11:41:59 EDT Thu 28 Mar 2024
Enter Symbol
or Name
USA
CA



GreenSpace Brands Inc
Symbol JTR
Shares Issued 21,608,526
Close 2015-11-25 C$ 1.10
Market Cap C$ 23,769,379
Recent Sedar Documents

GreenSpace Brands loses $744,000 in Q2 2016

2015-11-26 20:13 ET - News Release

Mr. Matthew von Teichman reports

GREENSPACE BRANDS INC. REPORTS HIGHEST QUARTERLY REVENUE IN HISTORY WITH SECOND QUARTER REVENUE GROWTH OF 129%

GreenSpace Brands Inc. is releasing its second quarter financial results for the three- and six-month periods ended Sept. 30, 2015.

                           CONSOLIDATED PERFORMANCE SUMMARY
     (in thousands of Canadian dollars, except per-share amounts and as indicated)

                                                           Three months ended    Six months ended
                                                                     Sept. 30,           Sept. 30,
                                                               2015      2014      2015      2014

Revenue                                                     $ 1,733   $   757   $ 3,180   $ 1,374
Gross profit                                                    314       168       519       299
Gross profit margin                                            18.1%     22.3%     16.3%     21.8%
SG&A expenses                                                 1,051       354     1,856       644
Reverse takeover listing fee                                                        991
Interest and accretion expense                                    7        23        19        44
Change in fair value of derivative liability                               (2)                 (3)
Net (loss) from continuing operations                          (744)     (207)   (2,347)     (386)
Net (loss) from discontinued operations, net of tax                                            (2)
Net (loss)                                                     (744)     (207)   (2,347)     (388)
Net (loss) per share (basic and diluted)                    $ (0.04)  $ (0.02)  $ (0.13)  $ (0.03)
Adjusted EBITDA                                                (626)     (184)   (1,141)     (343)
Adjusted EBITDA margin                                        (36.1)%   (24.3)%   (35.9)%   (25.0)%

EBITDA means earnings before interest, taxes, depreciation and amortization.

The second quarter revenue results for the company continued to be strong, showing a 129.0-per-cent increase in the quarter compared with the prior year, achieving its largest quarter in sales by a significant amount. The strong revenue results were primarily from revenue being contributed by newly launched brands (Nudge and Kiwi Pure), and newly introduced Rolling Meadow product lines of yogurt, butter and kefir. These new brands and products continued to build on their strong sales momentum in the current quarter, and none were part of the company's product offering in the comparative quarter from fiscal 2015. As well, the company's Life Choices product line experienced its largest sales quarter in its 13-year history due to increased customer demand, a larger number of retailers carrying the product and newly established national distribution. All of the company's new brands and new product offerings have been extremely well received and customer demand continues to build momentum quarter over quarter.

As anticipated, gross profit margins in the quarter were lower than the comparable period due to a larger proportion of revenue coming from Rolling Meadow fluid milk products, increased trade spending to launch and support new brands, and start-up costs associated with the launch of Nudge, and the new Rolling Meadow product lines of vanilla yogurt and kefir. As well, the company experienced higher-than-expected inventory write-offs in the quarter as a result of increasing its fluid milk orders in anticipation of a large Canadian retailer indicating it was going to begin ordering the product. As typically happens in the industry, the retailer was delayed in making its first order and did not start the anticipated regular order patterns until October, 2015. Normalizing for the higher levels of inventory write-offs, management believes margins in the quarter would have improved by 2.1 per cent in the second quarter and 1.8 per cent year to date.

As the company is in its growth phase, and is continuing to invest in developing new brands, launching new products, and building its presence in the Canadian organic and natural food market, it was not unexpected that selling, general and administrative (SG&A) expenses increased in the second quarter and year to date in fiscal 2016, compared with the prior year. The company continues to invest in promoting and supporting the company's new brands. Storage and distribution expenses have also increased in proportion to revenue due to increased storage for the larger number of brands and a number of new products attaining national distribution. As well, the company incurred significant professional service costs in the current quarter and year to date on acquisition due diligence and to complete its going-public qualifying transaction. These incremental professional service costs are not expected to reoccur under normal operations in future periods.

Outlook

Management continues to believe that there are a number of fundamental trends occurring within both the global and North American food market, which will inevitably drive demand for the company's brands and products in future periods. As reported by the 2014 NPN Journal Industry Report, organic food sales are growing at an annual rate of 14 per cent, as compared with conventional food sales growing at an annual rate of less than 2 per cent. Presently, organic food sales make up only 6 per cent of consumer food purchases, but, with these varying growth rates, it is expected that organic and natural sales take a much larger portion of consumer food purchases over the next five years. Considering this, the 2014 NPN Journal Industry Report expects that the global organic food market will reach $210-billion by the year 2020, and, over the next five years, that market will have a cumulative average growth rate of 15.7 per cent.

With these trends in mind, management continues to be optimistic that this anticipated growth in the organic and natural food market will continue to drive demand for the company's developed products, and provides a lot of opportunity for further expansion into new product offerings and within existing brands. The combination of the company's inherent strengths and exposure to these growing markets provides good fundamentals to support long-term growth in all of the company's product lines. The company's strong customer relationships, existing extensive distribution networks, well-recognized and respected brands, and efficient operations, further support this fundamental market growth.

In particular, management believes it is one of very few companies positioned to capitalize on the emerging grass-fed trend in Canada. Through its dairy brand, Rolling Meadow, and the Life Choices brand, the company has carved out a niche in the Canadian grass-fed market, which it hopes to exploit with continued product and brand launches.

The company intends to continue to grow through a two-pronged growth strategy. Firstly, the company expects to have strong and continuing internal brand and product development. There are currently a number of new product offerings in various stages of development that will be released to market before the end of the current fiscal year. Secondly, the company expects to grow through acquisition by making strategic investments in strong, simple-ingredient businesses. The Love Child acquisition completed subsequent to quarter-end is a great example of the type of business that the company is looking to acquire. Through the company's strong customer relationships and existing extensive distribution networks, management expects to increase and diversify Love Child's revenue, and recognize a number of selling, general and administrative expense efficiencies, improving the overall profitability of the acquired business.

Management feels it is in a strong position to be one of the principal consolidators in the North American natural and organic food market, due to its industry position and accumulated reputational goodwill within the industry.

As it grows, the company will focus on cost containment, margin enhancement and cash flow management to offer innovative new products with healthy attributes. By integrating various brands, new products and strategic acquisitions, GreenSpace aims to achieve economies of scale and continue to enhance its overall market penetration.

We seek Safe Harbor.

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