Fire & Flower Reports Q3 Revenues of $13.7 Million, Net Income of $10.2 Million
Fire and Flower Holdings (TSX: FAF) released its third quarter financials for the thirteen weeks ended November 2, 2019 this morning, reporting revenues of $13.7 million on a net income of $10.2 million for the quarter. Revenues were up 23.6% on a quarter over quarter basis, however gross margins decreased marginally during the period relative to the previous quarter.
Despite the increase in sales, gross margins dipped to 34.7%, from that of 36.5% in the prior period. Average sales per store also decreased, with the current quarters 30 stores averaging out to revenues of $456,666 across the thirteen week period, as compared to 22 stores averaging $503,636 in revenues during the second quarter. While this ratio will be impacted by store opening schedules during the quarter, it is nonetheless a decrease.
Gross profit for Fire and Flower during the third quarter amounted to $4.7 million, while total expenses came in at $10.6 million. Expenses primarily consisted of general and administrative at $7.1 million, and depreciation and amortization of $2.0 million. Within the provided breakdown, general and administrative expenses largely consisted of salaries and benefits at $4.3 million, followed by legal and professional fees at $0.5 million.
The firm managed to post a net income for the quarter as a result of other income, which amounted to $16.1 million in total. This largely consisted of a gain from a derivative liability associated with the firms outstanding convertible debentures. In layman terms, this means the company “profited” from the value of its equity decreasing.
Fire and Flower posted a net income of $10.2 million during the quarter as a result.
Noteworthy for Fire and Flower shareholders is the debt coming due in 2020 for the firm. Currently, $47.1 million in the form of convertible debentures is due for payment in June and July 2020, all of which is currently under the previously agreed upon conversion prices. With only $42.8 million in cash and cash equivalents, and a negative operating cash flow, its likely that further dilution will come to shareholders as agreements are entered to lower conversion prices for the debt.
Fire and Flower last traded at $0.89 on the TSX.
Information for this briefing was found via Sedar and Fire and Flower Holdings. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.
