Verus International Inc (VRUS)

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Just tweeted...https://www.verusfoods.com/ceo-message

CEO Message
To Our Shareholders:



Happy New Year Everyone!



After wrapping up such a historic year, I want to take this opportunity to thank all of the dedicated shareholders, vendors, customers, and employees who helped make 2019 such a success. To set the stage for 2020, I’d like to review 2019 and share a glimpse into what is ahead. Our stock price finished 2019 with a 795% gain, placing us among the leading performers on the OTC. But for those of you who may think this is as good as it gets, I want to assure everyone that we believe our biggest growth is yet to come.



Our transformation has been so rapid since our restart, which began during February 2019 with our recapitalization, which will always be a historic event in Verus’ history.



We had a very different story to tell last January before our recapitalization. Back then, the company was faced with crippling variable rate convertible debt after being trapped in legacy litigation inherited from our reverse merger partner. That debt totaled tens of millions of dollars, with dilution looming on a scale that was unknown, but potentially massive. There is no sugarcoating the situation – our survival was uncertain and the pressure on our stock was unrelenting. For months, we worked to bring together creditors, litigants and new investors, all of whom had their own agendas and the potential to scuttle our future. There was nothing simple about the process, especially with more than a dozen different entities in the mix (including law firms); and we needed the agreement of everyone involved to forge a final solution.



Only a few people know how hard that period was, but I now judge those negotiations as the finest of my career. We put together a deal that was so far above the reality we actually faced, many multiples better, raising money significantly above market so that it positioned us not just to survive, but to thrive. We got a fresh start by paying off all of the convertible debt with cash.



Paying off all of the convertible notes set us free to begin the kind of growth that had always been in our strategic DNA, but was held hostage by the circumstances of our public merger. The speed that we transitioned from survival mode to growth mode and now hyper-growth mode has positioned us as the fourth fastest growing consumer products food company at the end of 2019.



We achieved such momentum by being both nimble and flexible with our working capital; and fastidious in our M&A discipline. We started with some product design and supply agreements for rice and honey in our core Middle Eastern markets and, in truth, have additional product lines we can launch fairly quickly in that region. Our acquisition of an existing french fry line during September is the kind of opportunistic add on that investors can expect to see in the future.



But it was the acquisition of Big League Foods during April 2019 that provided the blueprint for both our acquisition and growth strategies. Our goal is to add significant revenue growth so this kind of turnkey operation is exactly the kind of opportunity we will continue to seek. Our acquisition of a controlling interest in NutriBrands during October 2019 was similar, with an added boost from existing revenue, but it is the growth potential that is the most important element of every transaction. Through just these two acquisitions, we have established a foundation for years of top-tier organic growth, which is an important differentiator for institutional investors who will be discovering our stock for the first time.



Additional transformational accomplishments during 2019 included onboarding an experienced executive management team; starting with CFO Chris Cutchens, who has NYSE-listed company credentials; Jim Wheeler at Big League Foods, a food industry expert with broad knowledge of the U.S. markets; and General Counsel Michael McGowan, a tech-industry veteran who was involved in some of the largest tech deals of all time (including AOL-Time Warner). In the financial arena, during July we closed a foreign trade line of credit facility with Fulton Bank and during August secured $13.5 million of credit insurance from Euler Hermes. Those accomplishments set the stage for a major expansion of our foreign business and were essential to back our entry into the South American market.



Our announcement during December of a manufacturing facility in Texas is a first step in our plan to layer on additional vertical integration. The immediate impact will be on increased gross profit margins, as we control more of the gummi supply chain. This manufacturing facility was the exclamation point on a year where we implemented every element of our growth strategy, from new product design, to M&A, to geographic expansion, and to manufacturing. This was just the start of our long-term plan.



So, what is ahead for 2020?



2020 will be the year when all of the elements come together and record setting growth will become the central theme. We are coming off of back to back 150%+ growth quarters, but we expect to exceed that growth rate in subsequent quarters as we enter a period of hypergrowth. We have visibility into 2021 based on our current backlog and financing, with the only unknown being what level of additional financing we will add during 2020 to supercharge our growth. We are working to close a domestic credit facility in the near future and also expect to increase our foreign credit facility as required. Along with some additional funding sources, we expect to position ourselves in early 2020 with the resources to generate exceptional sector-leading results. Our 2020 revenue guidance is $58 million, however, we expect to be on a $100 million plus annual run rate by year end 2020, setting the stage for tremendous growth during 2021 and beyond.

It is somewhat easy to model our revenue growth, because we have very large backlogs in all of our geographies. For example, in our MLB business, our late start in 2019 meant we only had 4 teams for three months of the baseball season in about 2,500 locations. During 2020, we can roll out as many as 30 team brands, will capture a larger part of the full 8-month baseball season, and can reach more than 25,000 locations (not counting national chains) in just our initial distribution footprint. We are expanding the line with ice cream sandwiches and have secured a license to feature individual players on packaging. Feedback on our new candy designs has been outstanding, so we think we may have a hot product line in the gummi category. It is easy to see why our optimism is at an all-time high.



Our new Texas manufacturing facility is going to play a big role in our gummi expansion, in addition to nutraceuticals products and even new products which we expect to become important new revenue sources during 2020. We acquired the manufacturing facility to accelerate new product development, so you will see the impact of this facility as the year unfolds.



NutriBrands is a similar “unlock” story, with a very large backlog and enormous expansion potential, particularly in the Vivamil energy-drink category. The synergies are excellent, opening up a massive 70,000+ distribution footprint that has already attracted the attention of other major U.S. brands seeking an entry into the Brazilian market.



We plan to uplist to a national exchange during the first quarter of 2020, which we think will create a positive revaluation opportunity for current OTC holders. Verus is currently trading at 0.7 times forward sales estimates compared to its peers on the NYSE and Nasdaq, which typically trade at multiples of 3.5 times or higher. We encourage investors to run a screen on similar high growth consumer non-cyclical companies to see what could be in store. We expect Verus to have a faster growth rate than a majority of its peers this year, so we expect to earn a premium valuation, particularly as revenue scales.



My goal from the beginning has been to build a billion-dollar consumer products company, so if we seemed methodical at times during 2019, that was because such a large goal requires extra degrees of planning. We’ve laid the groundwork for a very bright future, so while we take a few minutes to savor the accomplishments of the past, we are just as anxious to share the next chapter in the Verus story with you. On behalf of the entire Verus team, thank you all for your continued support. Get ready for big things during 2020!



Happy New Year,



Anshu Bhatnagar

Chairman and CEO, Verus International