January 24, 2019

Eve & Co Inc (CVE:EVE) Newfoundland Supply Agreement, Clone Shipments

Midas Letter
Midas Letter
Eve & Co Inc (CVE:EVE) Newfoundland Supply Agreement, Clone Shipments

Eve & Co Inc (CVE:EVE) (OTCMKTS:EEVVF) CFO Landon Roedding discusses the company’s 2019 goals and Newfoundland supply agreements. Eve & Co received its Health Canada licenses in December and is hopeful for a March harvest from its Strathroy site. The company is in the middle of construction on a 700,000 square foot expansion of its Strathroy facility and plans to undertake a financing round to complete the build. Roedding concedes that recreational sales have been slower than the industry would like, but Eve & Co is picking up steam. The company’s inked supply agreements with Newfoundland and is entering into memos of understanding with British Columbia and Ontario. Eve & Co will launch products in Newfoundland in Q2 but has already shipped clones to the province for sale to individuals who wish to try home growing.


Fraser Toms:  I’m joined now by Landon Roedding, who’s the new CFO of Eve & Co. Landon, how’s it going?

Landon Roedding:   Excellent, thank you.

[stock_chart symbol=”EVE:TSV” align=”left” range=”1M”]

Fraser Toms:  Great. So let’s jump into the company; you jointed the team in October, was it?

Landon Roedding:   Yeah, that’s right.

Fraser Toms:  So maybe can you just tell us a little bit about your background and why it was a good fit for you to join Eve & Co?

Landon Roedding:   Certainly, yeah. So my background is, I’m a CPA, and I spent about 8 years at PricewaterhouseCoopers in their mining practice, and from there I moved on to work at Sheraton International in their financial importing group, for a coupe of years, and from there I moved on to Kinross Gold, Director of Financial Reporting, dealing mainly with external reporting, MD&A financial statement disclosures, all focused on IFRS. And from there I moved onto a private company called Blue Goose Capital, makers of organic beef, chicken and trout, which is really good from a biological asset standpoint and sort of transitioned nicely into my role here at Eve & Co.

Fraser Toms:  Cool. So in December, Eve & Co got the license, so maybe walk us through that timeline and what you’re able to do in what time frame in terms of, from getting a license to actually reaping the rewards.

Landon Roedding:   Yeah, certainly. So I think in July of last year we had our second flower room ready to go, and the Health Canada approvals came through in early December of last year, which would allow us then to put plants into those rooms, which will take typically 8 to 12 weeks, depending on the year; this time of year there’s less daylight, so it takes a bit longer. So we’re hoping that the plants we were putting in there in December, we’ll be able to start harvesting those in early March, mid-March and then into the end of March we should be hitting full stride on that second flower room, which will really allow us to, you know, realize our full capacity of the current 220,000 square feet that we have.

Fraser Toms:  220,000 – that’s a lot. Okay, so in terms of just broad stroke financials, what can investors look forward to in 2019?

Landon Roedding:   Yeah. I think 2019 is going to be a fantastic year for Eve & Co. We’re really going to be hitting our full stride in end of March like I said, so sort of the last three quarters we’re going to see, I think, a big uptick in the sales numbers; we’re going to see some positive EBITDA numbers coming out of there in the second, third and fourth quarters.

We’re really hopefully that we’ll be able to realize on our sales mix strategy, as well. Right now we’re looking to be launching products into Newfoundland in the rec market sometime in mid to late February; we’re working through some of the purchase order details right now. We’re already shipping clones into Newfoundland, one of the first companies to be shipping the clones. That’s been received pretty good considering the time of year that we’re in, and we’re hopeful that in the Spring that’ll pick up, and we’re also hopeful that other jurisdictions will pick up on that as well and allow us to work with them on the clone shipping.

In terms of, you know, other financial highlights for the year, I think in the last interview Melinda had mentioned we are looking to do some financing right now. We’re currently building out a 780,000 square foot expansion project which started in June of last year. The project’s been working very well so far; things are on track, most of the materials are arrived and on site right now, the workers are there daily, although I’m not sure that in the last few days they’ve been onsite, necessarily. But we definitely have active workers there. We’re working on building out the boiler room, the irrigation system right now, and so part of the financing we’re working through various options is to come up with the funds we’re going to need to finish that and move that project forward and keep that on tract for completion the summer of this year.

Fraser Toms:  Okay, so is that I’m just guessing that’s a buildout of your existing Strathroy operation?

Landon Roedding:   Exactly yes. So it’s going to augment the existing facilities; we’re going to leverage some of the administrative space, processing, packaging, drying rooms, and then we’re going to be building a new facility out and around the existing structure. It’ll all be integrated and fully functional; and it’ll be very exciting, you know, we’re very much looking forward to how that’s going to continue to let the company build and grown and leverage the brand.

Fraser Toms:  Cool. Just looking at your latest press release on January 3rd, there’s a Board appointment of Ms. Shari Mogk-Edwards. Just talk a little bit about how that’s going to help the company moving forward.

Landon Roedding:   Certainly, yeah, Shari was an excellent addition to the Board of Eve & Co, being a female focused brand, and her being a leader at the LCBO, having CPG experience, it ties in very nicely with the strategy at Eve & Co to launch CPG products this fall when it legalizes in Canada. The hope is we’re going to be able to build our existing brand and allow Shari to leverage her network, her expertise, to help us focus on the right areas, build the strong partnerships that we are hoping to develop, and really accelerate the process for us in terms of entering the CPG space.

Fraser Toms:  Just curious from your perspective, the launch of rec, what has surprised you, if anything, and how do you see things changing moving forward and are you happy with the current situation?

Landon Roedding:   I mean, I think the rec market in Canada has developed a little more slowly than people would have liked to have seen, in general. I mean, the supply shortages certainly haven’t been a big help to allowing access to the product lines for most consumers. I do think, though, that all companies are talking about their products coming online, new expansions coming online, so I think that’s going to start to see  a correction in terms of supply/demand curve on the rec market.

Despite the fact that we were a bit late in getting our approval from Health Canada in December of last year, it hasn’t really hurt us in terms of our ability to sell, given that there’s still a huge demand for product out there, so you know, we’re very excited to be moving into the rec market in Newfoundland in February.

Fraser Toms:  Okay. So and Newfoundland, is that the only place you’re allowed to sell at the current time?

Landon Roedding:   No, no, Newfoundland just happens to be first because we’ve already dealt with them on the clone side of things; we also are working with Ontario and British Columbia we have memos of understanding in place, and we’re hoping to be launching additional product in there, come, we’ll say, mid-to-late March once the second flower room comes online and our ability to have higher yields and higher harvest will come up.

Fraser Toms:  And the clone sales, what does that look like? You’re selling a clone to another licensed producer?

Landon Roedding:   Yeah, so we’re able to sell to other licensed products, but right now the clone sales we’re doing to Newfoundland are to individuals that want to be ale to take advantage of growing plants at home so they can control the inputs to the products and how it behaves and what chemicals they may or may not want to put in there in terms of the growth cycle.

So we’ve got some pretty unique packing that we’ve sourced that allows the products to be shipped, stay warm, stay alive, you can ship up to four clones per package, same price as if you ship one, so I suggest people look at buying more than one, if they’re going to. And then there’s a lot of other companies out there, sort of this ancillary market around the cannabis space that allow people to buy light systems, watering systems for their homes, and that’s, you know, we’re trying to facilitate that.

Fraser Toms:  James just bought a whole bunch of stuff to grow stuff at home. But with the clones from Eve &Co, what’s the – like, if I was a consumer, why would I want to grab one of your clones?

Landon Roedding:   Certainly. I think right now, at least in Newfoundland, we’re one of the only people offering clones for sale, and certainly, you know, there are certain strains that are offered that have certain THC ranges, CBD ranges, so I think it really depends on the end users, what they’re looking for right out of the plants, and we’re trying to offer a variety to meet all users’ needs in terms of what we would offer in terms of the range of THC/CBD content. So it think it’s really up to the individual to decide what strains they want, and you know, hopefully we’re able to demonstrate a continued success in the plants we ship out and getting good feedback from the customers in terms of that they’re alive, they’re healthy, they’re well and they’re performing well.

Fraser Toms:  Yeah, well that brings up a point, because I guess in order for you guys to make the decision to sell those in the first place, you must have understood that there’s a market there for people who do want to grow their own plants. So –

Landon Roedding:   Yeah, I mean, I haven’t done a lot of research myself, but what I understand is that in places like Uruguay, where it’s been legalized for some time, there’s, you know, roughly 1-2 percent of the population that have started growing their plants on their own. You can kind of extract that a little bit to see how it would play out in Canada down the road, and I think there’s also a small bit of novelty right now. People are allowed to do it and they want to maybe try their green thumb and see how they can handle it, but I think it’s certainly a good opportunity for consumers to look at other ways of obtaining and consuming their cannabis.

Fraser Toms:  How much do those cost?

Landon Roedding:   Right now we’re selling the clones for about $20 each, and shipping flat fee anywhere in Newfoundland we’re doing for $35 right now.

Fraser Toms:  Okay, that’s cool. Landon, that’s awesome. Thanks for coming in and giving us that update, and we’d like to have you come back once things are rolling out more in 2019.

Landon Roedding:   That’d be fantastic.

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