Great post, Towering. AHLooong!!!
Toweringmars wrote: We'll, since it’s been a few days since my last bathroom read, I thought perhaps I would go over a few things from my last write up, and expand on where I see the company going in the next few months. Perhaps we can get a little discussion going here and bring back a little bit of that excitement.
Q2-Snapshot:
So as 'most' of us have come to accept, Q2 was the beginning of a major transition period for the company. As a recap, we generated 9.775 in topline revenue. This is while utilizing 32,500kg's of our now licensed 128,500kg capacity. Along with handcuffed capacity, we previously had around 13,000kg's of extraction capacity, we now boast 115,000kg's. A pretty neat feat considering the regulatory hurdles we've faced thus far. The execution story here is very telling of how hard management has worked, and found ways to get things done in the down time.
Last year we grew 12,747kg's in our first year of outdoor harvest. To date, this has proven to result in 20.624 million in revenue for our young company. Now it’s been said many times that we are not looking to be wholesaler's, but rather a consumer packaged goods company chasing the higher margin products.
Moving forward:
Now this is pure speculation and some napkin math, but supposing we kept with the same trend we did last year, where we're looking at roughly 1,000kg's per acre. We can safely assume to see around 66,000kg's from the harvest this year. Given that we're scaling just a little over 5x, we could be looking at revenues of $104.56 million on a wholesale basis alone. (this is of course using the 5x multiplier on the sales from last year, not entirely an accurate representation of what ‘could’ be, and on a wholesale basis alone.) Factor in the lower costs per gram, and we'd see that profit margin grow in a big way.
Now a big trend I see from the short camp, is “how are they going to sell that product?”. Even though we’ve proven this through our execution of last year’s harvest. The news we got this morning was one of the key pieces to that puzzle. Aleafia Germany will be a serious feather in our cap moving forward, and one I am happy we have. What’s interesting to note is that Foliedge and Kesara have been trademarked in Germany, this to me says that they will be launching the Foliedge platform there as a means of educational tool, and we could see more revenue come in from that arm of our business as well. We’ve seen the positive impacts of this tool with gaining trust in the medical community here in Canada, why shouldn’t that be a major factor abroad? We saw that the company submitted its EU-GMP certification application on May 7th, but cannot speak to the timeline. This controlled drug license will be pivotal in obtaining this certification. There are 27 countries in the European Union, so bear in mind that once we secure EU-GMP status, we will likely be able to sell to many of those countries with favorable medicinal cannabis regulations. Back home we saw the successful launch of our Direct-to-door medical cannabis delivery platform. Same day delivery is available for the greater Toronto area, along with surrounding communities. Currently the company is looking to further expand to other large metropolitan areas like Calgary and Edmonton. With the large influx of new registered patients, I can see this being a major pull factor to sign on-board with the emblem arm. That, along with the fact that a second wave of this pandemic would almost ensure medical patients (often with underlying medical conditions) will make the jump to a company that offers them the safest way to obtain their medicine.
If we can keep the same run rate of signing active patients in Canada, we can expect to see a lot of growth come from that division. We had 10,983 patients as of March 31st 2020, that number rose to 13,285 as of June 30th 2020, and now with the guidance the company provided, has again jumped to 14,250 as of August 11th. To put that into perspective, we gained 3,267 patients in under 5 months, proving that it wasn’t just the exodus of Cantrust patients jumping ship, but rather a well-executed plan.
Shoppers has been making a big regulatory push to be able to supply patients directly at the pharmacy. So I would consider that to be another avenue we could possibly take to sell product. After all, we are one of the few companies with agreements with them.
But getting away from the sales for a moment, I can see the company is stacking its team with qualified industry leaders, as seen with the recent hire of Tricia Symmes. Someone with a background in CPG and product launches, but also with ties and experience in the pharmaceutical industry. This is a great move considering we’re approaching the launch of Kin Strips and 510 cartridges. I can see Kin Strips quickly becoming adopted by the medical industry, as many doctors simply don’t like the stigma of prescribing something their patients would have to smoke. The 510 cartridges, well that’s just something for ya boy here. It breaks my heart to have to support Aphria’s ‘good supply’ brand, but thankfully I wont have to do this for much longer. I’d like to think that I share this sentiment with many others who will be happy to start buying the Aleafia brand.
And lastly, can we address the Paris facility for a few seconds? We boast that capacity of 115,000kgs of extraction right? Something I don’t hear many people chatter about is biomass. Yes, the ugly part of cultivation, biomass. I wonder how much biomass comes from tens of thousands of plants? We all like to think that the outdoor will primarily be used for extraction, but keep in mind the thousands and thousands of grams of biomass that will accompany the flower. Heck, didn’t 48 North report their harvest last year in biomass equivalents? Arent extraction companies like Valens and Pump buying biomass and re-selling it as 2.0 products? Isn’t that Auxly’s whole strategy in a nutshell? Looks like we’ll be playing the best of both worlds with Paris and our harvest. A match made in Heaven if you will.
I could go on and on about what this company can be worth down the road, but if you’re invested here you already know that. You already know the napkin math behind what the 2021 numbers could be, and you certainly know about the results of a 162 million dollar company making 250+ million annually and how it will catapult it into unicorn land.
And now... We wait.