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spk04: Hello, and thank you for standing by. Welcome to Unrivaled Brands' second quarter 2021 final results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. At this time, I would now like to turn the conference over to Jason Assad, Investor Relations with Unrivaled Brands. Please go ahead.
spk03: Thank you, Operator. Good afternoon, and welcome to Unrivaled Brands' second quarter 2021 conference call. Financial Results Conference Call. With us today are Unrival's Chief Executive Officer, Frank Nuttall, and Chief Financial Officer, Jeff Batliner. Before I turn the call over to management... Please remember that this is a conference call that contains forward-looking statements as defined within Section 27A of the Securities Act of 1933 as amended and Section 21E of the Security Exchange Act of 1934 as amended. These forward-looking statements and terms such as anticipate, expect, intend, may, will, should, or other comparable terms involve risk and uncertainties because they relate to events and depend on circumstances that will occur in the future. These statements include statements regarding the intent, belief or current expectations of unrivaled and members of its management, as well as the assumptions on which the statements are based. Prospective investors are cautious that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, including those described in unrivaled's periodic reports filed with the SEC, and that actual results may differ materially from those contemplated by such forward-looking statements. Except as required by federal securities law, the company undertakes no obligation to update or revise forward-looking statements to reflect changed conditions. Finally, this conference call is being webcast. The webcast link is available in the investor relations section of our website at www.unrivaledbrands.com. With that, I'm going to turn the call over to Unrivaled Brands CEO, Frank Nuttall. Frank?
spk01: Thanks, Jason. and thank you all for joining us this afternoon to discuss unrivaled brand second quarter operating results. As we have in the past, I'll provide an update on our primary initiatives, including this morning, this afternoon's announcement with respect to acquiring People's First Choice, and Jeff will provide insight into our Q2 operating results. While Jeff will provide a more detailed summary of those results, I would like to note that these financial statements are rearward-looking and do not fully reflect our business as of today. Notwithstanding the fact that our financial statements reflect work we have done on two of the three initiatives we set forth at the beginning of the year, notably operating improvements and balance sheet reorganization, it does not reflect the third initiative, rebuilding unrivaled brands and the merger with Umbrella, Silver Streak, and People's First Choice, all of which we believe have the potential to result and further material enhancements to our scale, revenues, and market share. Before I set forth the details of this third initiative and some of the impact on our business and future revenue, I would like to highlight a couple items with respect to our operating performance and balance sheet reorganization. To begin with, we have continued to make improvements and see gains in our existing operations. With revenues of 6.3 million in the second quarter of 2021, a 131% year-over-year improvement compared to the same period in 2020, we recorded our largest quarter of revenue since the fourth quarter of 2019. Our second quarter revenue also reflects a sequential 22% increase relative to our first quarter of this year. On the other side of the ledger, we have continued to review our operations and drive appropriate cost reductions. Jeff will provide more details shortly, but I'd like to note that our non-GAAP SG&A expenses, which reflects the elimination of non-cash or non-recurring items were down considerably. For the second quarter of 2021, our non-GAAP loss was 1.1 million, down 90% from the second quarter of 2020 when we had a non-GAAP loss of 11.5 million. Additionally, on a quarter-over-quarter basis, our non-GAAP loss is down 16% from the first quarter of 2021. A full non-GAAP reconciliation can be found in our 10-Q filing. One note with respect to our operational review and improvement initiatives. Having worked on upgrading our approach to the management of the company and executed on the overhaul of operations during the last six months, we believe that we have largely cleared out most of the historical operational excesses and have a strong, solid core team going forward to operate and grow the business. While operational excellence is an ongoing effort, one that remains central to our management of Unrivaled, We do not expect any further sweeping changes at this time with respect to the historical core operations of the company. With respect to the monetization of financial assets, I am pleased to report that during the second quarter, we entered into a definitive agreement to sell our non-operating Fourth Street property in Las Vegas. As a reminder, this property became useless for its intended purpose of opening a cannabis dispensary based on zoning changes in Las Vegas. The sale of this property formally closed in August, which resulted in net cash receipts of approximately $825,000. In addition, the sale removed ongoing carrying costs associated with its ownership, including the repayment of the $1.6 million mortgage on that property, reducing our outstanding debt and ongoing interest payments. Related to our overall debt amount, all of the original convertible notes entered into in 2019 have been converted and Unrival no longer has any carrying costs associated with that debt. With the sale of our investment in Hydrofarm, we added approximately $40 million to our balance sheet. Additionally, we have a note receivable and puttable equity in the amount, approximate amount of $12.1 million associated with the sale of two dispensaries in Nevada in early 2020. We expect to be able to monetize the note receivable and the puttable equity over the next 6 to 12 months. The sale of the Hydrofarm stock and warrants and the 4th Street property provides us with more flexibility to focus our attention on growth and better position the company for what we believe is a very opportunistic future. This includes the close of the merger with Umbrella on July 1st, 2021, the anticipated closing of the transaction to acquire Silver Street Solutions, in late Q3 or early Q4 2021, the anticipated closing of People's First Choice in early Q4 2021, future potential acquisitions, and organic growth from existing assets. With this respect, our largest initiative going forward is building on our platform and core operations both organically and strategically. While I will discuss both, allow me to start with the latter by providing an update on the three primary strategic transactions we announced thus far, principally the merger with Umbrella and the execution of definitive agreements to acquire Silver Streak Solutions and People's First Choice. In July, we announced the successful completion of our merger with Umbrella, doing business as unrivaled. The merger with Umbrella brought together two California-based companies with combined operations in California, Oregon, and Nevada. Collectively, the company operates a broad array of cannabis assets, including cultivation, distribution, brands, processing, and dispensaries, strengthening our base of operations. In connection with the merger with Umbrella, as previously announced, the company changed its name to Unrivaled Brands, and as part of the company's rebranding, the company started trading under its new ticker symbol UNRV on the OTCQX market. We believe the synergies will rival existing brand portfolio and distribution operations in multiple states will lead to greater scale and produce meaningful economic and operational benefits. We look forward to integrating our businesses and expanding the company's platform and aligns with our goal of becoming the premier cannabis multistate operator in the West. Turning to our acquisition of Silver Streak Solutions, we continue to progress toward the close and expect all the closing conditions to be met by early October. We have begun working on a plan to expand the technology employed in running the business and, importantly, plan the rollout to additional locations. Principal among these are opening delivery services out of our San Leandro and Santa Ana facilities and potentially other locations as well. As previously indicated, we announced earlier this afternoon the execution of definitive agreements to acquire People's First Choice. The People Santa Ana dispensary is fully operational and we believe is one of the most prominent and largest dispensaries in all of California. Additionally, there are two other licenses, one in Los Angeles and one in Riverside, that are under development and expect those to both open by Q1 2022, as well as two other retail sites under development in Southern California. The additional footprint and the scope of operations provides us with considerably greater revenue going into 2022. Importantly, we also intend to enter into a management services agreement whereby we will take full control of the People Santa Ana location as of September 1st. This will allow us to book all the revenues and receive all the cash flow from this operation. We feel that this is a transformative acquisition for Unrivaled and sets us on a path to becoming one of the leading cannabis companies operating in the California market. With respect to our organic growth initiatives, we have experienced some minor systems and permitting delays in opening our Hagenberger cultivation facility. We originally but we remain two to four weeks out from our first planning. This will have only a minor impact in our operations and expected financial results, and we expect our first harvest in late Q4. As previously stated, the Hagenberger facility is approximately twice the size of our existing cultivation operation in Oakland, and we expect it will provide high-quality, regular source of flower to drive the expansion of the Carova brand, which was acquired as part of the unrivaled merger. Concerning our other major project, our Dyer Road flagship location, we are diligently working on planning for and opening that dispensary as part of phase one, and the cultivation as part of phase two. Given the planning work completed to date and our knowledge of the Santa Ana process, we expect the dispensary operation to be opened by the end of Q1 2022 with the cultivation operation anticipated to open later in the summer of 2022. We remain focused on building Unrivaled in a logical and coherent manner with an eye towards our shareholders. We have been working hard and diligently towards this goal And while much work remains, I firmly believe the pieces are coming together. Importantly, I would like to thank every member of the Unrivaled team making this happen. There's no doubt some of our best assets are our people. That concludes my prepared remarks. With that, I would like to now turn the call over to Jeff, our CFO, for a detailed look at our 2021 second quarter financial results.
spk02: Thanks, Frank, and good afternoon, everyone. For the quarter ended June 30th, 2021, we generated revenues from continuing operations of approximately $6.3 million, compared to $2.7 million for the quarter ended June 30th, 2020. So, an increase of $3.6 million, or 131%. This increase was driven by a $1.5 million increase in production revenue, a $1.2 million increase in retail revenue, $835,000 increase in cultivation revenue, This was partially offset by a $700,000 decrease in bloom distribution revenue. Our gross profit for the quarter ended June 30, 2021, was approximately $2.3 million, compared to a gross profit of approximately $1.2 million for the quarter ended June 30, 2020. This was an increase of $1.1 million. Our gross margin for the second quarter of 2021 was approximately 37%, compared to an approximate 46% for the second quarter of 2020. Our selling, general, and administrative expenses for the second quarter of 2021 were approximately $6.2 million, compared to an approximate $6.3 million for the second quarter of 2020. So it's a decrease of approximately $100,000, or 1.4%. We saw roughly $1.4 million in expense reductions across salaries and wages legal fees, accounting fees, and other professional fees. And we experienced roughly $1.4 million of expense increases stemming from stock compensation, options expense, insurance expense, and licensing. These favorable and unfavorable factors essentially netted each other out, and our overall SG&A expense decline was the result of an accumulation of small expense reductions across numerous expense items. and the result of management's continued focus on cost control. Other expenses for the quarter ended June 30, 2021, were approximately $1.1 million, compared to other expenses of approximately $540,000 in the prior year, so an increase of roughly $520,000. The expense increase was driven by the mark-to-market calculation on our hydro farm investment and was partially offset by less interest expense in 2021 compared to 2020. In total, we incurred a net loss of $4.1 million or two cents per share for the 2021 fiscal second quarter, compared to a net loss of 18.2 million or 10 cents per share for the second quarter of 2020. We had some very significant legacy-related one-time hits this year. And while the impact of those items was greatly minimized this quarter, we feel that the schedule showing non-GAAP measurements continues to provide more clarity into our performance. This quarter, when we eliminate items such as the $900,000 hit from the hydro farm mark-to-market, the $800,000 in Stockholm expense, $1.1 million in amortization and depreciation, our non-GAAP loss is $1.1 million for the quarter. And this is a $200,000 improvement compared to last quarter. Also noteworthy in Q2, we once again had growth in our cash balance as it rose from $1.2 million at the beginning of the quarter to $40.3 million by the end of the quarter. I would like to reiterate that management intends to continue to invest in further expanding our operations and a comprehensive marketing campaign with the goal of accelerating the education of potential clients and promoting our new name, and our products. Management intends to continue its efforts to increase revenue and improve the efficiency of operating expenses. And given that most of the operating expenses are fixed or have a quasi-fixed character, management expects that as revenue increases, those expenses as a percentage of revenue will significantly decrease. I would like to thank the Unrivaled Brands finance and accounting team for all its efforts on this filing. And thank you to you, our audience, for your attention to this financial summary. Operator, you may now open the call for questions.
spk04: We will now begin the question and answer session. To ask a question, you may press Store, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Store, then 2.
spk00: At this time, we will pause momentarily to assemble our roster. Once again, if you have a question, please press store, then one. As a final reminder, if you have a question, please press store, then one. Pardon me, it appears at this time we have no questions.
spk05: And I would now like to turn the conference back over to Jason for any closing remarks. Actually, I'm going to jump in.
spk01: This is Frank Nuttall. So thank you, operator, for your assistance. I'd like to thank all of our shareholders today for joining us, and more importantly, for your continuing support. We look forward to speaking with you on our Q3 earnings call in November. In the interim, and as always, please feel to reach out to us or the IR team if you need anything else, and please follow us on social media. Thank you all.
spk04: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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