Follow up thoughts post CC
I listened to the conference call. I don't believe it's been posted yet to the Verus Foods website, but if you email the IR team they will provide it to you. A few observations:
1. The gross margins were very strong. Management indicated a range of 16-20% for the year. The past quarter only included buffalo meat, but as they ramp some of the frozen vegetable and french fry products, that will help boost margins. Traditional beef shipments will likely be at the lower end of the range. In short, high teens margins seem quite doable.
2. Operating income break even only requires $3mm in revenue per quarter. That means that the annual opex will be a very low $2mm. I assumed $3mm in my prior post to allow for incremental advertising, but the point remains that with $100mm in revenue, the company will be highly profitable.
3. CEO is working hard on new business deals. Apparently the Vietnam deal ($29mm order, could have been a lot larger but they need more working capital) was signed just shortly before the earnings call. I'd expect to hear of more deals in the next few weeks as the CEO was in Asia during the call and is actively sourcing new business. I've encouraged IR to post new business wins (signed deals) as soon as possible to help build some momentum for the stock.
The company is obviously behind from a capital markets perspective (name change, reverse split, distribution of whatever value is tied to the legacy real estate business (probably not much)). Once they settle the lawsuit (RBIZ could see an infusion of a little over $1mm if victorious), that will enable them to get all of the aforementioned capital markets changes done. In the interim, I think the current stock price is absurdly cheap.
