In this edition of "Rising High," The Fly conducted an exclusive interview with Darren Bondar, founder and chief executive officer of Inner Spirit Holdings (CSE: ISH, OTC: INSHF), a Canadian-based company with a national network of franchised and corporate retail cannabis stores. Here are some of the highlights:
RETAIL AND FRANCHISING: Inner Spirit Holdings is a Canadian retail cannabis company aiming to be the leading lifestyle brand in the recreational market. The company has established a network of 64 stores under its Spiritleaf brand and applies a scalable, low-capital franchise business model to the market. “It really goes back to the early days when we started and the objective was to be able to support local entrepreneurs and give as many people as we could the opportunity to participate in the exciting emergence of recreational cannabis retail,” he said. “We started franchising and its proven to be quite effective with local communities supporting small and local business.” The CEO added that simultaneously having corporate stores enables Inner Spirit to be in the business and support each franchisee with first-hand knowledge of how to operate. “We’ll work on maintaining our share and gaining market share on a daily basis just through effective branding, experience and ensuring that our staff is engaged and happy to be part of Spiritleaf,” he said. “Then we’ll continue to open stores across the country which will help us gain additional market share.” The company plans to open over 40 new locations over the next six to twelve months from British Columbia to Newfoundland in every regulated province that allows private retail, Bondar said, adding Inner Spirit could potentially expand internationally. “There are some exciting developments with countries starting to legalize like Israel,” he said. “We’re certainly well-suited to do something internationally via our existing infrastructure and licensing agreement abilities.”
Q3 EARNINGS: On November 16, Inner Spirit reported third quarter earnings per share of C$0.00 on a revenue of C$8.1M, which compared to an EPS loss of C$0.01 on revenue of C$3.2M for the prior year period. The company also reported Q3 system-wide retail sales of C$31M and adjusted EBITDA of C$1.3M, which compared to C$9M and a loss of C$0.9M, respectively, in 3Q19. System-wide retail sales includes the sales through all franchised and corporate stores and is the best measure against Inner Spirit’s peers. “Our shareholders were really excited about the earnings,” the CEO said. “It shows, one, we’re growing and, two, we’re profitable and have built a real sustainable business. We hope to continue to grow from there and have a real foundation to continue to work from.”
CORONAVIRUS: The coronavirus pandemic has impacted many companies within the cannabis industry and Bondar said Inner Spirit was affected on two fronts. “First and foremost, we have really done everything we can to try and keep our employees and guests safe,” he said. “We’re on the front lines and we have been deemed an essential service - so that’s of our utmost concern and thought on a daily basis.” Spiritleaf stores have been operating with enhanced customer service processes to ensure the safety of employees and customers and the company has established a Select & Collect service allowing customers to pre-shop and order prior to pick-up in store or curbside. Bondar added that Inner Spirit has also been fortunate to see steady sales throughout the pandemic due to being deemed essential and the fact that cannabis can often be used as a tool for people during difficult times.
LEGALIZATION: When asked about the potential federal legalization of cannabis in the U.S., the CEO said he doesn’t think the country will legalize cannabis but it will decriminalize it. “That will make a big difference for companies that are already operating down there to be able to grow, flourish and operate their businesses legally,” he said. “It definitely opens up opportunities for companies like Spiritleaf who have been patiently watching from the sidelines as things develop.”
DELIVERY SYSTEMS: As technology advances and delivery systems for cannabinoids become more diverse, Bondar says Inner Spirit is already seeing a shift in use of delivery systems and he has made some changes as a personal consumer as well. “I do think that one potential real bright side for cannabis is in beverages,” he said. “You can have a very controlled dose, instant onset and its generally more socially acceptable versus smoking.” The CEO noted that some of the biggest companies in the world are working on cannabis beverages with large cannabis companies. “They’ve proven to be really quite effective and quite delicious, so I think that’s where the industry will continue to move and develop some new users,” he said.
CHALLENGES: When asked about the biggest challenges facing the industry, the CEO said Inner Spirit is looking to get through the coronavirus pandemic just like all the other companies in the space. “It’s difficult to retail and really do a great job in this environment,” he said, “but I think the industry is really over its biggest hurdles.” Bondar added that the slowness to get licenses, particularly in Ontario, is still a challenge but overall he believes the industry is over the worst. “For many of us who have been doing it now for quite a number of years, it’ll be nice just to be able to operate some stable businesses with the ability to project into the future,” he said.
OPPORTUNITIES: As the cannabis space develops, Bondar said the company is excited to continue to open in new markets and introduce Spiritleaf to more customers. “There’s opportunity for new retail and there’s still an opportunity to gain new customers who perhaps aren’t familiar with cannabis,” he said, noting a statistic that 80% of consumers will admit to alcohol use, whereas only 20% of the population currently says they use cannabis. “For us it’s just ongoing education and showing people the benefits of cannabis and how they can participate,” he said.