Sack Lunch Productions (
OTC: SAKL,
Forum) is rising fast as a leading member of the new wave of public entertainment event production. The company is shaking up the $20.0 billion-dollar global event production space, by creating and collecting innovative public events which appeal to our sense of fun, community, friends and family. In this age where someone’s life story is valued more than their belongings, events like the ones hosted by Sack Lunch and its franchisees, provide a perfect opportunity to gather and make memories that last a lifetime. Over the last 12 months the company has made some serious progress, expanding its market footprint across the globe in major markets and right now, Sack Lunch Productions is sitting pretty for a breakout year come fiscal 2017. Stockhouse writers sat with Sack Lunch Productions CEO, Richard Surber, to get an in-depth understanding of the company, what it offers and the potential it presents for investors.
Richard, for those who still haven’t had the pleasure, would you please briefly describe Sack Lunch Productions?
Sack Lunch Productions is an event management and production company. We currently host both corporately and through franchisees five different events. The two flagship events are Slide the City® and Color Me Rad®. Next in line would be the Lantern Fest® and the fourth would be Dirty Dash®. As for the fifth, we are launching the first Trike Riot® event in August and we’ll see how that goes as far as opening additional events under that brand.
Our events are more fun-based rather than competitive. Also our events have an emotional tie and an appeal to the millennial segment of the population who generally prefer great experiences over things.
It’s been a phenomenal year in terms of revenue and growth, in fact, SAKL just reported system-wide sales of $2.05 million in June. Where does that place SAKL for the year so far and what can investors expect in terms of ticket sales for the rest of fiscal 2016?
Well, right now if we are headed down the same path, we’ve revised our forecast. We’re looking at $17.1 million dollars in total gross sales. It’s important to note that those will be recognized revenues. In the June report we just put out, I go through and breakdown what those revenues are comprised of. Two of the things they do not include just yet is our sponsorship dollars and whatever our franchise fees are that we’re taking in, but the top line revenue also includes ticket sales from franchisees which do not get included as part of Sack Lunch Productions’ revenues.
What we’re looking to do is increase our footprint with regard to The Lantern Fest®. Where most of those events predominantly occur in spring or fall. We intend to increase this by eleven to fifteen events and a lot of those events will occur as late as November. On the Slide the City® side, we’ve reduced the numbers of events so we can focus on the larger primary markets.
Sack Lunch is responsible for the wildly popular Slide the City®, Lantern Fest®, Color Me Rad®, Dirty Dash® and Trike Riot® events. Can you give us an update on how Sack Lunch has managed to expand the market footprint of these events this year and what growth milestones are yet to come in the next 12 months?
In 2015, including franchised events, we had a total of 100 events system-wide. In the last quarter of 2015, we acquired Springbok Holdings, which was the owner of Color Me Rad® and Dirty Dash®. So we made those additions to the portfolio and one of the milestones we reached is integrating those two new brands.
Also we wanted to expand the franchise footprint of Slide the City®; we’ve done that both here and throughout the rest of North America, in South America, and it looks like we have Mexico. We also expanding in Asian markets as well. For example, Mainland China is another market we were able to enter into. And we’ve been able to build on the other franchised regions as well. For instance, some of the markets in Japan will be hosting their second round of events this year and those are really large markets.
So integrating new acquisitions and expanding our footprint significantly was our main focus during 2015. Looking forward we want to have several innovative events in the hopper and we’re always looking for opportunities for expansion through potential acquisitions. And one of the things we’d really like to do, is acquire a major running event. I think by adding marathons or half-marathons to our event roster we will build a solid and stable revenue that will benefit both the company and its shareholders.
Are there any new events in development that you can tell investors about?
The only thing I can say is, we’re looking seriously at developing up to three additional events. At the appropriate time, we will roll those out.
With all the record-breaking revenue this year, how are the books? Will there be another financing in the near term? If so, why?
Really what we'd like to do is re-finance some of the expensive money that we have as it has a short fuse on it. The $1.8 million dollars we took for this acquisition had a 15-month pay back and the company is making close to $200,000 in monthly payments. What the company is looking to do, is to get that note amortized over a more reasonable period of time. This would bring down a lot of the interest expense and it would help improve cash flow.
In the event that we can’t do that, we’re going to take on some additional draws in order to get us where we need to be. We’re predominantly looking at debt to do all this, but we’re also looking toward some of our long-term private individual investors to raise something in the neighborhood of $1.0 million dollars between now and the end of the year. That would take care of any cash flow issues hopefully and leave us with enough cash in the bank to prep for 2017 and be able to capitalize on any acquisition opportunities that may come our way. I am actively looking at other potential event acquisitions as I stated earlier.
What are the major challenges facing Sack Lunch as it continues to work toward its remaining milestones this year?
We're pretty much on track. The predominant issue is one of cash flow. We are on track to show a profit. I mean we’re having revenue growth of 60% to 80% over 2015 and our debt load is much improved. The working capital position of the company will be much improved. Everything is looking better.
Do you have any advice for investors looking to expose their portfolios to the public entertainment space and why should they consider Sack Lunch Production as an investment option?
Well, as of July 7, 2016, we’re trading about $0.07 per share. We have about 145 million shares issued and outstanding. So if you do the math, you’re still looking at around a $10.0 million-dollar market cap company which is going to generate over $17.0 million dollars in gross revenues. We have lots of runway for future growth and quite frankly, the trend is our friend and by “trend”, I mean Millennials are really digging this type of entertainment. There is a strong social media element as well, which essentially is free marketing. Most attendees want to take selfies, snap pictures of friends and/or take video, and then share that over social media networks with friends and family. This truly has a snowball effect as it both significantly raises awareness, but it also attracts new participants. We’re just getting started.
When you look at it, we’re a ground-level opportunity and I think we’re priced at a bargain. I mean even our high was about $0.17, which considering how much we expect to bring in this year is a still a really good P/E ratio. Also the expenses, like the heavy interest expense we had to endure during 2016 will simply not be there any more. A lot of the inefficiencies in integrating an acquisition into the company – all those costs are going to be eliminated. The high accounting and admin costs of getting the company where it is fully-reporting to the US Securities and Exchange Commission – these costs are going to be cut in half. So coming into 2017, we’re going to be a leaner, more efficient machine and we’ll have additional bandwidth for growth.
Our long-term goal is up-listing onto a Tier 1 NYSE or Nasdaq small cap. That’s where we’re going to head with this company and it looks like that’s going to be very possible in 2017. I think we present a novel long-term growth opportunity for the retail investment community.
FULL DISCLOSURE: Sack Lunch Productions is a Stockhouse Publishing client.