Cannabis Operator Makes Extremely Difficult Decision To Lay Off 63 Employees For Expected Savings Of $7M, Spends ~$21M In The Process

Clever Leaves Holdings Inc. CLVR CLVRW announced the wind-down of all operations in Portugal as part of its ongoing restructuring initiatives. Under this restructuring plan, the company expects its Portuguese flower cultivation, post-harvest processes, and manufacturing activities to cease in full by the end of the first quarter of 2023.

By exclusively cultivating and producing our cannabinoid products in Colombia, we aim to leverage our existing cost efficiencies in the country as we ramp our dry flower offering, stated Andres Fajardo, CEO of Clever Leaves. We believe this transition will allow us to optimize our production infrastructure and drive increased cost savings, positioning us to compete more effectively in the global medicinal cannabis market. Although our decision was extremely difficult, we believe it is in the best interests of the company, since it positions us more effectively to satisfy our customers requirements. Additionally, we plan to incorporate the substantial learnings from our work in Portugal to enhance the success of our Colombian operations.

Colombia Cultivation Transition and Flower Strategy

Beginning in the second quarter of 2023, the company will solely cultivate its flower strains in its Colombian greenhouses, where preparations for dry flower exports have been underway for the past 18 months. Clever Leaves believes it remains on track to commence sales of dry flower from Colombia later this quarter, and it has begun the process of transitioning its flower production to Colombia for current customers.

Restructuring Costs and Expected Savings

On January 17, 2023, Clever Leaves board of directors authorized a restructuring plan that is designed to improve operating margin and support the companys growth, scale, and profitability objectives. In conjunction with its restructuring plan and wind-down in Portugal, the company announced a collective dismissal of 63 employees associated with its Portuguese operations. Clever Leaves expects to incur total charges of approximately $19 million to $21 million in the fourth quarter of 2022 related to its operational closure in Portugal. The charges that Clever Leaves expects to incur are subject to a number of assumptions, and actual expenses may differ from the estimates disclosed above.

Taken together, the operational transition and workforce reduction initiatives are expected to generate approximately $7 million in savings by year-end 2023, compared to 2022.

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