Connecting some dots, seems the company wants to go big or go home.
They have unprecedented liquidity in cash, bolstered by the recent building sale. They have a new credit line with a reputable bank. And still they filed the shelf offering for $200M.
They announced relationships with 7-11 and Walmart, mentioning "national," but also "participating stores' and no mention of number of outlets nor potential revenue. They also pointed out that both deals will be supported by NBEV marketing.
They bought Morinda, and subsequently lowered the 2019 EBITDA guidance from $20M to $15M.
They established relationships with bigger players and have orders for $60M in CBD beverages and shots, while also launching CBD cosmetics through Morinda,
They almost doubled the size of their Denver facility.
Net, net, I think they want to establish true national chain distribution by testing products at no profit in order to gain share and credibility as a means to launch other beverages and CBD products with greater scale, potentially with enough greater scale to tap the sources of capital they opened.
They will never need $200M beyond what they have for these purposes; to me, the size of the shelf provides flexibility, including for an acquisition. If you don't like the S-3, you should sell the stock, because likely it will be in effect for a long time.
Morinda allows them to "overspend" on their own beverages and still show overall positive EBITDA. I think the metric to watch for 2019 is beverage revenue, not profits. If the ramp is steep, as they are surely gunning for, and if the CBD orders come through as announced (sometime in 2019), plenty of profits will come in 2020-2021.
If they execute well, marvelous strategy; if not, not so much.
Q1 results will lend a first, relatively small glimpse of performance: whether or not they meet or beat $60M guidance, but more importantly, any traction with in-house beverages. They've just begun so it's unreasonable to expect too much. New guidance may shed more light, and Q2 results more so, hopefully with Q3 and updated full year guidance.
