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TREES Corp (Colorado) (CANN)·Q2 2019 Earnings Summary

Executive Summary

  • Q2 2019 revenue was $1,356,865, up 22% year over year; net loss narrowed to $2,894,802 from $3,669,297 in Q2 2018, while loss per share was $(0.11) vs $(0.10) last year .
  • Segment mix shifted toward Operations with revenue nearly doubling YoY; Security declined on customer attrition and slower-than-expected California growth; Consumer Goods faced weak Chiefton apparel trends mitigated by cost cuts .
  • Management emphasized Colorado HB-1090-driven M&A pipeline (non-binding term sheets) targeting ~45,000 sq ft cultivation capacity, two dispensaries, and one infused products license, plus debt reduction via a registered direct equity offering .
  • No formal numeric guidance or earnings call transcript was available; consensus estimates via S&P Global were not available, so beat/miss vs Street cannot be assessed. This limits near-term estimate-based catalysts, making execution on acquisitions and STOA Wellness traction the primary stock narrative drivers .

What Went Well and What Went Wrong

What Went Well

  • Operations segment revenue surged 97% YoY to $792,642 in Q2 on consulting contracts in emerging markets and wholesale products expansion; management expects further benefit from pipeline initiatives .
  • The company completed a registered direct equity offering and “subsequently paid down the majority of our debt,” improving balance sheet flexibility ahead of acquisition opportunities .
  • Launch of STOA Wellness CBD retail store and e-commerce platform targeting athletes, supporting Consumer Goods revenue prospects in H2 2019; “We trust these factors will generate growing Consumer Goods revenue through the remainder of the year” .

What Went Wrong

  • Security segment revenue declined 17% YoY to $507,556 as customers forewent guard services and California growth lagged expectations; management is pursuing camera monitoring/installation and product transport to diversify revenue .
  • Consumer Goods revenue fell 71% YoY to $28,892 due to Chiefton apparel weakness; annualized overhead was reduced by ~$350,000 over the last three months to better match revenue potential .
  • Total costs and expenses remained elevated at $3,843,252 (+7% YoY), sustaining operating losses despite revenue growth; Q2 operating loss was $2,486,387 (flat YoY) and other expense remained a drag at $408,415 .

Financial Results

Revenue, EPS, Operating/Net Loss

MetricQ2 2018Q1 2019Q2 2019
Revenue ($USD)$1,114,541 $1,389,289 $1,356,865
Loss per share ($)$(0.10) $(0.12) $(0.11)
Operating loss ($USD)$(2,491,317) $(3,230,656) $(2,486,387)
Other expense ($USD)$1,177,980 $1,283,039 $408,415
Net loss ($USD)$(3,669,297) $(4,513,695) $(2,894,802)
Total costs and expenses ($USD)$3,605,858 $4,619,945 $3,843,252

Segment Revenue Breakdown

SegmentQ2 2018Q1 2019Q2 2019
Security ($USD)$614,281 $564,592 $507,556
Operations ($USD)$402,287 $780,101 $792,642
Consumer Goods ($USD)$97,973 $29,775 $28,892
Investments ($USD)— $14,821 $27,775
Total Segment Revenue ($USD)$1,114,541 $1,389,289 $1,356,865

Year-to-Date (Six Months) KPIs

MetricH1 2018H1 2019
Revenue ($USD)$2,057,023 $2,746,154
Total costs and expenses ($USD)$7,714,822 $8,463,197
Operating loss ($USD)$(5,657,799) $(5,717,043)
Other expense ($USD)$2,477,885 $1,691,454
Net loss ($USD)$(8,135,684) $(7,408,497)
Loss per share ($)$(0.23) $(0.23)
Revenue >$1M quarter streak (#)4 at Q1 2019 5 at Q2 2019

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2019No formal numeric guidance provided; strategic “Outlook” focused on segment priorities and growth initiatives No formal numeric guidance provided; focus on acquisitions under HB-1090 and Consumer Goods growth via STOA Wellness Maintained (no numeric guidance)
Segment margins/OpExFY 2019Not provided Not provided Maintained (N/A)
Tax rate / OI&E / DividendsFY 2019Not provided Not provided Maintained (N/A)

Earnings Call Themes & Trends

Note: No earnings call transcript was found; themes reflect press releases and SEC 8-K disclosures.

TopicPrevious Mentions (Q4 2018 and Q1 2019)Current Period (Q2 2019)Trend
Regulatory/legal (HB-1090)Preparing to assess and acquire companies/licenses in Colorado as legislation evolves Entered multiple non-binding term sheets for ~45,000 sq ft cultivation, processing, and adult-use dispensaries; planning binding transactions post-regulations Expanding toward execution
Operations performance2018 Ops revenue +36% YoY; Q4 Ops +93% vs Q3; strong product sales and consulting in Q1 Ops revenue +97% YoY in Q2; focus on consulting in emerging markets and wholesale product expansion Strengthening
Security segmentConsistent growth; expanding into California; tightening credit; expect further growth as markets mature Revenue decline from customer attrition and slower California growth; exploring camera monitoring/install and transport Mixed/softness; pivot to new revenue streams
Consumer Goods (Chiefton / STOA Wellness)Launching STOA Wellness in Q2; scaling Chiefton to e-commerce and B2B; anticipated overhead reduction by end of Q2 STOA Wellness store and e-commerce launched; Chiefton overhead reduced by ~$350k; aim to grow H2 revenue Transitioning to new platforms
Financing / Balance sheetAggressive pursuit of loans/investments; infrastructure investments Registered direct offering; paid down majority of debt Improving financial flexibility
Regional trends (CO vs CA)Building California presence; PubCo Bill opens CO ownership prospects CA growth slower for Security; CO acquisitions pipeline under HB-1090 Rebalanced focus to CO

Management Commentary

  • “We have surpassed $1 million in revenue for the fifth consecutive quarter, with a 34% increase in year-to-date revenue in 2019 compared to 2018.” — Brian Andrews, CFO .
  • “Security revenues were negatively impacted by customers deciding to forego guard services and slower than expected growth in California… we continue to explore additional revenue streams within the Security segment, such as camera monitoring design and installation, and product transport.” — Brian Andrews, CFO .
  • “We expect these steps to reap benefits over the near term… we completed a registered direct offering of our common equity and subsequently paid down the majority of our debt.” — Michael Feinsod, CEO & Executive Chairman .
  • “We have entered into non-binding term sheets for approximately 45,000 square feet of cultivation space, a processing facility and adult use dispensaries… We look forward to moving forward with these transactions and integrating these new teams.” — Brian Andrews (and management) .
  • “This planned acquisition would expand our business to central Denver… bring our anticipated cultivation space to approximately 45,000 square feet, our anticipated owned dispensaries to two, and one infused products manufacturer license within the state of Colorado.” — Michael Feinsod, CEO .

Q&A Highlights

  • No earnings call transcript was available in the document set; therefore, Q&A themes and guidance clarifications could not be assessed from an investor call [ListDocuments returned zero earnings-call-transcript for 2019].

Estimates Context

  • Wall Street consensus estimates (S&P Global) for Q2 2019 revenue and EPS were not available; we attempted retrieval but could not obtain figures. As a result, beat/miss vs Street cannot be determined for this quarter.
  • Implication: Without consensus anchors, investor focus likely shifts to operational execution (Ops growth, Security pivot), STOA Wellness traction, and HB-1090 acquisition milestones for narrative and valuation updates .

Key Takeaways for Investors

  • Operations momentum is the growth engine (+97% YoY in Q2), suggesting continued top-line support as consulting and wholesale expand into new markets; monitor contract wins and conversion to recurring revenue .
  • Security softness (–17% YoY) necessitates successful execution of camera monitoring/install and transport initiatives; California recovery remains a swing factor for segment stabilization .
  • Consumer Goods is pivoting from Chiefton apparel to STOA Wellness CBD, backed by ~$350k annualized overhead cuts; watch e-commerce KPIs and retail expansion to validate H2 revenue uplift .
  • Balance sheet action via equity raise and debt paydown increases strategic flexibility for Colorado-driven M&A under HB-1090; near-term stock narrative hinges on converting non-binding term sheets into definitive deals .
  • YTD revenue growth (+34% YoY to $2.746M) with lower other expense supports narrowing losses; sustained cost discipline is critical to further loss reduction .
  • With no formal numeric guidance and no accessible consensus, trading may react to discrete catalysts (acquisition closings, STOA growth updates, segment diversification progress) rather than quarterly beats/misses .