Canadian modular farming leaders, CubicFarm Systems Corp announced its Q2 financial & operating results for the three and six months ended June 30, 2022, & announce laying off 16.5% of its workforce during the quarter to enhance its operational margins.
“In the second quarter, we continued our focus on project execution, including installations underway of our commercial indoor growing CubicFarm Systems and HydroGreen Automated Vertical Pastures™ (“AVPs”) solutions, while further building our sales pipeline,” said Carlos Yam, Chief Financial Officer, CubicFarms. “We will review our operating performance on an ongoing basis and implement measures, including expense management, to ensure financial alignment within our operations,” said Yam.
“HydroGreen’s installation of AVPs that make up the world’s largest automated indoor growing solution is nearing completion at Burnett’s Land & Livestock in Carpenter, Wyoming, where our HydroGreen Certified Dealer Network is already touring potential customers,” said Dan Schmidt, President of HydroGreen, a division of CubicFarms. “Recently, we welcomed more than 400 National Holstein Convention conference participants to our HydroGreen Innovation Center R&D facility in Sioux Falls, South Dakota. At the event, we showcased growing from seed to feed in six days and how nutritious HydroGreen fresh forage can lower methane emissions in dairy cows by about 24 per cent on a per unit milk output and in beef cattle by about 48 per cent on a per kilogram weight gain basis, plus other significant benefits like saving water and land. We’ve received strong interest in our machines from both domestic and international markets.”
“Our focus is on the strategic growth of our next generation of indoor growing systems, empowered by our software platform and latest research,” said Dave Dinesen, Chief Executive Officer, CubicFarms. “Our R&D efforts continue to drive improvements in the scalability of the CubicFarm Systems and HydroGreen AVPs, and through leveraging data science, we’re making continuous progress on plant and animal performance results. We’re also very excited about the announcement of our carbon credit commercialization strategy. The incremental value of carbon credits from our AVPs coupled with recently announced studies has created a compelling economic proposition in the livestock industry, in addition to the environmental benefits allowing farmers and ranchers to achieve reliable and consistent feed production for their herds.”
- The Company currently has a total of 223 modules pending manufacturing and installation, with a total estimated contract value of USD $30.7 million.
- Revenue for the three months ended June 30, 2022, was $2.9 million, up from $0.4 million in the prior period. Q2 revenue included sales of CubicFarm Systems and HydroGreen AVPs of $2.7 million, up from $0.1 million in the prior period. Revenue for the six months ended June 30, 2022, was $3.1 million, compared to $4.3 million in the prior period.
- Net loss for the three and six months ended June 30, 2022, was $9.1 million and $17.9 million respectively, compared to net loss of $6.5 million and $10.1 million in the prior period. The increased net loss in the current quarter reflected the Company’s continued expansion through staffing additions in the areas of research and development and general operations.
- Research and development expense for the three and six months ended June 30, 2022, was $3.2 million and $5.8 million respectively, compared to $1.3 million and $2.5 million in the prior period.
- Selling, general and administrative expense for the three and six months ended June 30, 2022, was $6.0 million and $11.7 million respectively, compared to $5.0 million and $8.9 million in the prior period.
- On April 1, 2022, the Company announced Mountainland Supply Company as a new member of the HydroGreen Certified Dealer Network.
- On April 27, 2022, the Company announced the appointment of Carlos Yam as CFO of the Company, effective June 27, 2022. With over 15 years of experience as a senior financial executive for public and private companies, Yam has served as CFO of both publicly traded and private companies with responsibilities ranging from strategic growth, capital markets, mergers and acquisitions, business integration, risk management, banking and treasury, to financial reporting and analysis and operational finance.
- On May 12, 2022, the Company announced new data that demonstrates 54% to 62% less energy is used in CubicFarm System modules compared to results reported by other vertical farms surveyed by Agritecture in its 2021 Global Controlled Environment Agriculture Census Report. With electricity being the number one input cost in vertical farming, this is a significant advantage to customers using the CubicFarm System technology.
- On May 17, 2022, the Company announced that its HydroGreen division has entered into an agreement with Deloitte LLP to develop a carbon commercialization program designed to provide high-quality carbon credits to a fast-growing global market. HydroGreen’s commercial scale AVPs help meet increasing demand for valuable farm-based inset and offset carbon credits from organizations with net-zero goals worldwide.
- On June 2, 2022, the Company announced the closing of its overnight marketed public offering of unsecured convertible debenture units (the “Debenture Units”) at a price of $1,000 per Debenture Unit for total gross proceeds of $6,540,000, and 7,361,000 common shares at a price of $0.55 per common share for total gross proceeds of $4,048,550. In aggregate, total gross proceeds were $10,588,550, which is inclusive of the partial exercise of the overallotment option.
- On June 14, 2022, the Company announced that it has entered an agreement with Cnossen Dairy for the sale of 10 HydroGreen AVPs. The AVPs will be installed in Hereford, West Texas, which currently milks 11,000 cows over 7,500 acres of farmland. In addition, the Company also announced Dairy Specialists, Advanced Dairy Systems, and Penner Farm Services have joined the HydroGreen Certified Dealer Network.
- On June 28, 2022, the Company announced that it has entered into agreements with NTE Discovery Park Ltd. for the sale of 26 CubicFarm System modules at a sale price of $4.4 million, as well as the future manufacturing of major components for contracts within North America. The initial 26 modules will be installed at Discovery Park in Campbell River, B.C., with the intention to expand with the sale and manufacturing of an additional 100 modules in the near future.
The Company’s second quarter financial statements and management’s discussion and analysis will be issued and filed on SEDAR at www.sedar.com on August 15, 2022, and will be available on the same day on CubicFarms’ website at https://cubicfarms.com/investors/.
The Company also announced a comprehensive review of its internal cost structure to optimize operating efficiency and accelerate its path to profitability.
“We have realigned operating expenses by reducing approximately 16.5% of our workforce and other non-payroll related overhead expenditures, resulting in an estimated $6.7 million of annualized savings, or 21.8% of the Company’s cash-based operating expenses on a trailing 12-month basis,” said Yam. “Investors can expect to see the positive impact of these initiatives and results starting from Q3 onwards. With an optimized corporate structure and cost reductions, we are better positioned to support the disciplined, long-term growth of the business.”
In addition, the Company will implement a centralized procurement structure aimed at rightsizing indirect costs and driving further efficiencies across its supply chain.