Last week, Body and Mind Inc. (CSE: BAMM) (OTCQB: BMMJ) released fourth quarter financial results and issued an operational update.
After visiting Body and Mind’s Las Vegas facility and meeting with the management team in October, we became especially excited about the US multi-state operator (MSO). When compared to other MSOs, we believe the company is trading at a discount and has more significant growth prospects.
During the quarter, Body and Mind generated $8.14 million of revenue which was approx. 14% higher than the prior quarter. Two metrics from the fourth quarter earnings release that we find to be significant are the $1.53 million of adjusted EBITDA* and the positive operational cash flow.
For the entire year, Body and Mind generated $26.9 million of revenue which is more than 330% higher than the prior year. While we find this growth to be impressive, the almost 700% increase in gross profit (when compared to the prior year) is a statistic that our readers should be aware of.
When compared to the prior year, adjusted EBITDA* increased by almost $6.5 million and we are favorable on this trend. We believe the significant improvement is a testament to the management team’s focus on lowering expenses while increasing production capacity and entering new markets in the US.
A Coast-to-Coast US Growth Story
When it comes to the new markets that Body and Mind is levered to, we are most bullish on its opportunity in California, Ohio, and Michigan. Over the next year, we expect these markets to serve as a growth catalyst and will monitor how the management team is able to capture market share in these states.
In September, Body and Mind completed the transfer of ShowGrow’s Long Beach dispensary license in California to a subsidiary that is wholly-owned by the company and we are monitoring this aspect of the business. California is the largest cannabis market in the world and we are favorable on the leverage that Body and Mind has to it.
Prior to receiving the license for the California dispensary, Body and Mind completed the transfer of Clubhouse’s dispensary license in Ohio. When compared to Illinois and Michigan, Ohio has not received nearly as much attention and we believe the market is discounting the growth prospects that are associated with it. The company completed the rebranding process for the dispensary and we expect the market to serve as a catalyst for growth in 2022.
In Ohio, Body and Mind has already produced and shipped the first batch of branded products and we consider this to be a milestone for the business. During the quarter, the company completed the construction of a 4,000 square foot production facility and the acquisition of NMG’s dispensary and production facility. We expect these two developments to increase production capacity and lead to the business generating more revenue in the state.
Michigan is a market that we have especially bullish on and we are favorable on how Body and Mind has been driving this aspect of the story forward. The company has started to execute on a vertical market expansion strategy and has leased a commercial building with the goal of developing a cultivation facility that has 50,000 square feet of canopy and a production facility.
During the quarter, Body and Mind was granted pre-approval licenses at the state and local level and building permits for a cultivation and production facility that has approx. 25,000 square feet of indoor cultivation space and 5,000 square feet of production and manufacturing space. The company also was granted pre-approval licenses to construct a dispensary and has started the process in Muskegon.
In the near future, we expect to learn more about Body and Mind’s agreements with two entities in Illinois that have been identified in the state’s Department of Financial and Professional Regulation (IDFPR) as recipients of conditional recreational dispensary licenses in the greater Chicago-area. Illinois has been one of the fastest growing markets in the US and we are bullish on the potential for Body and Mind to capitalize on it.
A Growth Story that is Trading for a Discount
Body and Mind has been executing on a multi-faceted growth strategy and has advanced operations in burgeoning medical and recreational cannabis markets in the US. Going forward, we expect the business to report strong revenue growth from existing operations, the Ohio production facility, and flower sales in Arkansas. The company is highly focused on the opportunity in Michigan and plans to continue to upgrade and expand existing assets while pursuing new state licenses and evaluating accretive acquisition opportunities.
As of July 31st, Body and Mind reported to have more than $7 million of cash and we expect the capital to be used to expand the business. With more than $40 million of total assets, we believe that Body and Mind is undervalued and expect this to change as the business starts generating revenue in new markets.
At current levels, Body and Mind’s market capitalization is less than C$55 million and we find the risk-reward profile to be favorable. We believe the US cannabis operator has significant potential growth catalysts and consider this to be an underappreciated aspect of the story. As the management team continues to drive the story forward, we expect Body and Mind to hit an inflection point and believe this a business to be aware of.
If you are interested in learning more about Body and Mind, please send an email to firstname.lastname@example.org with the subject “Body and Mind” to be added to our distribution list.
For the fastest access to data on Body and Mind, sign up for our free newsletter!
*Adjusted EBITDA is a Non-GAAP metric used by management that does not have any standardized meaning prescribed by U.S. GAAP and may not be comparable to similar measures presented by other companies. Management defines the Adjusted EBITDA as the Income (loss) from operations, as reported, before interest, taxes, and adjusted for removing other non-cash items, including the stock-based compensation expense, depreciation, and further adjustments to remove acquisition related costs or gains. Management believes Adjusted EBITDA is a useful financial metric to assess its operating performance on a cash adjusted basis before the impact of non-cash items and acquisition activities. The most comparable financial measure calculated and presented in accordance with U.S. GAAP is net operating income (loss), which was presented above prior to the Adjusted EBITDA figure.
Pursuant to an agreement between StoneBridge Partners LLC and Body and Mind Inc. we have been hired for a period of 90 days beginning October 1, 2021 to publicly disseminate information about (BAMM) including on the Website and other media including Facebook and Twitter. We are being paid $5,000 per month (BAMM) for or were paid “ZERO” shares of unrestricted or restricted common shares. We plan to sell the “ZERO” shares of (BAMM) 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 (BAMM) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.