1933 Releases Q3 Financial Results

1933 Industries (CSE:TGIF, OTCQX:TGIFF) released 2020 Q3 financial results, a period in which underlying results were adversely impacted by COVID-19 closures in Nevada.

COVID-19 Impacts Operations

The company generated $2.6 million in revenue, a decline of 18.6% quarter over quarter.  Gross margin came in at $0.9 million, an improvement of 186% from the previous quarter (loss of $0.8 million).

Adjusted EBITDA was -$3 million for the quarter, an improvement of 45% from the previous quarter (-$4 million).

Top line sales were negatively impacted by COVID-19 related closures in Nevada, leading to much lower-than-expected sales across the company’s product lines, in particular its AMA business line.

Even though cannabis businesses were deemed essential during the pandemic, the decline in tourism, and sales only being limited through delivery contributed to the revenue declines.

Subsequent to the reporting period, Nevada has announced plans to gradually reopen the economy, and the state has seen several leisure properties begun resuming limited operations as a result.

Dispensaries are now allowed to be opened in limited capacity too and permitted to do curbside pickup, which would help recover some revenue in the coming quarters.

The company’s cultivation facility is moving towards full capacity as the economy reopens, and they are now adjusting their business model to adapt to the rising popularity in online sales, by significantly increasing B2C E-Commerce with their Canna Hemp line of products.

Renewed Focus on Profitability

On June 15, 2020, the company announced the appointments of Paul Rosen as CEO and Eugene Ruiz as President.

Management stated that it is focused on cost controls, managing their cash position and improving efficiencies during the period of volatility brought on by COVID-19.  Mr. Ruiz stated the company’s main overarching goal is to reach cash flow positive operations as soon as possible.

As a result of this renewed focus on profitability, management announced that since the beginning of the current fiscal year, they have reduced SG&A expenses, public company expenses, and other non-operating expenses by 46%, 68% and 24% respectively.

These efficiencies should be fully reflected in the forthcoming operational quarter.

The outlook for the remainder of fiscal 2020 is for limited revenue growth as the company adapts to the uncertain economic backdrop of COVID-19.

Additional Operational Highlights

  • Scaledd up operations in the cultivation facility in Las Vegas, with all 15 grow rooms populated and continuous harvest occuring every 14 days.
  • On February 14th,2020, the company began harvesting their first batch of cannabis plants in California and has commenced distributing its Canna Hemp products to dispensaries with in the state.
  • On March 30, 2020, the company began harvesting its second batch of cannabis at its Las Vegas growing facility.

Outlook

COVID-19 and the resultant negative economic impact to the state of Nevada has presented 1933 Industries a challenged operational backdrop.

We are seeing green shoots of the economy recovering with the re-opening of casinos, however the pandemic remains the key risk factor in the absence of a functional COVID-19 vaccine.

Management’s singular focus on cost containment and profitability during this volatile period is the right strategy going forward. Ultimately this puts the company on a much more solid footing when tourism and economic growth return to Nevada.

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1933 Industries is a market awareness client of Capital 10X.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

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