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Digital - Business - Media

ManifestSeven Holdings Q3 2020 Results Indicate Operating Performance Trending Up

ManifestSeven Holdings Corp. (CSE: MSVN), California’s first integrated omnichannel platform for legal cannabis, today announced its financial results for the three and nine months ended August 31, 2020. The results follow last month’s listing of the Company’s common shares on the Canadian Securities Exchange. All financial information in this press release is provided in U.S. dollars unless otherwise indicated.

Financial Highlights:

  • Revenue for the three and nine months ended August 31, 2020 increased 64% and 96% year-over-year to $4.7 million and $13.8 million, respectively.
  • Revenue from cannabis distribution, delivery, and dispensary operations, the Company’s core operating segment, for the nine months ended August 31, 2020 increased 217% year-over-year to $9.3 million.
  • The Company generated record revenue of $3.5 million from ongoing cannabis operations for the three months ended August 31, 2020, an increase of 94% year-over-year and 30% sequentially.
  • Gross margin for the nine months ended August 31, 2020 was 31% of revenue, up from 30% of revenue year-over-year, while gross margin from cannabis operations for the nine months ended August 31, 2020 was 30% of revenue, up from 17% year-over-year.
  • Adjusted EBITDA loss for the three months ended August 31, 2020 decreased 69% year-over-year and 8% sequentially to ($1.3) million.
  • Net loss from operations for the three months ended August 31, 2020 decreased 59% year-over-year and 8% sequentially to ($1.9) million.

Operational Highlights:

  • The Company’s cannabis operations generated significant growth both year-over-year and sequentially, with M7’s core operating segment representing 68% of total revenue for the nine months ended August 31, 2020, up from 44% for the same period in 2019, and a record 75% of total revenue for the three months ended August 31, 2020.
  • M7 continued to expand its coverage of California to keep up with the growing demand for its cannabis distribution services. The number of licensees serviced by the Company’s distribution division totaling 270 as of August 31, 2020, up 315% year-over-year and 29% sequentially.
  • M7’s retail customer base in core markets throughout California continued to expand rapidly. The number of unique customers served by the Company’s Weden-branded dispensary and delivery operations during the three months ended August 31, 2020 increased 133% year-over-year.
  • M7 continued to implement the strategic cost reduction program, initiated in the second quarter of 2020, targeting non-core operations of the Company, resulting in a 42% year-over-year and 17% sequential reduction in operating expenses and continuing to advance the Company on its pathway to net profitability.

To read the press release in its entirety, please click here.

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TDR Commentary: ManifestSeven is an integrated omnichannel platform for legal cannabis, merging compliant distribution with a retail “superhighway” in California, and eventually, beyond (think federal legalization and/or descheduling opening up distribution channels across state lines). The company augments business-to-business value proposition through shoring up dispensary supply chains, local on-demand delivery services, e-commerce, and subscription offerings.

With hubs stretching from the desert to the Pacific, ManifestSeven integrates compliant distribution operations and retail channels into one seamless platform. They are one of the few remaining pure-play ‘pick & shovel’ public operators in the industry. This is in reference to an investment strategy that invests in the underlying technology needed to produce a good or service instead of producing the final output itself.

Although ManifestSeven is virtually unknown among cannabis investors at this point, the company’s third quarter/9-month performance was impressive. As seen in the financial and operational highlight above, sequential revenue is soaring, EBITDA loss is rapidly narrowing and operating expenses are being reduced. It is a trifecta of catalysts which, if trends are maintained, could lead to positive cash flow over the next 2 or 3 quarters.

For now, TDR is watching the developments of this low-profile cannabis company. In some respects, we view M7 similarly to CannaRoyalty Corp. (named later changed to Origin House) in its early days before it was eventually acquired by Cresco Labs in 2019. We now await further cues as the company proves its business model in the world’s 5th largest standalone economy—California.

TDR will have additional coverage as events warrant.

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