Australis Capital Inc. (CSE: AUSA) (OTC: AUSAF) (operating as Audacious Brands) recently released its second quarter financial results, recording impressive growth on several key metrics (on a year-over-year comparative basis). Overal, we are very impressed by the level of execution shown with a very comprehensive turnaround achieved in months, as the numbers testify to.
2021 has been a banner year for Audacious, as highlighted by the management team transforming the business from an investment company to a US multi-state operator (MSO). Based on the second quarter results, we believe this transformation has been beneficial for the business and are of the opinion that it has significant potential catalysts for growth.
When compared to the same period last year, Audacious’ revenue increased by more than 2,000%, and we believe the business is well positioned to record continued growth in future quarters. In the earnings report, the management team forecasted more than $3 million of revenue for the third quarter, which would be more than 30% higher than the prior quarter. Going forward, we will monitor how the company is able to grow and surpass the $3 million revenue level.
A metric that stands out to us from the second quarter is gross margin. During the period, Audacious strengthened gross margins and attributes the improvement to the successful integration of its ALPS subsidiary. The improvement in gross margins is a testament to the strength of its capital-light business model and we are bullish on this trend.
A Differentiated Story Being Led by Executives with Proven Track Records
When compared to its peers, Audacious represents a differentiated opportunity with a business model that is highly focused on partnering and expanding its portfolio of integrated cannabis operations to capture additional market share in the US and in certain international markets.
Audacious is led by a management team that has a long track record of success in the cannabis industry and we expect this collective expertise to play a key role in how the story advances in 2022 and beyond. Going forward, we are highly focused on how the team is able to identify synergistic opportunities between the cannabis assets it owns and expect this to benefit the business as the story continues to advance.
The management team remains focused on advancing its capital-light business model by scaling operations and streamlining costs while entering additional burgeoning cannabis markets. Over the next few months, we expect to learn about Audacious’ strategy to expand into New York and New Jersey while continuing to bring new products to market. During this time, the company will pursue multiple initiatives to increase production volume and we are bullish on the amount of value that can be generated by successfully executing on the strategy.
In future quarters, we expect Audacious to see a bigger impact from the revenue that is generated by ALPS and management fees that are related to Green Therapeutics (GT). These subsidiaries are expected to play an important role in gross margin appreciation and will monitor this metric in future quarters. We consider these assets to be core growth drivers for the business and will monitor this aspect of the story.
GT Should be a Major Revenue Generator in Future Quarters
Through GT, Audacious is focused on both premium designer products, predominantly derivatives under the Tsunami brand, and high quality value products under the Provisions brand. We are favorable on these products due to their higher-margin profile and expect this vertical to play an important role in making the business a profitable one in future quarters.
GT is well known for its Provisions cannabis brand and Audacious is focused on supporting the launch of an edibles product line under it. Earlier this month, the company launched the edible product line in Nevada and plans to enter other markets where the business has a presence.
Currently, consumers can buy a curated selection of Provision products in California on the EAZE menu. With approx. 8 million cannabis deliveries to date and 2 million registered customers, EAZE is the largest legal cannabis delivery service in the US. We are favorable on the distribution that is associated with the relationship and expect the product line to be a catalyst for revenue growth.
Audacious is working to secure additional manufacturing space in Nevada to increase extraction capacity in order to produce GT’s edible product line as well as other product categories. upon transfer of the GT licenses, the new products are anticipated to accelerate revenue growth and we are favorable on this aspect of the story.
When it comes to GT, we are bullish on how the wholly owned subsidiary is executing on high-impact growth initiatives in Nevada and believe the market does not appreciate the potential that is associated with this. We are also highly focused on GT’s plan to become operational in Missouri and expect this market to support growth in 2022 and beyond.
During the quarter, Audacious successfully launched its LOOS brand in California and we are bullish on the potential growth that is associated with the cannabis beverage shot brand. Currently, LOOS is available in 17 retailers and on the EAZE menu in California.
Since commencing production, purchase orders have been increasing on a month-over-month basis. A few weeks after the products became available on the EAZE platform, LOOS became one of the best-selling beverages on the menu and consider this to be an underappreciated aspect of the story.
The product line is currently ranked in the top five of the most successful beverage products in California and we find this to be an impressive achievement in such a short period of time. Based on the successful launch and growing demand for the LOOS product line, Audacious is working with its partners to scale up production through licensing agreements and will monitor how this aspect of the business grows in 2022.
A Global Growth Story That is Trading for a Discount
From Massachusetts to the Asia-Pacific region, Audacious is highly focused on expanding into new markets. We have been favorable on the low-cost strategy that is associated with the planned expansion and will monitor how the management team is able to capitalize on these markets. Going forward, we will also be focused on the multi-year agreement with Professional Bull Riders (“PBR”). Through the relationship, Audacious will sell topical cannabidiol (CBD) products that are endorsed by PBR under the brand Wreck Relief. Products will be sold online and, later on, intended to be sold through major retailers.
During the second quarter, Audacious announced several important milestones and we believe the business is well positioned to record continued growth on a quarter-over-quarter basis. The period was highlighted by the entrance into the California and Massachusetts markets and we are bullish on these opportunities.
At current levels, we believe Audacious has a compelling valuation and a favorable risk-reward profile. We are bullish on how the management team has used ALPS to enter new markets in a low-cost fashion and consider this to be a core pillar of the long-term opportunity that is associated with the US cannabis operator.
Over the next year, we expect Audacious to continue to hit new milestones and this is an opportunity our readers should be aware of. If you are interested in learning more about how Audacious Brands is positioned to capitalize on the global cannabis market, please send an email to email@example.com with the subject “Audacious Brands” to be added to our distribution list.
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Pursuant to an agreement between StoneBridge Partners LLC and Australis Capital Inc. we have been hired for a period of 180 days beginning September 13, 2021 and ending on March 13, 2022 to publicly disseminate information about (AUSA) including on the Website and other media including Facebook and Twitter. We are being paid $5,000 per month (AUSA) for or were paid “ZERO” shares of unrestricted or restricted common shares. We plan to sell the “ZERO” shares of (AUSA) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (AUSA) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.