International Cannabrands Inc (CNSX:JUJU) CEO Provides Update on Operations
International Cannabrands Inc (CNSX:JUJU) (OTCMKTS:GEATF) (FRA:31G) CEO Steve Gormley provides an update on the company’s operations. Gormley suggests that as a brand aggregator, International Cannabrands isn’t focused on share price, but on profitability. The company’s acquisition of La Vida Verde, a cannabis branded product manufacturer based in California, and Riotous, a Seattle-based financing and distribution play, continue to generate profit for International Cannabrands. These deals also help International Cannabrands expand the footprint of its house brand, JUJU Royal. Gormley believes the company is currently undervalued and when a sector rebound happens, large companies are going to look at companies that have stable earnings, such as International Cannabrands, as potential partners.
James West: Guess who just flew in? Steve Gormley of International Cannabrands is here again in the house – Steve, welcome back.
Steve Gormley: With my dear friend Ed and James. So happy to be up North again.
James West: Are you?
Steve Gormley: Yeah.
James West: It’s just a little bit colder up here than it is down there.
Steve Gormley: Actually, not today. It was pouring when I got in, but I was in Los Angeles last week, we had a major launch event for JUJU Royal, so I got a full week of sun.
James West: Very cool.
Steve Gormley: Yeah.
James West: Wow, so it was sunny and California-esque. I was there the week before that and it was anything but sunny and California-esque.
Steve Gormley: Right. Well, it’s tough time out there with the fires.
James West: Yes, yes it is. So tell us about JUJU! I mean, there’s so much going on, and, like, what’s happening? What’s the story?
Steve Gormley: So we’ve spoken about this on and off the air. Prior to legalization here on October 17th, there was this insane artificial exuberance, right, and for the more sagacious minds like –
James West: What are you trying to –
Steve Gormley: To my left, it was clear that there was going to be a contraction. I don’t know that any of us knew that the downturn in the market, particularly in the cannabis markets, would be as venomous as it’s been. And I said to you then, and I’m here to reinforce now, what distinguishes International Cannabrands from the pack is that we actually bought real profitable businesses and are building and growing businesses. I’ve focused less on share price and I’ve focused more on performance. You might have seen our announcement last week; our acquisition of La Vida Verde has exceeded expectations. It’s 15 percent higher over the last quarter in terms of revenues produced.
I actually went up from LA to Santa Cruz to see how they were deploying the capital that we gave them in the earlier part of the transaction, and I was elated to see an incredibly immaculate and well-run cultivation and manufacturing facility. I was able to see the equipment, the state-of-the-art equipment that was bought with the investment that International Cannabrands made, and the human capital, which was really exciting, to see the tremendous talent under the leadership of Bryce Bariasa that’s been brought on to really push that business above and beyond its goals.
James West: So these are numbers that we’re going to see in the next financials, I guess.
Steve Gormley: Well, yes. I’ll come out and say that. We’re really excited about how it’s going, and our acquisition of Riotous also turned out to be a really savvy choice; it’s performing ahead of schedule. We expect to see strong revenues from that on a monthly basis, come the middle of 2019, and we’re hitting our marks. Our team is in order. Since my partner and I took the company over in July, we’ve made tremendous progress, as you know.
Now, I don’t think that that’s reflected in our share price, and I think that we are at a point where we’re so undervalued that people who don’t invest will be kicking themselves, but I’m sticking to my knitting, James. I’m focused on fundamentals. Because like I said to you, when the dust clears – and it will, there will be a snap back, you know that – it’ll be those companies that focused on earnings and EBITDA, revenues and performance, that will really stand out and be pioneers, if you will, in the pack. We’re not a single brand built around an RTO; we’re not a concept or a long play. We’re a real business.
James West: Okay. Why don’t we run through exactly what is the business of La Vida Verde and of Riotous, because I think a lot of viewers don’t quite understand that these are running functioning businesses.
Steve Gormley: You know, fair enough, because I eat, sleep and drink it every day.
So Riotous was an acquisition we acquired more than a 20 percent interest in; a services business. So as you know, our overall strategy at International Cannabrands has been to focus on middle-market, profitable brands. We’re a brand play, we’re an aggregator of money—makers that have strong followings in the communities and the markets that they serve. Like, I’ve told you this before, but imagine rolling up regional beers, right? These craft beers who’ve got really popular, and you’ve got people like Heineken and Corona looking at buying them because by word of mouth they’ve proliferated.
We’re doing the same thing but in cannabis. We’re not going after the MedMen route; we’re not bagging elephants. We’re not buying assets at a premium that keep my bottom line in the red. We’re buying businesses that are growing and expanding, emerging, that have in their DNA the ability to be franchise-able, the ability to be national and international brands, but with a track record of performing in the markets that they serve. That’s the distinction. And we’re also not hitting the start-up space, right? I don’t have interest in a brand that hasn’t been proven; there’s just too many of them out there. The market’s overcrowded, and we’ve seen the results of RTOs that have wrapped themselves around single brands that have no market penetration.
The results for shareholders are disastrous. So what we offer the market is an alternative: we offer the market an opportunity to invest in real businesses. Because when the rebound will, and it ultimately always does, large companies will be looking to buy earnings, and they’re not going to go after companies like MedMen that are operating in the red –
James West: And have paid too much for.
Steve Gormley: And have paid too much! And they’re not going to put more good money after bad for, you know, single brands that are floundering with share prices that are being kicked all over the map; they’re going to go for companies that have stable earnings, and that’s International Cannabrands. And so that’s the overarching strategy, but we are feathering into our business model the acquisition of businesses that support vertical integration, that are going to create better margins for the brands that we acquire.
So businesses like cultivation, like manufacturing, that can not only white label products to other brands, but serve the brands at International Cannabrands by providing better pricing, by providing synergies, and we’re also acquiring brands that are in those businesses as well that have an understand of distribution and cultivation and manufacturing, that get really solid genetics and the importance of providing the market with quality product.
And so we acquired a company like Riotous, which is a service b business. It provides financing for licensed manufacturers and cultivators. And the reason I went after that deal is, it also came with an incredible distribution opportunity in the state of Washington. So now, as long as I can get my packaging across the border, which is perfectly legal, I can actually distribute JUJU Royal and La Vida Verde brands in the Washington market. So that’s an extension of my reach and that’s sort of the first step toward legitimately and lawfully becoming a national brand in the US.
James West: Okay, so then, exactly – so you’re distributing, Riotous does financing, and so you guys bought part of Riotous to help them capitalize part of their financing division?
Steve Gormley: We were interested, no, Riotous comes with its own financing already; what we were interested in Riotous is their contracts that they have. So we’re contracting with cultivators and manufacturers who have money but need additional funds to scale their business, to fund expansion, to, you know, generally speaking, upgrade the quality of their production facilities, buy new equipment.
And so those contracts are served by brands and by businesses that are in strategic geographies that International Cannabrands plans on exploiting.
James West: Okay.
Steve Gormley: And so the view on that particular deal was to get into bed with brands and marijuana businesses and markets outside our core centre of California.
James West: Okay, so what will then be in 2019 the big milestones that the investors are looking forward to be indicative of this imminent balance sheet expansion?
Steve Gormley: Well firstly, we’re going to continue to focus on the businesses that we have – doubling and tripling revenues. We’re going to be focused on earnings. But obviously, we’re an aggregator of brands; we’re a brand play. So we live in a universe where we have to be on top of the hottest trends in terms of brands that are coming to the market.
And you and I have had this discussion, and Ed and I have had this discussion, on and off the air – brands trade at incredible multiples, right? They trade higher than cultivation, they trade higher than technology. So we’re strategically looking at brands not only in California but in other strategic geographies that augment and support this middle-market strategy we have, that are run and founded by younger entrepreneurs.
I’m not looking for somebody who’s in his mid-forties or fifties who’s been working for 3 decades and wants to grab a pile of money off the table. I want a young, savvy, talented entrepreneur who gets that a publicly traded platform in Canada can provide them with the opportunity to expand their own portfolio in a way they would never dream to be able to do off their own money. So that’s the profile we’re looking to build: it’s a family of formidable brands with management teams that are just as strong.
James West: All right, see, well, that’s a great update. I’m still excited, I still own the stock, so we’ll come back to you in due course and we’ll follow up on the conversation.
Steve Gormley: Absolutely.
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