Body and Mind Inc.
Q2 2021 Earnings Call Transcript

Published: 22 Mar 2021

[Operator:]

Good afternoon, ladies and gentleman. Thank you for standing by. Welcome to Body and Mind's Financial Results for Fiscal Q2 2021 Conference Call for the quarter ending January 31, 2021. Body and Mind is a U.S. GAAP reporting issuer and unless otherwise noted, all figures will be in U.S. dollars. During today's presentation, all parties will be in listen-only mode. Following the presentation, the conference call will be opened to questions. This conference is being recorded today, March 22, 2021. I'd like to turn the conference call over to Graham Farrell of Harbor Access, Investor Relations Advisors for Body and Mind. Please go ahead, sir.

[Graham Farrell:]

[Michael Mills:]

Thanks, very much Graham. Hello everyone and thanks for taking the time for an update on the progress we've made at Body and Mind over the last quarter and we look forward to discussing our second quarter of fiscal 2021 ending January 31, 2021. We've been looking forward to reporting this quarter as we consolidated almost all our managed revenue in reported revenue as a result of successful license transfers and do 100% owned subsidiaries of Body and Mind. To preface our discussion, I'll remind you that we are a U.S. GAAP issuer and we do report in U.S. dollars. I'll touch on the potential benefits of the U.S. GAAP reporting a little bit later in the call. We're pleased to report both record consolidated revenue of US$6.31 million for Q2 which is a 300% record revenue growth for Q2 2021 compared to Q2 2020. Q2 showed a 19% sequential revenue increase over Q1 and I'll remind you that our reported income for the entire fiscal year 2020 were $6.23 million. On a very conservative run rate basis, that puts us at roughly $25 million run rate of revenue with any allowance for increased sales or new revenue from projects currently near completion. We'll discuss our current projects later in the call.

[Trip Hoffman:]

Thank you, Mike. I'll now provide a brief history and update on the operational facilities of Body and Mind. In Nevada, we continue to operate a 100% owned 14,000 square foot cultivation and production licenses that we began in 2015. In March of 2020, we completed construction and commenced operations of a new 7,500 square foot production facility here in Las Vegas. This facility provides up to 10 times the capacity for more SKUs and more white label manufacturing opportunities. In December 2020, we completed the construction of converting the space from the prior production location into an approximate 20% increase in our flower canopy capacity of the cultivation operation. Also in December 2020, we received our distribution license approval, which allows B2B delivery of wholesale products and will provide overhead cost reductions for our wholesale operations. In March this month 2021, we completed the full utilization of our additional canopy space and we expect the sales going forward to reflect the new capacity.

[Michael Mills:]

Thanks very much, Trip. If there are any questions out there please feel free to contact the operator and we'd love to give you update now.

[Operator:]

Thank you. There are no further questions at this time, you may proceed.

[Graham Farrell:]

Operator, do we have any questions there?

[Operator:]

It looks like we have one more question from Peter Wright with Intro-act. Peter, your line is now open.

[Peter Wright:]

Great. Thank you guys for taking my question and congratulations on the fantastic results. Three questions if I can. My first question is on scale, and if you think of the target model, help us think about how you're thinking over the next 18 months. What are the numbers, maybe on a top line level that you have to get to achieve your target model?

[Michael Mills:]

Thanks very much, Tony . I'm going to let Trip comment on the first couple of questions here. And I think we think, let me talk to you, let me talk a little bit about brand, and when you have a disparate brand, kind of like, I think you have mentioned the Clubhouse in Ohio, and moving that to Body and Mind, I think every time we bring Body and Mind to the forefront in the form of dispensaries, in the form of our products, in the form of really everything that we have to offer, we gain that much more interest across the broad market and it's very interesting to see the change in Ohio from Clubhouse to Body and Mind, in the sense that this is a brand and this is a group that's bringing opportunities from states that have been medical and then transitioned to adult-use for many, many years. So I think obviously the Body and Mind brand, we feel that it appeals to a very large broad group of people and bringing it into really every aspect of our business is key. With respect to getting to some of the operational numbers that we had discussed earlier, I might want Trip take that one and then circle back to other question.

[Trip Hoffman:]

Yes, thanks Mike and thank you, Tony. So, as we think about how we're going to meet our forecast for the next 18 months, there's couple of drivers that don't include acquisition or starting up new businesses. Essentially we have our organic growth from the existing operations and we also have the expansion operations that we've discussed in the past, the Ohio production plus the Arkansas cultivation. So we do expect, as I mentioned in my summary, both of those new operations that come online very soon, we've been involved with the state licensing authorities for inspections and things like that just recently, and so we're in a very good position, we know that we're very close to those. So we do expect those events to take place as planned. And then on top of that, the organic growth starting with our 20% increase in capacity here in Nevada, and then following that up with all the dispensaries with extremely strong demand as everyone else is seeing across the country as the adoption of the use of cannabis just keeps -- continues to grow, we do expect to see something along the lines of a 30% year-over-year growth, just from our existing operations, but it could be slightly more than that, but that's from where we are.

[Michael Mills:]

Peter, did that answer all your questions?

[Trip Hoffman:]

He may have dropped off. He did have one other question, Mike, I will just touch on regarding dispensary trends and what we're seeing across the country, basket size and such. So just to speak generally on dispensary basket size and the number of customer tickets per day, varies greatly from location to location. It will vary from as low as $60 per average ticket to as high as $140 per average ticket depending on if you're in one of the blue collar communities versus a more affluent community, and likewise your number of tickets can also be dependent upon the amount of competition around. In each of our stores that we are seeing significant growth on both the average ticket size, and on the number of tickets per day, the number of tickets per day that is an easy one, just as we get more market footprint in new areas, and as we keep pushing on our marketing efforts which we are really pushing a new digital marketing campaign effort this year for all of our operations, that includes not just the digital online presence but also social media strategy and the like. And we are already seeing tremendous responses from that effort we expect that to continue. But generally, we do expect the trends to continue to grow with the number of tickets, and the basket size depends upon how wholesale prices fluctuate from place to place, as well as the competition in nearby areas and we do see them holding strong as well right now.

[Michael Mills:]

I might just add, we had such great success in the past with our outreach programs that are directed at the dispensary level, getting to know budtenders, getting to know managers at dispensaries, running what we would call pop-ups, where we have a Body and Mind representative go into various dispensaries and showcase our products, and interact with budtenders, interact with customers. We haven't been able to do that, really for the last year or so, and we know that that's a very effective program for us when people try our products they like them. So we're really looking forward to get back into that routine. And as I mentioned, in California, we used to run Cozy Sesh concert series at Long Beach, something that we had looked to bring to San Diego. That's a great way of building a customer base, interacting with your customer, but also bringing some of the brands in and letting them interact with your customers. So a lot of these marketing channels and when you think about cannabis, and being able to reach customers, a lot of the standard advertising that a CPG company would use. It is just not available to cannabis companies. So you have to be very strategic with your social media, which we're being, but this personal touch and the ability to really have those conversations with your customers and your budtenders, with your buyers is incredibly important. We're really looking forward to that opening up again.

[Operator:]

Thank you.

[Michael Mills:]

Welcome.

[Operator:]

There are no further questions at this time, you may proceed.

[Michael Mills:]

Great, well thank you very much for everyone for calling in and listening to this earnings, and I would encourage anyone to reach out directly if you have specific questions. I would like to say that these record results that we've brought forward are a huge team effort, and I would really like to thank everyone on the Body and Mind team, our investors and the people who've supported us to get here. Thanks very much.

[Operator:]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.