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WINNIPEG, Manitoba — Farmers Edge Inc. (“Farmers Edge” or the “Company”) (TSX: FDGE), a pure-play digital agriculture company, reports its results for the three and nine months ended September 30, 2023. All amounts are expressed in Canadian dollars. Certain key performance indicators and non-GAAP and other financial measures used in this news release do not have a standardized meaning as presented by IFRS. See “Key Performance Indicators and Non-GAAP and Other Financial Measures” section below.
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Business Highlights
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In Q3 2023, Adjusted EBITDA deficiency improved by 30% over Q3 2022 and 25% for the nine months ending on September 30, 2023 over the comparable period in 2022. The Q3 2023 Adjusted Free Cash Flow deficiency improved by 12% for the three-month period and 27% for the nine-month period ended September 30, 2023. This progress was a result of various cost reduction efforts. Operating expenses, excluding non-recurring items, are expected to stabilize at around 50% of the 2022 run rate in 2024.
The revenue per acre in ARR increased by 14% in 2023. Digital Agronomy Acres also decreased by 20% in Q3 2023 primarily due to the discontinuation of low value acres in Brazil and expiring contracts. Plans are in place to reverse this trend in the future.
Claro, one of Latin America’s largest telecommunications providers, entered a strategic partnership with the Company in Q3 2023 to introduce Farmers Edge digital solutions to the Brazilian agricultural community. This collaboration promotes digital agtech tools and enhances rural internet connectivity, aiming to leverage our products on over 600,000 acres in 2024.
“In the third quarter, we made significant improvements in Adjusted Free Cash Flow and Adjusted EBITDA, while putting the building blocks in place to expand our top-line in the future,” said Vibhore Arora, Chief Executive Officer of Farmers Edge, said. “The strategic partnership with Claro demonstrates our commitment to driving revenue growth. We are confident that this deal marks the beginning of our revenue turnaround and appreciate Fairfax’s support which will enable us to continue executing our business plan.”
OPERATING HIGHLIGHTS
in thousands, except per share amounts
Three Months Ended September 30
Nine Months Ended September 30
2023
2022
2023
2022
FINANCIAL PERFORMANCE
Revenues
$
4,427
$
5,943
$
15,906
$
22,182
Operating expenses (1)
(17,695
)
(24,379
)
(58,755
)
(79,936
)
Non-recurring items (2)
2,215
2,606
4,112
5,880
Adjusted EBITDA (3)
$
(11,053
)
$
(15,830
)
$
(38,737
)
$
(51,874
)
Net loss
$
(17,900
)
$
(21,125
)
$
(55,143
)
$
(66,826
)
Loss per share – basic & diluted
$
(0.43
)
$
(0.50
)
$
(1.31
)
$
(1.59
)
Adjusted Free Cash Flow Deficiency(3)
$
(13,285
)
$
(15,059
)
$
(42,350
)
$
(57,728
)
September 30, 2023
December 31, 2022
FINANCIAL POSITION as at date specified
Total assets
$
59,382
$
87,018
Total liabilities
$
91,666
$
66,529
Total equity (deficiency)
$
(32,284
)
$
20,489
September 30, 2023
December 31, 2022
KEY PERFORMANCE INDICATORS AND OTHER FINANCIAL MEASURES as at date specified
Digital Agronomy Acres (4)
5,189
9,773
Annual Recurring Revenue (ARR) (4)
$
19,438
$
34,429
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(1) 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 non-recurring legal fees as set out in the Company’s Statements of Operations and Comprehensive Loss in its Interim Financial Statements. (2) Non-recurring items include restructuring expenses of $0.7 million and legal fees of $1.5 million in Q3 2023 compared to restructuring expenses of $0.2 million and $2.4 million related to legal fees in Q3 2022. Non-recurring items include restructuring expenses of $1.0 million and legal fees of $3.1 million in Q3 YTD 2023 compared to $1.4 million in restructuring costs and legal fees of $4.5 million in Q3 YTD 2022. (3) Adjusted EBITDA and Adjusted Free Cash Flow Deficiency 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 Interim Financial Statements to which Adjusted EBITDA, Free Cash Flow, and Adjusted Free Cash Flow Deficiency relates, is in the “Results of Operations” section of this MD&A. (4) Digital Agronomy Acres and ARR are supplementary financialmeasures used throughout this MD&A. See “Key Performance Indicators and Non-GAAP and Other Financial Measures” for more information on each supplementary financial measure.
THIRD QUARTER BUSINESS UPDATE
The net loss for the three and nine months ended September 30, 2023, was $17.9 million and $55.1 million, respectively (Q3 2022 – $21.1 million loss; Q3 2022 YTD – $66.8 million). The improvement was the result of the company’s cost reduction efforts.
Digital Ag and Fertility solutions subscription revenue was $4.1 million for Q3 2023 (Q3 2022 – $4.6 million). The revenue decline primarily resulted from a lower acre footprint in North America, discontinuation of low-value acreage in Brazil, and the closure of the Australian operations. The decrease in the Q3 YTD 2023 Digital Agronomy and Fertility solutions subscription revenue was also lower than the prior period for the same reasons.
E-commerce revenue was nominal in Q3 2023 (Q3 2022 – $0.6 million) and $2.7 million for Q3 YTD 2023 (Q3 YTD 2022 – $5.5 million). This decline is primarily due to the Company shifting to a third-party business model. Business analytics solutions revenue for Q3 2023 was $0.2 million and $0.4 million for Q3 YTD 2023 (Q3 2022 – $0.7 million and Q3 YTD 2022—$1.3 million). The decreases are attributed to lower insurance revenue.
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Conference Call Notice
Farmers Edge will hold a live audio webcast at 8:30 a.m. Eastern Time on Thursday, November 9, 2023, 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/12696. 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”, “Free Cash Flow” and “Adjusted Free Cash Flow Deficiency”. This press release also makes reference to “Annual Recurring Revenue” or “ARR” and “Digital Agronomy 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 interim 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 of Operations”.
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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 interim 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 interim 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 Deficiency 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 Interim 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. Adjusted Free Cash Flow Deficiency is a non-GAAP financial measure and its more directly comparable financial measure that is disclosed in our Interim 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 Deficiency 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 September 30
Change
Nine Months Ended September 30
Change
2023
2022
2023
2022
Adjusted EBITDA (1)
(11,053
)
(15,830
)
4,777
(38,737
)
(51,874
)
13,137
Foreign exchange loss
124
52
72
66
594
(528
)
Depreciation of property and equipment
1,692
2,506
(814
)
5,224
7,542
(2,318
)
Amortization of intangible assets
1,516
2,143
(627
)
4,367
5,432
(1,065
)
Finance costs
1,467
449
1,018
3,876
740
3,136
Other income
(167
)
(2,461
)
2,294
(1,239
)
(5,236
)
3,997
Non-recurring items (2)
2,215
2,606
(391
)
4,112
5,880
(1,768
)
Net loss
$
(17,900
)
$
(21,125
)
$
3,225
$
(55,143
)
$
(66,826
)
$
11,683
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(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 Interim Financial Statements to which Adjusted EBITDA relates. (2) Non-recurring items include restructuring expenses of $0.7 million and legal fees of $1.5 million in Q3 2023 compared to restructuring expenses of $0.2 million and $2.4 million related to legal fees in Q3 2022. Non-recurring items also include restructuring expenses of $1.0 million and legal fees of $3.1 million in Q3 YTD 2023 compared to $1.4 million in restructuring costs and legal fees of $4.5 million in Q3 YTD 2022.
Free Cash Flow
in thousands
Three Months Ended September 30
Change
Nine Months Ended September 30
Change
2023
2022
2023
2022
Net loss
$
(17,900
)
$
(21,125
)
$
3,225
$
(55,143
)
$
(66,826
)
$
11,683
Foreign exchange loss
124
52
72
66
594
(528
)
Depreciation of property and equipment
1,692
2,506
(814
)
5,224
7,542
(2,318
)
Amortization of intangible assets
1,516
2,143
(627
)
4,367
5,432
(1,065
)
Finance costs
1,467
449
1,018
3,876
740
3,136
Other income excluding government subsidies, and financial assistance
(308
)
(1,165
)
857
(1,226
)
(1,766
)
540
Stock-based compensation
189
177
12
624
647
(23
)
Additions to property and equipment (net of proceeds)
(641
)
(666
)
25
(1,218
)
(6,435
)
5,217
Additions to intangible assets (net of proceeds)
(1,320
)
(1,117
)
(203
)
(4,080
)
(3,494
)
(586
)
Repayment of right-of-use obligations
(565
)
(885
)
320
(1,851
)
(2,700
)
849
Non-recurring items (1)
2,215
2,606
(391
)
4,112
5,880
(1,768
)
Free Cash Flow (2)
$
(13,531
)
$
(17,025
)
$
3,494
$
(45,249
)
$
(60,386
)
$
15,137
Changes in non-cash working capital
246
1,966
(1,720
)
2,899
2,658
241
Adjusted Free Cash Flow Deficiency (2)
$
(13,285
)
$
(15,059
)
$
1,774
$
(42,350
)
$
(57,728
)
$
15,378
(1) Non-recurring items include restructuring expenses of $0.7 million and legal fees of $1.5 million in Q3 2023 compared to restructuring expenses of $0.2 million and $2.4 million related to legal fees in Q3 2022. Non-recurring items also include restructuring expenses of $1.0 million and legal fees of $3.1 million in Q3 YTD 2023 compared to $1.4 million in restructuring costs and legal fees of $4.5 million in Q3 YTD 2022. (2) Free Cash Flow and Adjusted Free Cash Flow Deficiency are non-GAAP financial measures. See “Key Performance Indicators and non-GAAP and Other Financial Measures”. This table provides a quantitative reconciliation of Free Cash Flow and Adjusted Free Cash Flow Deficiency to Net Loss during the period, the most directly comparable IFRS financial measure disclosed in our Interim Financial Statements to which Free Cash Flow and Adjusted Free Cash Flow Deficiency relates.
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About Farmers Edge
Farmers Edge is an agriculture technology company with a broad portfolio of proprietary technological solutions, 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 and delivers value to growers and all stakeholders in the agricultural ecosystem. Farmers Edge technologies accelerate digital transformation on the farm and beyond, protecting our global resources, supporting sustainable food production for a rapidly growing population and helping growers and businesses reach their growth and sustainability goals.
For more information on Farmers Edge, please visit www.farmersedge.ca. Additional information relating to the Company, including all public filings, is available on 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 and Uncertainties” section in the Company’s management discussion and analysis filed today, November 8, 2023, 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.
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