 million at September 30, 2022. This was 3.1 million acres lower than at June 30 ,2022 due to the release of PGP acres not converted, normal paid acres churn and lower smart reporting acres.
- ARR at September 30, 2022 was $43.0 million due to lower subscribed acres.
- During the quarter, management developed a new strategic plan focusing on hiring new talent, building a B2B enterprise customer footprint, and improving the customer experience. Management is also executing a cost reduction program which will save the company $20 million annually starting in Q1 2023.
- The $75 million financing with Fairfax Financial Holdings Limited was closed in July 2022 and management believes the company has sufficient funds to operate during the next 12 months and will continue to focus on reducing the cash burn rate and accelerating growth.
“We have implemented a cost turnaround plan to streamline our operations, lower operating expenses and reduce the cash burn rate,” said Vibhore Arora, Chief Executive Officer of Farmers Edge. “At the same time, we are investing in our technology in order to better serve our growers and enterprise customers. Our technological advancements, combined with our emphasis on a new B2B enterprise strategy, will strengthen our market position and drive top-line growth.”
OPERATING HIGHLIGHTS
|
in thousands, except per share amounts |
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
Unaudited |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
||||
|
FINANCIAL PERFORMANCE for periods ended September 30 |
|
|
|
|
|
|
|
|
||||
|
Digital Ag and Fertility solutions revenue |
$ |
4,624 |
|
$ |
4,953 |
|
$ |
15,333 |
|
$ |
16,905 |
|
|
Add: channel partner subsidies |
|
— |
|
|
400 |
|
|
— |
|
|
2,416 |
|
|
Digital Ag and Fertility solutions subscriptions |
|
4,624 |
|
|
5,353 |
|
|
15,333 |
|
|
19,321 |
|
|
Business analytic solutions |
|
379 |
|
|
856 |
|
|
797 |
|
|
2,504 |
|
|
Agronomic services |
|
315 |
|
|
279 |
|
|
528 |
|
|
696 |
|
|
Crop input sales |
|
625 |
|
|
336 |
|
|
5,524 |
|
|
336 |
|
|
Revenues (1) |
$ |
5,943 |
|
$ |
6,824 |
|
$ |
22,182 |
|
$ |
22,857 |
|
|
Operating expenses (2) |
$ |
(24,379 |
) |
$ |
(23,147 |
) |
$ |
(79,936 |
) |
$ |
(56,541 |
) |
|
Non-recurring items (3) |
|
2,606 |
|
|
359 |
|
|
5,880 |
|
|
(6,335 |
) |
|
Adjusted EBITDA (4) |
$ |
(15,830 |
) |
$ |
(15,964 |
) |
$ |
(51,874 |
) |
$ |
(40,019 |
) |
|
|
|
|
|
|
|
|
|
|
||||
|
Net loss (6) |
$ |
(21,125 |
) |
$ |
(19,359 |
) |
$ |
(66,826 |
) |
$ |
(46,616 |
) |
|
Loss per share – basic & diluted (5) |
$ |
(0.50 |
) |
$ |
(0.46 |
) |
$ |
(1.59 |
) |
$ |
(1.33 |
) |
|
|
|
|
|
|
|
|
|
|
||||
|
Adjusted Free Cash Flow (4) |
$ |
(15,061 |
) |
$ |
(18,295 |
) |
$ |
(57,730 |
) |
$ |
(61,165 |
) |
|
|
|
|
|
|
|
|
|
|
||||
|
|
September 30, 2022 |
|
December 31, 2021 |
|
|
|
|
|
||||
|
FINANCIAL POSITION as at date specified |
|
|
|
|
|
|
|
|
||||
|
Total assets |
$ |
83,618 |
|
$ |
135,783 |
|
|
|
|
|
||
|
Total liabilities |
$ |
42,644 |
|
$ |
31,749 |
|
|
|
|
|
||
|
Total equity |
$ |
40,974 |
|
$ |
104,034 |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
||||
|
|
September 30, 2022 |
|
June 30, 2022 |
|
|
|
|
|
||||
|
KEY PERFORMANCE INDICATORS AND OTHER FINANCIAL MEASURES as at date specified |
|
|
|
|
|
|
|
|
||||
|
Digital Agronomy Acres (6) |
|
11,790 |
|
|
14,208 |
|
|
|
|
|
||
|
Other Acres (6) |
|
494 |
|
|
1,127 |
|
|
|
|
|
||
|
Total Subscribed Acres (6) |
|
12,284 |
|
|
15,335 |
|
|
|
|
|
||
|
Annual Recurring Revenue (ARR) (6) |
$ |
43,039 |
|
$ |
49,014 |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
||||
| (1) Revenues include $0.4 million and $2.4 million subsidies revenue related to commercial partner agreements for the three months and nine months ended September 30, 2021, respectively. There was no similar item in the three months and nine months ended September 30, 2022. |
| (2) Operating Expenses include Cost of revenue, Data and technology infrastructure expenses, Selling and marketing expenses, Product research and development expenses, and General and administrative expenses including restructuring expenses and legal fees as set out on the Company’s Statements of Operations and Comprehensive Loss in its Financial Statements. |
| (3) Non-recurring items include restructuring expenses of $0.2 million and legal and consulting fees of $2.4 million in Q3 2022 compared to $0.4 million in Q3 2021 related to legal and consulting fees. Non-recurring items also include restructuring expenses of $1.4 million and legal fees of $4.5 million in Q3 YTD 2022 compared to $0.5 million related to costs incurred to become a public company and legal fees of $1.4 million in Q3 YTD 2021. Satellite imagery settlement gain of $8.2 million is also included in the YTD 2021 numbers. |
| (4) Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures used throughout this MD&A. See “Key Performance Indicators and Non-GAAP and Other Financial Measures” for more information on each non-GAAP financial measure. A quantitative reconciliation of Adjusted EBITDA to Net loss and Free Cash Flow, the most directly comparable IFRS financial measures are disclosed in our financial statements to which Adjusted EBITDA and Adjusted Free Cash Flow relates, is in the “Results of Operations” section of this MD&A. |
| (5) Dilutive securities have been excluded from the calculation of diluted loss per share because including them would be anti-dilutive. The loss per share – basic and diluted for the periods ended September 30, 2021 and 2022 have been retrospectively adjusted to reflect the consolidation of common shares on a 7:1 basis, which occurred at the time of the IPO. |
| (6) Digital Agronomy Acres, Other Acres, Total Subscribed Acres and ARR are supplementary financial measures used throughout this MD&A. See “Key Performance Indicators and Non-GAAP and Other Financial Measures” for more information on each supplementary financial measure. These numbers are unaudited. |
- Revenues for the three months and the six months ended September 30, 2022 (after including partner subsidies in 2021) were down $0.9 million and $0.7 million, respectively. Crop input e-commerce sales increases in both periods were partially offset by no subsidies in 2022 and lower digital ag and fertility solutions revenue due to the lower subscribed acres. Lower fertility revenue in Q1 2022 of $1.0 million due to a higher soil test completion rate in Q4 2021 also impacted the year-to-date results.
- The Adjusted EBITDA loss for the third quarter of 2022 was $15.8 million (2021 – $16.0 million) and $51.9 million (2021 -$40.0 million) for the nine months ended September 30, 2022. The reduction was primarily due to the weaker results in the digital agronomy business from lower subscribed acres and higher sales and marketing expenses which will be reduced in the future as part of the cost reduction plan.
- Adjusted Free Cash Flow deficiency was $15.1 million (2021 – deficiency of $18.3 million) in the third quarter of 2022 and a deficiency of $57.7 million (2021- deficiency of $61.2 million) for nine months ended September 30, 2022 and included the positive impact of a lower investment in working capital in Q3 2022.
- The Net loss was $21.1 million (2021 -$19.4 million loss) for the third quarter of 2022 and $66.8 million (2021 – $46.6 million) for the nine months ended September 30, 2022. Non-recurring items were $2.6 million in Q3 2022 (2021- $0.4 million) and nine month ended September 30, 2022 were $5.9 million (2021 – credit of $6.3 million).
Conference Call Notice
Farmers Edge will hold a live audio webcast at 8:30 a.m. Eastern Time on Tuesday November 15, 2022, to discuss the Company’s financial results and business highlights. All interested parties are invited to listen to the live audio webcast at https://www.gowebcasting.com/12263 Following the event, a replay of the webcast will be available on the Farmers Edge Investor Relations website.
Key Performance Indicators & Non-GAAP and Other Financial Measures
This press release makes reference to certain non-GAAP and other financial measures and key performance indicators (“KPIs”). These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We make reference to the following non-GAAP measures: “Adjusted EBITDA” and “Free Cash Flow”. This press release also makes reference to “Annual Recurring Revenue” or “ARR” and “Digital Agronomy Acres”, “Other Acres” and “Subscribed Acres”, which are operating metrics used in our industry. These non-GAAP measures and KPIs are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-GAAP measures in the evaluation of issuers. Our management also uses non-GAAP measures and KPIs in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation.
Adjusted EBITDA is the net loss before income tax expense, other income, finance costs, foreign exchange (gain) loss, depreciation and amortization after adjusting for the effects of any unusual non-recurring items. Adjusted EBITDA is a non-GAAP financial measure and its more directly comparable financial measure that is disclosed in our financial statements is net loss. The Company’s management and Board use this measure to evaluate consolidated operating results. In addition, this measure is used to make operating decisions as it is an indicator of the performance of the business and how much cash is being used by the Company and assists in determining resource allocation decisions. This measure may not be comparable to similar measures presented by other companies. See reconciliation under “Results from Operations”.
Free Cash Flow is net loss, adjusted for other income excluding government subsidies and financial assistance, finance costs, foreign exchange (gain) loss, depreciation and amortization as set out in the Company’s consolidated statement of operations and comprehensive loss in the financial statements, stock-based compensation, net additions to property and equipment and intangible assets, repayment of right‑of‑use obligations, and any unusual non‑recurring items. Free Cash Flow is a non-GAAP financial measure and its more directly comparable financial measure that is disclosed in our financial statements is net loss during the period. The Company’s management and Board use this measure to assess the availability of the Company’s cash. See reconciliation in “Results of Operations”.
Adjusted Free Cash Flow is net loss, adjusted for other income excluding government subsidies and financial assistance, finance costs, foreign exchange (gain) loss, depreciation and amortization as set out in the Company’s consolidated statement of operations and comprehensive loss in the financial statements, stock-based compensation, net additions to property and equipment and intangible assets, repayment of right‑of‑use obligations, any unusual non‑recurring items and changes in non-cash working capital. Free Cash Flow is a non-GAAP financial measure and its more directly comparable financial measure that is disclosed in our financial statements is net loss during the period. The Company’s management and Board use this measure to assess the availability of the Company’s cash. See reconciliation in “Results of Operations”.
Adjusted Free Cash Flow is useful as a performance measure to analyze the cash used in operations before the seasonal impact of changes in working capital items or other unusual items.
Adjusted EBITDA and Net Loss
|
in thousands |
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
for the periods ended September 30 |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
||||
|
Digital Agronomy operations |
$ |
(16,324 |
) |
$ |
(15,964 |
) |
$ |
(51,580 |
) |
$ |
(40,019 |
) |
|
E-commerce operations |
|
494 |
|
|
— |
|
|
(294 |
) |
|
— |
|
|
Adjusted EBITDA (1) |
|
(15,830 |
) |
|
(15,964 |
) |
|
(51,874 |
) |
|
(40,019 |
) |
|
Foreign exchange (gain) loss |
|
52 |
|
|
(815 |
) |
|
594 |
|
|
(2,595 |
) |
|
Depreciation of property and equipment |
|
2,506 |
|
|
2,634 |
|
|
7,542 |
|
|
7,669 |
|
|
Amortization of intangible assets |
|
2,143 |
|
|
2,010 |
|
|
5,432 |
|
|
5,677 |
|
|
Finance costs |
|
449 |
|
|
155 |
|
|
740 |
|
|
7,586 |
|
|
Other income |
|
(2,461 |
) |
|
(948 |
) |
|
(5,236 |
) |
|
(5,405 |
) |
|
Non-recurring items (2) |
|
2,606 |
|
|
359 |
|
|
5,880 |
|
|
(6,335 |
) |
|
Net loss |
$ |
(21,125 |
) |
$ |
(19,359 |
) |
$ |
(66,826 |
) |
$ |
(46,616 |
) |
|
|
|
|
|
|
|
|
|
|
||||
|
Digital Agronomy operations |
$ |
(20,070 |
) |
$ |
(19,031 |
) |
$ |
(64,953 |
) |
$ |
(46,288 |
) |
|
E-commerce operations |
|
(1,055 |
) |
|
(328 |
) |
|
(1,873 |
) |
|
(328 |
) |
|
Total net loss |
$ |
(21,125 |
) |
$ |
(19,359 |
) |
$ |
(66,826 |
) |
$ |
(46,616 |
) |
| (1) Adjusted EBITDA is a non-GAAP financial measure. See “Key Performance Indicators and Non-GAAP and Other Financial Measures” for more information on each non-GAAP financial measure. This table provides a quantitative reconciliation of Adjusted EBITDA to Net loss, the most directly comparable IFRS financial measure disclosed in our financial statements to which Adjusted EBITDA relates. |
| (2) Non-recurring items include restructuring expenses of $0.2 million and legal and consulting fees of $2.4 million in Q3 2022 compared to $0.4 million in Q3 2021 related to legal and consulting fees. Non-recurring items also include restructuring expenses of $1.4 million and legal fees of $4.5 million in Q3 YTD 2022 compared to $0.5 million related to costs incurred to become a public company and legal fees of $1.4 million in Q3 YTD 2021. Satellite imagery settlement gain of $8.2 million is also included in the YTD 2021 numbers. |
Free Cash Flow
|
in thousands |
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
for the periods ended September 30 |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
||||
|
Net loss |
$ |
(21,125 |
) |
$ |
(19,359 |
) |
$ |
(66,826 |
) |
$ |
(46,616 |
) |
|
Foreign exchange (gain) loss |
|
52 |
|
|
(815 |
) |
|
594 |
|
|
(2,595 |
) |
|
Depreciation of property and equipment |
|
2,506 |
|
|
2,634 |
|
|
7,542 |
|
|
7,669 |
|
|
Amortization of intangible assets |
|
2,143 |
|
|
2,010 |
|
|
5,432 |
|
|
5,677 |
|
|
Finance costs |
|
449 |
|
|
155 |
|
|
740 |
|
|
7,586 |
|
|
Other income excluding government subsidies and financial assistance |
|
(1,165 |
) |
|
(162 |
) |
|
(1,766 |
) |
|
(445 |
) |
|
Stock-based compensation |
|
176 |
|
|
842 |
|
|
646 |
|
|
2,616 |
|
|
Additions to property and equipment (net of proceeds) |
|
(666 |
) |
|
(1,010 |
) |
|
(6,435 |
) |
|
(6,024 |
) |
|
Additions to intangible assets (net of proceeds) |
|
(1,117 |
) |
|
(846 |
) |
|
(3,494 |
) |
|
(2,880 |
) |
|
Repayment of right-of-use obligations |
|
(885 |
) |
|
(715 |
) |
|
(2,700 |
) |
|
(2,254 |
) |
|
Non-recurring items (1) |
|
2,606 |
|
|
359 |
|
|
5,880 |
|
|
(6,335 |
) |
|
Free Cash Flow (2) |
$ |
(17,026 |
) |
$ |
(16,907 |
) |
$ |
(60,387 |
) |
$ |
(43,601 |
) |
|
|
|
|
|
|
|
|
|
|
||||
|
Changes in non-cash working capital |
|
1,965 |
|
|
(1,388 |
) |
|
2,657 |
|
|
(17,564 |
) |
|
|
|
|
|
|
|
|
|
|
||||
|
Adjusted Free Cash Flow (2) |
$ |
(15,061 |
) |
$ |
(18,295 |
) |
$ |
(57,730 |
) |
$ |
(61,165 |
) |
| (1) Non-recurring items include restructuring expenses of $0.2 million and legal and consulting fees of $2.4 million in Q3 2022 compared to $0.4 million in Q3 2021 related to legal and consulting fees. Non-recurring items also include restructuring expenses of $1.4 million and legal fees of $4.5 million in Q3 YTD 2022 compared to $0.5 million related to costs incurred to become a public company and legal fees of $1.4 million in Q3 YTD 2021. Satellite imagery settlement gain of $8.2 million is also included in the YTD 2021 numbers. |
| (2) Adjusted Free Cash Flow is a non-GAAP financial measure. See “Key Performance Indicators and Non -GAAP and Other Financial Measures”. This table provides a quantitative reconciliation of Adjusted Free Cash Flow to net loss during the period, the most directly comparable IFRS financial measure disclosed in our financial statements to which Adjusted Free Cash Flow relates. |
About Farmers Edge
Farmers Edge is leading the next agricultural revolution with the industry’s broadest portfolio of proprietary technological innovations, spanning hardware, software, and services. Powered by a unique combination of connected field sensors, artificial intelligence, big data analytics, and agronomic expertise, the Company’s digital platform turns data into actions and intelligent insights, delivering value to all stakeholders of the agricultural ecosystem. Farmers Edge disruptive technologies accelerate digital transformation on the farm and beyond, protecting our global resources and ensuring sustainable food production for a rapidly growing population.
For more information, please visit www.farmersedge.ca and SEDAR (www.sedar.com).
Forward-Looking Information
This press release may contain forward-looking information within the meaning of applicable securities legislation. Such information includes, but is not limited to, statements related to the Company’s anticipated results and future cost savings and its future business prospects, partnerships and opportunities, including the planned further expansion into the carbon credit market, and the anticipated benefits therefrom. Words such as “expect,”, “anticipate”, “intend,”, “may,”, “will”, “estimate” and variations of such words and similar expressions are intended to identify such forward-looking information. This information is based on the Company’s reasonable assumptions and beliefs in light of the information currently available to it and the statements are made as of the date of this press release. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the Company’s control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such assumptions, risks and uncertainties include, but are not limited to, the factors discussed under “Forward-Looking Information” and “Risk Factors” in the Company’s most recent Annual Information Form and under the “Risk Factors” section in the Company’s management discussion and analysis filed today, November 10, 2022, each of which are available on the Company’s website (www.farmersedge.ca/investor-relations/) and on SEDAR (www.sedar.com). The Company cautions that the list of risk factors and uncertainties is not exhaustive and other factors could also adversely affect the Company’s results. Readers are urged to consider the risks, uncertainties and assumptions associated with these statements carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such information. The Company does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.
View source version on businesswire.com: https://www.businesswire.com/news/home/20221110006171/en/