Business Wire

WINNIPEG, Manitoba--(BUSINESS WIRE)--$FDGE--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

• 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