WINNIPEG, MB – March 25, 2022 – Farmers Edge Inc. (“Farmers Edge” or the “Company”) (TSX: FDGE), a pure-play digital agriculture company reported its financial results for the three months and year ended December 31, 2021. 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 year ended December 31, 2021 were 3.0 million and 7.3 million acres, respectively, including 2.4 million new Progressive Grower Program (“PGP”) acres (YTD – 5.3 million PGP acres).
- First quarter 2022 acre sales continue to be solid, with another 1.5 million digital agronomy acres signed to date.
- Other acres were up 0.9 million acres in Q4 to 2.4 million acres at December 31, 2021 and are business analytics acres. The reduction in other acres of 6 million acres for 2021 includes 2.0 million discontinued low value acres in the Russian and Ukrainian markets as we are winding down those operations and 3.6 million discontinued acres in prior quarters. These discounted acres had a combined recurring revenue value of approximately 0.7 million.
- Conversions of acres from the 2020 Elite Grower program were approximately 45% with the converted acres signing on to a higher value fertility product at over 65%.
- Conversions of acres from the PGP 21 program with a due date April 1, 2022 are approximately 63%.
- ARR of $60.4 million increased by $10.8 million (22%) since December 31, 2020 and is attributable to the addition of new acres and carbon offset revenue and upsells to fertility products in 2021 offset by the impact of foreign exchange, and 5.6 million digital agronomy acres that were discontinued including approximately 3.3 million 2020 Elite Grower Program acres not converted.
- 3.2 million acres under the carbon program were signed in Canada by the end of year. These acres are expected to generate $13 million of revenue primarily in the back half of 2022.
“We continue seeing solid demand for our higher value fertility products and Smart Carbon program,” said Wade Barnes, Chief Executive Officer and founder of Farmers Edge. “We are disappointed in our Elite 2020 conversion rate and have implemented steps to improve our retention rate and PGP conversion success by refining our business model, expanding and diversifying the channel partner network, pre-qualifying customers enrolling in the new PGP programs, and improving operational efficiency and effectiveness.”
OPERATING HIGHLIGHTS
(1) Revenues included subsidies and commercial contract revenue related to commercial partner agreements for the three months and years ended December 31, 2021 and 2020. Starting in 2021, the Company began marketing new acres under the Progressive Grower Program. Its remaining commercial contract arrangements expired on December 31, 2021.
(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 as set out on the Company’s Statements of Operations and Comprehensive Loss in its Financial Statements.
(3) Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures used throughout this Press Release. See below “Key Performance Indicators and Non-GAAP and Other Financial Measures” for more information on each non-GAAP financial measure.
(4) 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 December 31, 2020 and 2021 have been retrospectively adjusted to reflect the consolidation of common shares on a 7:1 basis, which occurred at the time of the IPO.
(5) The satellite imagery settlement gain of $8.2 million in the second quarter of 2021 is included in the results for the year ended December 31, 2021.
(6) Digital Agronomy Acres, Other Acres, Total Subscribed Acres and ARR are supplementary financial measures used throughout this Press Release. FY2020 Digital Agronomy Acres, Other Acres and Annual Recurring Revenue have been restated to conform to current year’s presentation. See below “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 year ended December31, 2021 (after adjusting for partner subsidies and commercial contract revenues from commercial partner agreements), were up $2.4 million and $1.0 million, respectively over the comparative periods in 2020. Q4 2021 higher revenue also reflects a higher fertility service completion rate and more fertility acres. Total revenues for the year ended December 31, 2021 reflect higher business analytic revenues and crop input sales from CommoditAg, which were more than offset by the impact of the stronger Canadian dollar, acres churn, and lower channel partner subsidies and commercial contract revenue.
- The Adjusted EBITDA loss for the fourth quarter of 2021 was $16.2 million (2020 – $4.6 million) and $49.9 million (2020 – $47.0 million) for the year ended December 31, 2021. The Adjusted EBITDA loss for the fourth quarter reflects lower revenue and higher expenses primarily related to stock compensation, higher people costs to support fertility service growth and other public company costs. The higher Adjusted EBITDA loss for 2021 relates to lower revenue which was partially offset by lower expenses, primarily related to the satellite imagery settlement impact of $8.2 million in Q2.
- Free Cash Flow was negative $17.4 million (2020 – negative $4.1 million) in the fourth quarter and negative $54.2 million (2020 – negative $51.3 million) for year ended December 31, 2021. The Free cash flow decline in the fourth quarter and full year 2021 reflects lower Adjusted EBITDA and lower government subsidies and assistance.
- The Net loss was $19.7 million (2020 -$17.1 million loss) in the fourth quarter and a net loss of $66.4 million (2020 – $84.6 million loss) for year ended December 31, 2021. The increased net loss of $2.7 million for Q4 was driven primarily by the higher Adjusted EBITDA loss which was partially offset by a reduction in finance costs compared to the prior period. The improved net loss of $18.3 million in 2021 was mainly a result of lower finance costs of $29.7 million and positive foreign exchange impacts which were partially offset by a reduction in government grants of $9.3 million in 2021.
- The Adjusted EBITDA deficiency and FCF deficiency were larger than expected for Q4 2021, primarily due to lower revenue related to the weaker 2020 Elite Grower Program conversion rate and the timing of the conversions, including some cancellation of earlier commitments and higher people costs to service the increase in acre volume.
- On March 25, 2022, the Company announced it has agreed to enter into a $75 million secured credit facility with Fairfax and/or certain affiliates of Fairfax (the ‘‘Facility”), which Facility will bear interest at a rate of 6% per annum and will mature January 31, 2025. The net proceeds of the Facility will be used for working capital and general corporate purposes. The company will pay an annual commitment fee of 1% on the total undrawn amount of the Facility. The closing of the Facility is subject to the acceptance of the Toronto Stock Exchange.
Conference Call Notice
Farmers Edge will hold a live audio webcast at 8:30 a.m. Eastern Time on Tuesday March 29, 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/11757. 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 as set out in the Company’s consolidated statement of operations and comprehensive loss in the financial statements. 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 below for a quantitative reconciliation of Adjusted EBITDA to net loss.
Free Cash Flow is net loss, adjusted for other income, 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, government subsidies and financial assistance, 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 below for a quantitative reconciliation of Free Cash Flow to net loss during the period.
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.
Subscribed Acres means the aggregate of all Digital Agronomy Acres and Other Acres, including both new and renewal acres as measured at each reporting date. Digital Agronomy Acres are the subject of a contract with a grower and are priced on a per acre basis. Other Acres typically include specialty products provided for fees that do not always correlate to acres subscribed, and can include those acres under fixed fee arrangements, product offerings that have a term of less than one year, and acres subscribed under its Business Analytics Solutions platform. Subscribed Acres, Digital Agronomy Acres and Other Acres are supplementary financial measures. The Company views Subscribed Acres as an important metric since these acres are expected to contribute to the future revenue of the Company.
Annual Recurring Revenue (“ARR”) measures the expected annualized subscription revenue associated with the Company’s contracts at the end of a reporting period. ARR is a supplementary financial measure. The recurring nature of the Company’s revenue provides visibility into future performance. However due to the revenue recognition policies under IFRS for Subscribed Acres, new acres may not immediately contribute to quarterly or annual revenues, depending on the timing and type of the new acres signed. The Company assesses its ARR at the end of each reporting period to reflect the expected annualized revenue associated with its committed contracts at a point in time. ARR includes carbon offset revenues from acres under contract with the Smart Carbon program. The carbon offset revenue potential is added to ARR by using the estimated carbon offsets created on an annual basis at an estimate of the market value for carbon offsets in a voluntary marketplace, excluding any additional years of carbon offsets that may accrue if multiple years are serialized. ARR also excludes any sales revenues associated with CommoditAg, as the revenues generated in that business are not based on a subscription model.
ARR is measured by taking the annual contract value at each period end date and adjusting for any committed recurring discounts or premiums on the contract and excluding any first‑year discounts, including those under the Progressive Grower program or those that are expected to be recovered upon a sale of carbon offsets. Contracts denominated in a foreign currency are translated to Canadian dollars based on the period end exchange rate. Management believes that ARR is a good predictor of its future revenue streams. Recurring revenue may fluctuate by the amount and timing of acre changes or cancellations on subscribed contracts, and by the foreign exchange impact of contracts held in foreign operations. For Subscribed Acres in the Progressive Grower program, ARR excludes the potential future upsell of converting to fertility contracts that would increase recurring revenue and excludes the potential lower recurring revenue as a result of an opt‑out option exercised by the grower.
Adjusted EBITDA and Net Loss
Free Cash Flow
About Farmers Edge
Farmers Edge is a global leader in digital agriculture revolutionizing the industry with a broad 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 adoption 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, March 25, 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.
For further information:
Farmers Edge Investor Relations:
InvestorRelations@FarmersEdge.ca
(204) 992-7019
Farmers Edge Media Relations:
Richard Berman
Richard@VerbFactory.com
(647) 294-8372