Welcome to the Cannabis Investing Newsletter Forum. This is for the cannabis stocks forum & discussion. Feel free to find your favorite cannabis stocks and contribute content as you please; content that continues the discussion of, and analysis of, cannabis stocks. – D. H. Taylor
Lowell announces second qrt results
Looks like they won't see the full impact of the shwazze deal and the new product rollout until Q4
After listening to the call yesterday, it seems one of the better bright spots for lowell and their licensing agreement has took a turn for the worst they are averaging between 700k and 1 mil a quarter for the last three quarters, this quarter it was 300k Why was it only 300,000 .It's really simple they had nobody representing their product they just made a relationship with another MS0 who's solving its own problems to deal with they were unconcerned with Lowell.
George Allen the CEO mentioned on the call that they had people representing them now and those other states they did have an add running on LinkedIn last month looking for Representatives. so let's say they realized what has to be done and they put a plan into place to remedy that it's not going to happen overnight.Ultimately you still have the similar problem of really not controlling your product quality when your not manufacturing it , the standard proceedure is to make prerolls with shake or trim , who know what Ascend was doing and why after 9 months/3 Q's of solid Revenue , the sales fell off a cliff
The new line of Lowell 35's which is probably one of the bright spots for lowell will launch this month in California , however that would take a long time to materialise because he sensually they've invented a new way to consume cannabis in a very small pre-roll basically shaped like a cigarette what's an incredibly low price point for a wholesaler around ten bucks and to be retail around 20, Lowell realized That 90% of cannabis is consumed by the daily smokers and daily smokers don't really want to put down a joint and have to relight it after it goes out so 35's is Lowell solution to that problem . That takes time which will translate to competition , obviously Big tobbacco knows how to do this . The bigger difficulty is for them to do it in other states , to just a hand one of their proprietary machines over it isn't really a good idea because it won't take long for somebody to just break it down and make their own and steal all their IP, George Allen mentioned that the solution was not an easy one that he couldn't really give an answer and how they would grow that line in other states. and speculated that one possibility was to do it themselves, but that requires alot of capital
Truthfully almost everyone had or is headed for a down quarter. Particularly in California. They are moving in the right direction , Selling plane old cannabis is a race to the bottom its about Brands , and Lowell has one of the best
I have to say I believe George Allen is one of the brightest CEOs there is in cannabis. He appears to be very sincere and it's absolutely passionate about Lowell and their success
@aconceptsketchgmail-com The quality control problems with ascend are compounded by inflexible pricing. The Lowell 35's couldn't come at a better time. I have listened to a few conference calls so far this quarter and some companies have a lower priced value product that they anticipate will perform better in tough times although nothing like the Lowell 35's I'm sure. George Allen is a very smart man and the reasoning behind the 35's seems pretty sound. Sure hope he's right because at this point they have a lot riding on them.
Hopefully, Lowell can get all of its own issues addressed with licensing. I believe this is a possible boon for the company over a longer period of time. But, and obviously, it is not an overnight thing that you just put out your shingle, open a door and let the line in.
I still need to read the transcripts and I want to get in to the numbers to take a look.
deep dive on Cali w/ Emily Paxhia
Earnings Below Expectations; New
Products / Markets Set To Provide Q3
Jason Zandberg, CFA
Amin Jazayeri, BA
EVENT: Lowell Farms, ("Lowell") or the ("Company") reported 02/22 results-revenue for 02/22 was recorded at US$13.2M, representing a sequential decrease of 6% from Q1/21 (CPG, wholesale flower prices and out-of-state licensing revenues being the primary culprit behind this decline) and Adjusted EBITDA was (US$1.1M), down from (US$0.9M) in Q1/21. Adjusted EBITDA was below consensus of $0.4M as was revenue from an industry consensus of US$15.4M.
We value LOWL by using discounted cash flow analysis and using mid cap US cannabis peer multiples based on EV/sales and EV/EBITDA
IMPACT: Slightly Negative. The Company missed revenue and EBITDA
expectations. In particular, Lowell saw a decrease in CPG and out-of-state licensing revenue. The Company has new markets coming online in Q3/22 along with smaller pre-roll products. Given these upcoming developments, we believe the long-term vision and potential of the Company remains intact.
▸ Strategic Pricing Decision Saw CPG Revenues Decrease. Lowell suffered sharp
declines in the CPG revenue as they made a strategic decision to hold their product
prices stable, while trying to reorganize edible and concentrate products. As per
their earnings conference call, this was due to the perceived difficulty in raising
prices once they would be lowered.
▸ Out-of-state revenues declines on a QoQ basis. Out-of State licensing declined 62% from Q1/22 to 02/22; this included a sequential decline in royalties of 32% with its partners in relevant markets. The decline in licensing revenue additionally. reflects lower packaging shipments to licensees in Q2/22.
➤ Lowell has two new states coming online in Q3/22. Lowell has two new states are coming online in Q3/22: Colorado and New Mexico with Schwazze, their partner and regional growth operator. The Company expects this to boost sales in those states and positively contribute to top-line overall.
▸ Bulk Flower Revenue Increased During the Quarter. Bulk flower revenue increased in Q2/22 to US$3.4M, a 94% sequential increase. The Company sold 6,374 lbs of bulk flower, a 76.8% increase sequentially. Lowell Herb Co. contributed to 66% of CPG revenues, and ranked 10th out of 30 brands in terms of the lowest change in wholesale cost per gram. This reflects positively on the brand's loyalty within a highly-contested California market.
C$0.40↓ from C$0.50
LOWL reported a challenging Q2, with lower than anticipated CPG revenue and weak bulk flower pricing as the market price for flower unexpectedly declined in the month of June. While Lowell Herb Co grew in share of CPG (66% vs 60% in Q2 of last year), an 18% sequential and 23% YoY decline in overall CPG revenue hampered overall results, and a more modest QoQ recovery in Q2 bulk flower pricing impacted revenues and gross profit. We note management achieved several cultivation milestones and a has a significant product launch (355) looming in Q3. We nevertheless remain on the sidelines in the face of lingering headwinds and uncertainty in the regulated California cannabis market, and liquidity. Our estimates are reduced and our price target is lowered from C $0.50 to C$0.40. Reiterate HOLD.
Reducing our estimates:
• Revenue: 3Q22E from US$16M to US$12.7M; 2022E from US$60M to US$54.3M;
2023E from $77.5M to $70M.
⚫ EBITDA: 3Q22E from $0.8M to ($0.3M); 2022E from $1.7M to ($2.2M); 2023E from $13.8M to $8.5M.
• Our C$0.40 price target represents an EV/Sales multiple of 1x on 2023 estimates.
Pricing pressure across bulk flower and branded CPG
LOWL reported Q2 2022 revenue of $13.2 million, an increase of 6% QoQ and 13% decline YoY, and ($1.1) million in adjusted EBITDA. Both revenue and adjusted EBITDA came in below our expectations of $14.2 million and $0.5 million, respectively and below consensus of $13.5 million and ($0.1) million, respectively. Revenue during the quarter was favorably impacted by the 141% QoQ increase in Lowell Farm Services (LFS) revenue reaching $2 million, and 94% QoQ growth from the bulk wholesale revenue reaching $3.4 million. LOWL's out-of-state licensing revenue declined 62% QoQ to $0.3 million, primarily driven by lower packaging shipments to licensees in the quarter. CPG product sales declined 18% sequentially to $7.4 million, primarily driven by the company's refraining from price reduction, as well as current efforts to reorganize edible and concentrates product offerings. LOWL is anticipating to see growth in CPG and LFS in the second half of the year. CPG revenue growth is expected to come primarily from volume increases in pre-rolls, including its new 35's product and packaged flower. The increase in LFS service fees reflects the impact from seasonal fall harvest, predominantly in Q4 compared to the small spring outdoor harvest activity. LOWL doesn't anticipate to return to the same level of third party bulk flower sales until this time next year.
Priced as of close of business 9 August 2022
Gross margin as reported was 11.3% compared to 12.7% in Q1 and 37.9% YoY. The sequential margin decline was primarily driven by lower CPG volumes as the company held pricing and reorganized its edible and concentrate offerings, while the YoY margin decline was due to significantly higher bulk prices realized in the prior year. As of June 30, 2022, LOWL had cash equivalents and restricted cash of $2.2 million.
Thanks for that post.
LOWLF is one of D.H.'s top picks.
I will leave it to D.H. to update his analysis of LOWLF, when he gets time. I am confident when he does, he will explain every detail like he always does, in a was anyone can understand!
I think LOWLF remains one of the most undervalued cannabis stocks on the OTC with huge upside potential. JMHO.
Nice twitter thread on cannabis busts in Ny and Cali ,,,The synopsis is that growers are buying way less supplies and According to lots of people, some legal business in CA are definitely risking a lot to stay afloat and selling/letting product hit illicit mkt , which is eventually going to lead to Cali busts of legal operators that will benefit other operators who are playing by the rules.
Cash problem is solved , this should get us over the hump ,Downside Dilution and really low conversion price
SALINAS, Calif., Aug. 19, 2022 (GLOBE NEWSWIRE) -- Lowell Farms Inc. (the “Company”) (CSE: LOWL; OTCQX: LOWLF), a California-born innovator in cannabis cultivation and maker of the legendary brand Lowell Smokes, along with its subsidiary, Indus Holding Company ("Subco"), has issued an aggregate of $4.2 million of senior secured convertible debentures ("2022 Convertible Debentures") of Subco, which are convertible, as more fully described below, into an aggregate of 18.2 million subordinate voting shares of the Company ("Subordinate Voting Shares") with respect to principal and additional Subordinate Voting Shares upon conversion of accrued and unpaid interest. Investors in the 2022 Convertible Debentures received warrants of the Company ("2022 Warrants") to purchase an aggregate of 18.2 million Subordinate Voting Shares and warrants of Subco ("Subco Warrants") to purchase an aggregate of 27.3 million non-voting common shares ("Subco Shares") of Subco. The Company has received investor commitments for the purchase of an additional $2.5 million in 2022 Convertible Debentures.
The 2022 Convertible Debentures are part of the same series of convertible debentures issued in connection with the Company’s and Subco’s April 2020 financing ("2020 Convertible Debentures"). Proceeds from the financing are contemplated to be used for working capital purposes, automation investments and expansion into new markets.
“We are grateful for investor support as a testimony to the strategy we have employed to differentiate ourselves,” said George Allen, Chairman of Lowell Farms. “This financing allows Lowell to bring capabilities to market that have been in development for years.”
Highlights of the Financing
The 2022 Convertible Debentures bear a fixed interest rate of 5.5% per annum and will mature on October 31, 2023. The amounts due under both the 2022 Convertible Indentures and the 2020 Convertible Debentures are secured on a pari passu basis by substantially all assets of the Company (other than the Company’s Salinas County processing facility).
The 2022 Convertible Debentures, including accrued and unpaid interest thereon, are convertible into Class C common shares of US Subco ("Class C Shares") at the option of the holder at a conversion price of US$0.2313 (the "Conversion Price"). Each Class C Share is redeemable for one Subordinate Voting Share.
Each investor in the 2022 Convertible Debentures received, for no additional consideration, 2022 Warrants to purchase a number of Subordinate Voting Shares of the Company equal to the number of Class C Shares into which such investor's 2022 Convertible Debenture is convertible. Each 2022 Warrant has an exercise price of US$0.2613 and a 42-month term from the date of issuance.
Each investor in the 2022 Convertible Debentures also received, for no additional consideration, Subco Warrants to purchase a number of Subco Shares equal to one-and one-half times the number of Class C Shares into which such investor's 2022 Convertible Debenture is convertible. Each Subco Warrant has an exercise price of US$0.2613 and a 42-month term from the date of issuance. Under certain circumstances, investors will have the right to require the Company to repurchase their Subco Warrants and any Subco Shares issued upon exercise of Subco Warrants on a Subordinate Voting Share-equivalent basis.
As further consideration for their investments in the 2022 Convertible Debentures, the expiration date applicable to 2020 Warrants held by certain investors will be extended from October 13, 2023 to April 13, 2025 and may be further extended to February 19, 2026, if applicable regulatory approvals are sought and obtained.
The financing is considered a “related party transaction” pursuant to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”) because certain directors of the Company participated in the financing. Pursuant to Sections 5.5(b) and 5.7(1)(a) of MI 61-101, the Company is exempt from the requirements to obtain a formal valuation and minority shareholder approval because the Subordinate Voting Shares trade on the CSE and the fair market value of insiders’ participation in the financing was below 25% of the Company’s market capitalization for purposes of MI 61-101.
Sad but true , Legal competition in Cali will decrease rapidly...Good for Lowell but bad for small legal Mom and pop grows
“I would expect to see at least half of our businesses to fail in the next year,” said Genine Coleman, executive director of the Origins Council. “If I’m being quite frank, I think we need a new proposition. So much wrong is baked into this system that we are just not going to be able to move ahead without one.”