On September 12, 2019, 1933 Industries (TGIF.C) provided guidance for Q4, 2019 – the quarter ended six weeks ago on July 31, 2019.
1933 Industries owns cannabis cultivation, extraction, processing and manufacturing assets, along with a portfolio of brands including: AMA flower and AMA concentrates, CBD-infused Canna Hemp, Canna Hemp X, and Canna Fused.
“Guidance” refers to an “indication or estimate of future earnings”.
These fiscal projections often have influence over investor decisions to buy, hold, or sell the stock.
Public companies are not legally required to provide earnings guidance, but most of them do because it’s an opportunity to contextualise the numbers in a more nuanced fashion than a press-released earnings report.
Timely communication with the Street helps investors to forgive “earnings lumpiness”. Guidance is a particularly useful tool for micro-cap companies without analyst coverage, as it gives investors an insight into earnings growth trajectories.
It’s reasonable to think a company might goose the guidance numbers up to create a short-term share-price bump. But that doesn’t happen a lot. More often the guidance is willfully conservative, so that the company can “exceed expectations” later.
1933 Industries Q4, 2019 Guidance:
Revenue of $5.2 million
13% increase over Q3 results $4.6M)
33% increase over Q4, 2018 ($3.9M)
A cash balance of $18.6 million
The cash balance is about $14.7 million higher than the previous quarter end.
1933 anticipates revenues for fiscal 2019 to total $18 million, marking an increase of 42.9% over its fiscal 2018 results $12.6M).
Gross margins are projected to continue to improve during the second half of fiscal 2020, as 1933’s infrastructure projects become fully operational.
Revenues are expected to increase during fiscal 2020, as 1933 expands distribution of its brands across the U.S, combined with additional revenue from new licensing partners.
“Our robust cash position will be utilized to complete large infrastructure projects, ramp up cultivation and manufacturing production in California and open new markets with an immediate focus in Arizona,” stated 1933 President Chris Rebentisch, “We have set a disciplined growth path to scale up our assets and production capacity in both Nevada and California where we see increased consumer demand for our AMA and Canna Hemp premium products.”
Below, is an illuminating July, 2019 interview with Rebentisch conducted by Proactive Investors.
Q4, 2019 Operational Highlights:
Completed construction & permitting of new cultivation facility in Las Vegas
Anticipated first harvest by December 2019
Original cultivation facility converted to expanded extraction facility
Increased raw material production for shatter, crumble, sugar, wax, budder, and distillate
Customized hemp extraction facility to produce CBD, CBN, CBG, CBC
Anticipated increased cannabinoid extraction efficiency
higher recapture rate
Higher margins for 1933’s branded goods.
State Expansion:
1933 has an agreement with California-based Green Spectrum, to assist them in establishing a new cannabis manufacturing and extraction facility.
In turn, Green Spectrum has a non-exclusive right to produce, manufacture, market and sell the 1933’s licensed products within California.
Green Spectrum is a cannabis cultivator, manufacturer and distributor, and also holds a pending home delivery business license.
The partnership with Green Spectrum will help create a turnkey expansion model that can be exported to other states.
On September 10, 2019 Blonde, a new high-end cannabis brand made its debut in Nevada after successful implementation in California.
Alternative Medicine Association (AMA), a 91% owned subsidiary of 1933, signed a one-year agreement for the exclusive rights to “cultivate flower, manufacture pre-rolls, live resin vape pens and cartridges” under the Blonde brand for distribution to legal dispensaries in Nevada.
In this Equity Guru Podcast, Chris Parry sat down with Rebentisch, to get a better look at the company, its holdings, the sector and what investors can expect over the next 12 months.
Rebentisch explains why CBD has been such an important revenue-generator in the early days of 1933.
“We track our demographic,” stated Rebentisch at the 3-minute mark of the podcast, “We do both THC products and hemp-based CBD products. With the THC product, we have a slight majority of men, aged 21 to 35. But then on the CBD side, the non-psychoactive side, it’s the 40 to 80-year-old, predominantly female. It’s the older professional woman. It’s the soccer mom. It’s the grandma. It’s that demographic that is just exploding.”
1933’s 12,000 sq. ft hemp extraction facility will be one of Nevada’s largest hemp operations, allowing for isolation of THC, CBD, CBN, CBG and CBC.
It boasts monthly throughput capacity of 68,000 kgs. of hemp biomass, producing approximately 5,000 kgs. of full spectrum oils or 4,500 kgs. of CBD isolate.
CBD isolate is currently worth about $7.50 per gram, making the targeted production worth a potential $33 million a month in retail sales. Actual sales, cost-of-goods and profit margins still to be determined.
1933 is a young company and there are a lot of question marks. But the curve line on revenue growth isn’t one of them.
The Company’s Q4 and audited Annual Report will be released by its due date of November 28, 2019.
Full Disclosure: 1933 Industries is an Equity Guru marketing client.
