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Investors are the lookout for real value and opportunity in the trillion-dollar new global green economy.
good natured Products Inc. (TSX-V: GDNP, OTC: SLGBF, Forum) is just that kind of company. The plant-based products and packaging company produces and distributes an assortment of better everyday products providing a wide variety of packaging products that are made with
the highest possible percentage of renewable, plant-based materials and no BPAs or other chemicals of concern that are potentially harmful to human health and the environment.
The company offers more than
385 products and services which include eco-friendly home and business products, food packaging, restaurant take-out containers, plus medical and industrial supplies.
Stockhouse Media’s Dave Jackson was joined by good natured Products’ CEO Paul Antoniadis to talk about the company’s unique business model, their recent strategic acquisition of Integrated Packaging Films, strong EBITDA / growth metrics, and all things ‘good natured’.
TRANSCRIPTION BELOW:
SH: For our Stockhouse investors who may be new to the plant-based packaging and products sector, can you tell us a bit about yourself, the company, and your unique-looking business model?
PA: Yeah, so a little bit about myself. So, I'm a dual citizen of Canada and the US. My business background is from the retail industry. I, for the most part, grew up with Best Buy as they were budding out of the Midwest. And I had, you know, a lot of different roles with the last one - in the US Business Unit, I was Vice-President of US Sales Development. I held it for four years. It was a strategic and operational role. And then once the international business unit got a point set up, I was appointed to a senior executive role and operating the international business unit. One of my responsibilities was CEO of Best Buy Brands, Europe. And I think it's important to kind of share that context with your listeners because Good Natured’s strategy and business model is kind of framed in under, you know, around the retail industry and consumer product industry.
And so Good Natured. I created a north star and I love creating these north stars because it allows our owners, our board, and our operating teams to be aligned on what we're aiming to accomplish as a group, which is to become North America's leading earth-friendly product company. We're going to accomplish that, Dave, by creating the largest assortment of plant-based products that consumers like yourself and your listeners along with business owners and operators can use as an alternative to the petroleum and synthetic chemical products that they’re using today in their businesses and homes. And, and we're going to create this, we call it internally, they would call it a “product authority” or very large assortment. We're going to create this plant-based product organically. So, we have a hundred people at Good Natured. We have engineers - material engineers, packaging engineers - certain planners.
And we target categories that are right for disruption with plant-based products. And we make them, as you described in your introduction, with the highest plant-based content level, for even any chemicals, concern, lower CO2 footprint gate to gate, and they perform equal to, or better than petroleum. The other way we're going to build this product authority is through acquisitions and we're targeting plant-based product companies where they're making products that we don't carry, but we're also targeting petroleum-based product companies that are EBITDA positive. They’ve got lots of customers, they've got lots of diverse products. Then once we acquire them, we convert their customers and products to plant-based materials. And then we activate this cross-selling, which basically means we take the company we just acquired products and are plant-based. We cross-sell to our existing customers. We take our current products, and we cross onto there, and having this authority makes it easy and affordable to switch away from petroleum. And so far, we're off to a pretty, you know, the model is demonstrating that it's really working, and we definitely have the, you know, we're serving now over 500 reoccurring BB customers and on pace to do well over 18,000 customer transactions directly through our e-comm site. And we also place our general merchandise products in stores. So, the brand in our, in our business approach is, is really resonating with our customers.
SH: In recent news, Good Natured closed a strategic acquisition of Integrated Packaging Films for $16.7 million back in December. Can you walk us through the deal?
Yeah, I can. First when you, when you look at the, at the strategic fit of IPF, which is integrated packaging film - we just abbreviated to IPF - is first and foremost, it fits inside of our industrial business group. So, our 385 products that you pointed out cover multiple business groups: packaging, general merchandise, industrial business, commercial pack and supplies, and our services, this fits in industrial. And we really liked that fit because it's a great compliment to our outsource industrial manufacturer based in the US. IPF is located in Ayr, Ontario, which is about an hour outside of Toronto. So, it's Canada-based. It also opened new market segments. It's opened medical. So, we're selling this industrial roll stock into the medical packaging segment, and also open up with electronics. And I'm not talking about Best Buy electronics.
These are electrical components that are sensitive to static electricity. And so that packaging is designed to protect against that. So also, with IPF strategically, it added a hundred customers to our base, right, which is really important. So again, new market segments, lots of customers, and it has an EBITDA of $3.7 million. And its TTM was $17 million in annual sales. So, for us, it was a great fit particularly, also the Mechar family. They'd been, you know, operating the sheet extrusion industrial roll stock space for over 20 years. It really strengthened our opera operating group. And it added 17 million in revenue. So, if you take our recent announcement of 16.4, which was our year-end 2020, it was up 65%. And you add the TTM, which is all public information. The TTM was 17 million from IPF. We've already set the stage to double the revenue of the company going into 2021. And so, we're, we really think this is a tremendous milestone for us. And lastly, it's located an hour away from our Shepherd Thermoforming facility, which is in Brampton, Ontario, near the Pearson airport just north of Toronto. And so, we're going to produce the roll stock that we use to create our packaging out of the IPF facility. That's going to create some margin expansion opportunities, but it's also going to increase our competitiveness of the products that we've produced.
SH: From a financial perspective, what are the benefits IPF brings both in terms of top-line performance and profitability?
Topline, it's going to bring that $17 million in TTM revenue. That's a positive because it, it positioned if you look at our historical trend, we've been growing between 50 to a hundred percent every year, and now we're set to grow with that acquisition a hundred percent in 2021. Now, the reason why that's important is we're a growth company. So, for your listeners and viewers, it's really important to understand that whether you're an owner, which we, we have lots of owners that are active in your community, but if you're thinking about becoming an owner, you need to know we're a growth company and we prioritize growth to create value for you as a potential owner or existing owner. So, more revenue, we do, we, we expect a multiple of sales, whether that multiple sales goes up or stays, even when you add more revenue, it's going to increase the value of your investment.
The other reason why we grow our revenue is that, the more products we sell, the more positive contribution we make to, to the environment and to the health and wellness of people on the profitability side of your question. Quite interesting, because it's already a very accretive EBITDA, positive company. It's going to add $3.7 million. But what excites me more is how it fits into the Shepherd Thermoforming acquisition. So, we're able to create that roll stock and utilize it at our Shepherd facilities and that's going to expand the profitability of the packaging that we're producing out of there. But it's also going to, you know, allow us to be more competitive and roll back some prices potentially to, to some of our customers and, or be more competitive to acquire net new customers. So, there's a lot of strategic value along with the EBITDA that acquisitions contributing.
SH: You also posted very positive Q4 revenue results – up 98 to 110-percent year-over-year. These numbers must sound like music to shareholders and potential investors' ears!
Yeah. You know, I think that's a great, that's a great perspective to, to bring out on, on the call here. Like if you look at the hundred percent growth in Q4 and you look at, even back in Q3 and Q2, and, you know, COVID began to, you know, continuous – candidly, to wreak havoc in our communities and business environment, our team that I'm humbled, very proud of what we’ve executed. And our business model has really “stood on its head” for those hockey fans out there, and it really is working. And so, we believe that revenue growth that's a growth company is the main driver of creating value for our owners and, and the biggest contributor to improving the positive impact to the environment. Now, mindfully, we're going to be, do that growth with disciplines.
So, if you look at our gross margins which are typically in the 32 to 37% range, and I get some owners asked me like, Hey, why didn't you pick that range? And I say, well, listen don't get too excited if our margins are 37%, because we either mixed in more medical packaging or remixed in different customer groups, don't get too concerned if it's 32%, because it's just product mix and customer mix. But the point I want to highlight is our margins remain stable. So, as we grow at these rates, it's important, we do it with discipline, stable margins, and year over year EBITDA improvement. But the, the way we're going to create value is through for our owners is through growth.
SH: It would be remiss of me not to mention your stock has had a very sharp incline…a nearly 600 percent increase since early October. Can you tell our investor audience what you feel was behind the strong move, and why you would continue to encourage them to become owners?
PA: I think first and foremost, it's the performance, right? So, you know, we've grown over a six-year period by about 158%. I think COVID is the mirror of the strength of leadership and team and business model. And I think when you look at what we've delivered - two acquisitions, 65% growth - stable margins should give you a vote of confidence that the products that we're offering to our customers are being really well received and that the business model really works. And I think that is getting recognized in my opinion. And also, we're not really well known. We're now getting the word out. I think, you know, we're seeing our ownership count climb. We're very, very close to our owners. We're, always listening or always making ourselves accessible for conversation.
And we're seeing that, that climb in our ownership count. And I think it's, that's also a factor is the word's getting out. And lastly, there's not a lot of folks like us out there. Like if you look at the public space whether you're an individual investor or retail or institution, it's like, there's not a lot of options where a public company, 100% focused on the environment and health and wellness of people, but we are very, very strong commercially. So, I got a lot of passionate people, they're fired up, they're fired up folks, and they're very enthusiastic about the environment, or they're more enthusiastic about health and wellness. And I always, I always say to them, listen, you want to do a lot of good to health to human health. You want to do a lot of good to the environment. Let's create great products at great prices and go out and talk to customers and in a ‘Good Natured’ way.
And we're confident that everyone out there is Good Natured. You know, if we present them on a product that is equal to petroleum or enhances or business performance. They're going to make the switch. And I think that's what we're seeing some of our owners or some of our customers becoming owners and advocates to ownership because they believe in what we're doing, and they've touched the product they're using the product. And some of our strong advocacy of ownership is coming from some of our customers, which is, I think, quite humbling, but also at a grassroots level gives me a vote of confidence that that's probably a good sign to consider investing. So, I would say in summary, look at our historical execution, understand that we're on pace to double and understand that our brand and our products are being really received by customers because the customers vote with their wallet, right. If you know, they're buying the products and they're not buying the products, and obviously, our revenue growth is demonstrating that consumers are interested in the products that we're offering.
SH: We were talking a little earlier about how words matter, and I really appreciate the fact that you use the term owners other than shareholders. I really think that says a lot to your style of management.
PA: Well, I'm one of the owners and I think it's really important for your listeners to know that, that this company belongs to our owners. We are the stewards of your capital. It's our responsibility to make sure we're aligned that we're a growth company and that's where we're going to invest. The last thing we want to do is have someone invest in us thinking we're an EBITDA company, it doesn't mean we're not going to improve. Even, I want to be really clear. We're going to improve it, but not at the cost of growth. Now, if you're an EBITDA company and it's really important to do that, you know, we're probably not the right fit and that's okay. Like I don't, we don't want to create disappointment or misalignment. And so, we're really strong advocates of owner’s perspective, whether it's the way we compensate our people. We structure median compensation, that's based off performance to align with our owners. So, we've got a great board that believes in this too. So, I feel really good that the best is yet to come. And I think as potential owners that are listening to this that culture of alignment, I think is fundamentally a big factor also to our success. Right?
SH: On the macro front, we’re seeing a lot of single-use plastics legislation planned or enacted on both sides of the border. Can you speak to how this could act as a tailwind for the company and any other positive or negative macro indicators you see?
PA: I'll start by saying these legislations are positive. They create what we term internally as a “halo effect” to all of our other products. When you look at the actual legislation that's occurring, we actually think it's really good. Like some of the things that are being banned, like stir sticks, do we really need plastic stir sticks, irrespective of whether it's plant-based or not like, you know, I'm not sure, like, I think we should challenge these orthodoxies of norms, but at the same token we believe that a lot of these single-use plastics should go-to materials that can fit into a compulsive closed-loop cycle that food waste fits into. So, whether it's, fiber-based or whether it's plant-based - but whether it's fiber or rigid plant-based material, you're seeing some straws that are paper straws, or seeing some strides that are plant-based rigid.
I think that's all positive. And I think that's, it's the right thing to do for our communities. It's the right challenge to throw at the industry to innovate. And it really puts the wind in our tails as you indicate, because, for us, there's no real negative impact. It's only positive and we want to do what's right for the environment. Like we're commercially minded. We want to demonstrate to our owners that you can be a real good commercial company driving growth and still do good. But if it means stir sticks can get eliminated, like we're not going to fight it. And we think that's actually a lot of good, good stuff.
We're an innovative company, right? So, we have a lot of strong macro wins. We pride ourselves on our service and our product and our model, and our approach. However, it drives innovation upstream, right? You talk about the metal straw. Well, the amount of material innovation that we're witnessing, it's incredible over the next decade, the innovation that's going to come out of material science that is, is a raw material that is more beneficial to you, our health, but also the environment is going to be no different than what mobile phones have done to landlines. And I think that's a positive thing. And I think this situation is driving new thinking and new innovation and new problem solving and obviously good nature's right smack in the middle of it. We know all the innovation that's taken place, whether it's a startup or very large plant-based material providers, and tremendous people that are trying to create materials for applications that we can't even, you know produce today.
SH: Environmental sustainability is clearly of paramount importance to Good Natured Products. Just how big do you think the global market opportunity is here?
PA: It's in the trillions of dollars. If you look at the packaging industry alone, it's well over a trillion dollars, I've said it in several different settings and, you know, I don't think it's ever had a down year. I don't think it's going to have a down year in 2020. I haven't seen the latest metrics. So, for us, we want to provide alternative customers like me, love choice, right? We like, we know humans love choices, and we believe by presenting an alternative choice to petroleum in a manner that performs equal to the current petroleum product they're using, we were betting on people being "good-natured", and they're going to make the right choice. As long as they're not paying three times as much and it's priced the same and it functions the same. I think people are going to make the switch. And I think I'm confident over the next few years that with the innovation that I know we're working on and the product roadmap we're working on it's pretty exciting to be in the center of that disruption or for good nature to be at the center of that disruption and presenting an alternative product to the market.
SH: Can you talk a little bit about your corporate management team, along with the experience and innovative ideas they bring to the burgeoning plant-based packaging sector?
PA: Yeah. The people, a piece of our business is very important. It's actually my favorite side of the business, other than talking with customers and you know, starting with Dr. [Michel] Labonte, I call him the master chef. He's our CTO as a good, good friend of mine. He's a Ph.D. in biopolymers. He's been in plastic processing. I joke with him longer than I've been alive, but he's a tremendous individual he's out there way upstream looking at materials trying to discover innovation. Then we have Stephanie [Zahn], who is our chief strategist and marketing officer. She's an Ivy League grad out of Kellogg's. She comes out of the Canadian retail industry. She identifies the categories we should go after how to position ourselves in the market. And then Don Holmstrom, I call him the, you know, he's our big defenseman. He's a big hockey fan. We talk a lot about hockey. You know, this, this guy has done over a billion dollars in acquisitions. He understands formation. He's really driving in a Good Natured M&A work in conjunction with Stephanie. And so, we've got a really good strong C-suite, but the leadership extends all the way down to our line level. Like if you look at our, our officer group beyond the C-suite, I'll just highlight a couple you know, John Roby, who comes from out of our, Under Armor and Nike, he understands the supply chain. He heads up all of our operations and supply chain. So, [Noel] Harvey's been in business development for many decades in the, in the plant-based business development side and leads our, our customer interaction. And then the recent acquisition of IPF. the, Mechar family, they've been operating sheet extrusion facilities for 20 years.
So, I think, you know, we've got a, a real solid diverse team with lots of diverse experience. And I think it's really designed to build a company that can grow into, you know, 300, 400, $500 million in sales. And, and that's important, right? You want to make sure that the, the depth of the team all the way in the line level can support this rapid growth and technology too. Like we are going to be investing in technology to support our continued growth. And, you know, I think people process and technology are front and center of our continuous support of, of this growth rate.
SH: In terms of the outlook for 2021, can you give us a sense at a high level of what the outlook is and news we can expect from the company?
PA: Well, I think the macro drivers are all green. All the leading indicators are green. So many inbound calls, and we’ve had a lot of news coming out for our sustainable goods. Our most recent one that we announced with Better Bites was a plant based bakery item, it's all really positive. We feel all of our leading indicators are green and in the early innings, second of all when you look at our business even though we don't give guidance, if you take what we've communicated, which is 16 million, in 2020 plus the TTM of IPF we're already on pace to grow the business by a hundred percent in 2021, and that doesn't include any acquisitions. It doesn't include any new products or any net new customers. So, I'll let your listeners determine and assess their perspective on what that outlook may mean to Good Natured.
And I also think the best indicator of the future is history, right? And even though we don't keep guidance, because we can't control the timing of activities, but I can say history is the best indicator of what's going to happen in the future. And so, take a look at our, you can go to, you can go to our investor site, that's investor.goodnaturedproducts.com. So, our owners or potential owners can simply access information and look at the pattern, stable margins, you know, real solid growth. We're making it really clear to potential, a better listing here. We're a growth company. And so, you can make your assessment and, and there's also some research coverage that's out there that, you know, your listeners can access for independent, you know perspective, but I've never been more confident. I've never been more excited in our, in our future. And I think the best is yet to come.
SH: And lastly, Paul, if there are any other developments you’d like to highlight or anything else that I’ve neglected to ask and you’d like to add, please feel free to give us the details.
PA: Well, I think this was a terrific conversation with you, Dave. I really, really very much appreciate it. And, you know, I just want to emphasize at closing here that I know I sound a little bit like a broken record, but you know, we're a growth company. We want you to know how we're as a potential owner, how we're going to create value, which is a multiple of our revenue. We believe our revenue multiplier of our current, our market cap, which is a multiplier of our sales is, is, is bit discounted because it doesn't account for any future trends. Second of all is we're going to do that with discipline, right? Stable, gross margins year over year EBITDA improvement. And the growth is what's going to create value. And the growth is what's going to improve our contribution, our positive impact we're making to the environment. And I hope some of your listeners join our ownership and become advocates of Good Natured and help get the word out because you know, there's 30 million-plus Canadians and there's 300 million Americans. I guarantee you, they're still small, tiny, tiny, tiny fraction that knows about us. So, we appreciate any advocacy we can get.
For more information, visit
goodnaturedproducts.ca.
FULL DISCLOSURE: good natured Products is a client of Stockhouse Publishing.