Cannabis security consultant 3 Sixty Secure Corp (SAFE.C) reported a significant boost in revenue during the first quarter, underscoring a period of rapid growth and transformation for the Mississippi Mills-based company.
The earnings report coincides with 3 Sixty’s keynote presentation at the Canaccord Genuity 2019 Cannabis Conference in New York, an annual event that connects industry thought leaders with technology providers, brand owners and hemp growers from around the world.
It’s shaping up to be a big week for 3 Sixty, which has spent the better part of a year laying the foundation for sustainable business development. Those efforts are well reflected in the latest earnings report.
New customers drive Q1 results
3 Sixty Secure Corp reported first-quarter revenue of $3.4 million, an increase of 877% over year-ago levels and a 47% jump compared with the fourth quarter.
The revenue surge helped to offset some of the expenses incurred over the same period. The company’s expenses rose 1,798% year-over-year to $8.3 million. As 3 Sixty enters its sixth year of operations, higher capital expenditures are to be expected.
If customer acquisition is a proxy for future revenue growth, then 3 Sixty had a stellar quarter. New customer wins between January and March are expected to add roughly $20 million in recurring revenue annually.
“In January of 2018 we had a virtual office, eight employees and two vehicles generating monthly revenue of $75,000. 3 Sixty now provides enhanced financial security solutions, cannabis security consulting, guarding and secure cannabis transport services to more than 600 customers and more than 100 cannabis licensed producers across Canada,” Thomas Gerstenecker CEO and Founder of 3 Sixty, said in a statement.
“We have accomplished a tremendous amount in a very short period of time and believe we have laid a foundation for continued growth as the growth velocity of the cannabis sector continues to increase across Canada.”
Recurring revenue: the holy grail
Recurring revenue is one of the most vital metrics in today’s tech-driven business climate. Long-term contracts are the best way to guarantee recurring sales in the future.
In the first quarter, 3 Sixty secured multi-year contracts with Canopy Growth Corp, one of the world’s largest cannabis companies, as well as the Ontario government. The company will be providing security services for the Liquor Control Board of Ontario and Ontario Cannabis Store, which serves as the retail arm of the province’s cannabis industry.
Combined, these two clients are expected to bring in approximately $50 million in total aggregate revenue.
On top of that, 3 Sixty entered into operational agreements with over 100 licensed marijuana producers across the country.
After such a strong quarter, 3 Sixty’s management expects revenue to more than double in the second quarter. Strong guidance will provide SAFE stock with a solid base from which to grow.
SAFE was unchanged after the open on Tuesday. The stock is currently trading just below $0.39.
Cannabis boom? Not without security
Those of us who’ve watched the Narcos series on Netflix know how vital security is for any thriving drug business. But as it turns out, the legal cannabis industry is also in dire need of a trusted bodyguard to securely transport product, deploy security systems for grow ops and provide monitoring and storage services.
We’re talking actual muscle, advanced technology, armored vehicles and industry experts who know how to conduct a security audit. In the United States, where marijuana is still under federal prohibition, cash processing is another area that needs protection.
With the legal cannabis industry projected to reach $65 billion U.S. by 2023, protecting vital infrastructure and business interests will take on greater importance.
The industry is currently under-served when it comes to security systems providers. Aside from 3 Sixty, Garda (a traditional industry player) and a few others, there’s not much. First-mover advantage will be huge.
The evolution of security technology, customer education and growing competition are just some of the trends that will define the cannabis-security nexus in the coming years. Higher capital expenditure will follow, putting companies like 3 Sixty in prime position to expand into new industry verticals.
Full Disclosure: 3 Sixty Risk Solutions is an Equity.Guru marketing client.
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