Farmers edge comment.This was a $10 IPO.
It is clear, the customers do not like the product.
ESG investors that jumped may look to Farm for exposure to the sector.
Farmers Edge Inc. FDGE (TSX): C$0.45 Stock Rating: Sector Perform Target: C$0.50 On the Edge Farmers Edge reported soft Q3 results relative to our (NBF) and consensus expectations. With respect to the headline results: • Revenue was $5.9 mln (-13.1% Y/Y) vs NBF at $7.6 mln (Cons. at $7.7 mln); • Adjusted EBITDA of -$15.8 mln vs NBF at -$15.9 mln (Cons. at -$14.0 mln). Other KPIs were also soft with: • Total subscribed acres of 12.3 mln, down -40.8% Y/Y (-19.9% Q/Q); • ARR of $43.0 mln was down -33.5% Y/Y (-19.9% Q/Q); • Negative FCF was -$16.5 mln with cash at September 30, 2022 of $10.7 mln. While the Company's conference call is scheduled for Tuesday, November 15, 2022, here is our take from a review of the filings. We estimate organic revenue declined 17.5% Y/Y, largely driven by lower total subscribed acres relative to the comparable period the year prior. As noted above, ARR came in at $43.0 mln (-33.5% Y/Y; -12.2% Q/Q). The decrease was largely due to a mismatch (i.e., net loss of ~3.1 mln acres) between acres gained and acres lost/discontinued within the quarter. That net churn (in acres) resulted in total subscribed acres at the end of Q3’2022 of ~12.3 mln (-40.8% Y/Y; -19.9% Q/Q). As communicated previously, the Company paused its PGP Program (i.e., no longer offering a one-year free acre period) on July 8, 2022 in an attempt to slow the burn rate (~$16.5 mln in Q3). In our view, that’s prudent given the Company’s dwindling cash balance and a conversion rate of only 20% on the PGP 21 Program acres with a due date to renew of October 1, 2022. ARPA (Average Revenue per Acre) ticked up to $1.94 (+47.2% Y/Y) care of the pivot to servicing higher quality acres (i.e., carbon/fertility acres). Further, Farmers Edge announced that it closed its C$75 mln credit facility with Fairfax Holdings (on July 15, 2022), noting that it had drawn $20 mln from that facility in Q3 which suggests the Company would have had a negative cash balance of ~$9.3 mln without that financing. With a current annualized burn rate of ~$66.0 mln and only $10.7 mln in cash remaining on its balance at the end of the quarter, we see notable liquidity risk. Looking ahead, the Company believes that it will be able to reduce costs by $20 mln annually beginning in Q1’2023 with its new strategy