Release Date: December 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RIV Capital Inc (CNPOF, Financial) successfully completed its business combination, strategically entering the large and fast-growing cannabis markets of New York and Florida.
- The company expanded its footprint to 42 locations, positioning itself well in high-growth markets representing 25% of the US population.
- Integration activities have already resulted in $2 million in annualized operating savings, with an additional $2 million in cost savings identified.
- RIV Capital Inc (CNPOF) reported its 12th consecutive quarter of positive cash flow from operations and year-over-year revenue growth.
- The company secured a new senior secured credit agreement with access to two additional credit lines totaling $25 million, supporting strategic growth plans with a strong balance sheet.
Negative Points
- The Florida adult use vote did not pass, which could lead to increased competition and potential price compression in the medical market.
- The company faces competition from illicit cannabis stores in New York, particularly in Manhattan, which could impact market share.
- RIV Capital Inc (CNPOF) has underperformed in per-store sales compared to competitors, indicating room for improvement in sales techniques and product offerings.
- The New York market is overserved with derivative cannabis products, leading to challenges in balancing supply and demand.
- The company is still working on improving the quality of its flower products in New York to meet market standards and consumer expectations.
Q & A Highlights
Q: With the amendment three not passing in Florida, how does that impact your market strategy, and do you anticipate further price compression or consolidation?
A: Robert Beasley, CEO: We did not financially extend in anticipation of the amendment passing, so internally, we have no further adjustments to make. However, the market may see increased production leading to price compression. We are preparing to become 10-12% more efficient to maintain margins. We expect a competitive environment for two to three quarters, followed by stabilization and potential M&A activity.
Q: How do you plan to compete against the illicit market in New York, and what is the supply-demand balance at the wholesale level?
A: Robert Beasley, CEO: We must outcompete the illicit market, which is mainly focused in Manhattan. Our strategy includes focusing on areas outside the city and offering competitive product profiles. The wholesale market is growing, and we see potential in bulk wholesale, which was previously unrecognized.
Q: Can you discuss the progress and potential for revenue per store in Florida?
A: Robert Beasley, CEO: We have underperformed in per-store sales compared to competitors. We are focusing on increasing same-store sales by 4-6% this year by improving our product offerings and sales techniques. We were late to certain product categories but are now catching up.
Q: What is your capacity in New York, and how are you addressing the market's needs?
A: Robert Beasley, CEO: We have 20,000 square feet of indoor space and are constructing a 50,000 square foot facility in Buffalo. New York is overserved with derivatives but underserved in high-quality flower, which we aim to provide. We plan to launch a high-quality premium brand as our capacity increases.
Q: How would you describe your relationship with Hawthorne, and what are their strategic priorities?
A: Robert Beasley, CEO: Hawthorne is committed to staying in the industry and building an empire. They are aligned with our growth strategy and supportive of future M&A. We have a strong and energetic partner in Hawthorne, which is beneficial for our long-term goals.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
