Golden Leaf (GLH.C) turns ship around, posts revenue increases

goldenleaf

There may be some heavy sailing to go, but the good ship Golden Leaf has finally put a few harpoons in its white whale.

With a news release that not only showed increases in revenue, but explained clearly what issues the company has had to work through lately to maintain momentum, long suffering GLH investors will be pleased to be getting clear communication from management – and evidence that the worst is behind them.

Preliminary results show that GLH generated US$3,011,000 in estimated and unaudited revenue for Q2 2016 as compared to unaudited revenue of US$2,476,688 for Q1 2016, representing a quarter over quarter increase of 21.5%.

Good good. And how’s June look?

The Company posted preliminary results for June 2016 showing UD$923,000 in estimated and unaudited revenue as compared to US$1,067,000 (updated and revised from previously published number) in May 2016, representing a month over month decrease of 13.5%. GLH sold all of the products that it produced in the month of June.

Down slightly. Which would be fine – summer can be that way. But, respect to management, they outlined exactly why June was a bit fluffy, in clear and certain terms.

Issue Proactive Response
Production obstacles, including cash constraints that impacted trim and flower purchases, trim quality issues and product testing delays from 3rd party vendors made it more challenging to source material inputs and produce product in a timely manner. GLH is leveraging cash from current convertible debenture funding to fulfill raw material requirements. The Company has developed a strategic trim supply agreement program focused on contracting with selected farmers to obtain low cost supply of high quality flower and trim with specific strain and genetic characteristics. GLH purchased new testing equipment to ensure the quality of trim and efficiency of testing timelines. The Company is building relationships with testing vendors to effectively manage testing bottlenecks.
The Oregon cannabis market saw slower than expected recreational consumer adoption of oils and extracts. The concept of using a vape pen for delivery and usage of marijuana is still relatively new for the average recreational user. The Company is working with dispensaries to provide merchandising tools that educate the consumer on the benefits of cannabis oil and new delivery systems.
The retail buying process at medical marijuana dispensaries, including effective purchasing and supply chain management is still evolving. Not all dispensaries stocked the appropriate inventory to meet new recreational consumer demand. Dispensaries are becoming more familiar with customers buying behavior, but room for improvement exists with raising the level of sophistication as it relates to inventory management and regular purchasing patterns. GLH is working closely with dispensary customers to help manage stock levels and ordering cycles.

Solid.

The share price hasn’t rocketed on the back of this release, which is fine, because the numbers are essentially predicting a potentially down quarter. Only slightly down, but down nonetheless. Also, the numbers are unaudited, so anyone with an aversion to trusting GLH might still be on the fence.

But what I take from this news is that management get it now. They know they need to be upfront with investors, they know they need to be clear and timely with news, they know they need to be on top of their numbers, not putting them out a quarter late.

This, to me, is the best GLH news release in a year. It’s the seachange we’ve been waiting for. Assuming cost reductions are continuing and the runway still has some length to it (admittedly, I’ve no evidence to say this is the case), it puts me back in the bullish camp.

Well played, Don.

— Chris Parry

http://www.twitter.com/chrisparry

FULL DISCLOSURE: I have been a consultant to the company, currently own stock in the company, but a lot less than I have previously. This may change in the near future.

ADDENDUM: I just bought some more.

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