***Aerogarden Conference Call Thoughts and Remarks***
I want to start off by saying that the conference call replay was a great way to hear all the information that was presented by Aerogarden for the releasing of their financials. If you have not heard the conference call I urge you to listen to it… To listen call: 1 (877) 870-5176 and input the conference ID: 10040618 when prompted to do so.
I wanted to break down the call into various segments that were highlighted in the call
Retail Sales: Retail sales is by far what I was looking at most as far as an indication as to how Scott’s Miracle Gro was directly impacting the sales outlook of Aerogarden. I gave a round number estimate of 30% as a target point that I was looking for. Aerogarden shattered that expectation and obtained a 48% retail sales for the quarter. I was exceptionally pleased to see an incredible increase in retail % sales. The retail sales that occur during the holiday season would mostly consist of Aerogarden growing units, which sets up for recurring revenues through seed kits, lights, nutrients, ect… Aerogarden made it clear of their intentions of furthering retail generated sales by entering into brick and mortar stores such as Home Depot and Costco. In addition Amazon ranked Aerogarden as a top selling product for their category during holiday sales... right next to Black and Decker...
Revenues: With total revenues at 5.0 million it is clear that Aerogarden executed on their claim of resurgence. With sales down to 650k for the quarter before this one, it is clear that Aerogarden quickly ramped up production after their co-branding stage with Scott’s had completed. These revenues lead to their quick turn around from net operating loss from last quarter to net operating gains this quarter. This quarter marks a pivotal turning point… A turning point that serves the company well for future growth.
Growth: It is important to compare their strategic growth currently to their attempted growth back in their 2007/2008 booming years. In 2007/2008, Aerogarden fell victim to themselves as they grew at a rate much faster than they could have supported. It is with this in mind that Aerogarden emphasized today greatly in their managed growth operations. Aerogarden’s ability to manage and control growth this time around definitely is something that is in great need and will serve them well for long term success. As a part of this growth, Aerogarden is working to manage costs while increasing production. They stated Scott's is a great help at enabling them to do such a thing.They certainly learned from their first mistake and am very glad to hear how they emphasized their strategic growth.
Reduced Debt: Aerogarden has nearly reduced all of their long-lasting debt. All that remains is $112,000, which is down from over 2 million just 1 year ago. Aerogarden in one quarter has turned profitable and at the same time has nearly eradicated debt. Aerogarden is accomplished in eliminating two very limiting factors in a companies ability to grow. Aerogarden expects all debt to be reduced to $0 by the end of the fiscal year.
Marijuana Business Involvement: As I have said before, Aerogarden has remained consistent that they do not want to quickly join in the hype of the marijuana industry. Mike Wolfe (CEO) addressed this in the first question of Q and A by stating they will adhere to state and federal level regulations… Mr. Wolfe did make it very clear, however, that they are monitoring the situation clearly and hinted that they are “on the right side of a growing trend.” He actually emphasized that statement twice in two separate questions. In addition during the main portion of the conference call Mr. Wolfe hinted towards the development of a “new product initiative” that is a “high margin” product. The mention of a high margin product has me thinking of being involved somewhere in the highly profitable (high margin) marijuana market. I have stated before that I would much rather Aerogarden announce involvement of direct Marijuana marketing after they have developed a proprietary product they can launch soon after announcing. I stand by that statement, and am encouraged to hear efforts are being put forth to their capitalize on their nearly inevitable involvement in the marijuana sector.
Last, but not least, I wanted to close by saying that Aerogarden stated in the call that in the future they may need temporary working capital. (Mr. Wolfe stated that they would need the capital for a period of around 120 days.) What was VERY encouraging to hear was that Mr. Wolfe clearly stated it was not their intention to do ANY dilutive transactions in order to obtain this money. As a shareholder this is great news on 2 fronts. First they need an amount of (roughly) $2-4 million in order to further progress development of the company, and second that they do not plan to create a dilutive transaction to do so.
Overall this report exceeded my expectations and provides a clear representation of a company in a “resurgence” mode as Mr. Wolfe has so accurately described.
I tried to cover everything briefly so as to not have a wall of text, so if there is any other information that you wish to add to the message boards please do so!
***If you have any questions regarding the call or the company please ask and I will see if I can answer it or find out the answer for you.***
AI
