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CLS Holdings USA, Inc. (CLSH)·Q1 2021 Earnings Summary

Executive Summary

  • Q1 FY2021 delivered record net revenue of $3.781M, up 32% year over year, with gross margin of 53% (+2pp YoY), driven by larger basket sizes and strong local demand despite COVID constraints .
  • Retail (Oasis Cannabis) revenue rose 48% YoY to $3.086M, while Production (City Trees) declined 10% YoY to $0.695M ahead of a September brand relaunch; average ticket increased 41.6% to $56.34, transactions averaged 595/day .
  • Operating loss narrowed YoY (from $(0.851)M to $(0.412)M), net loss improved to $(1.145)M vs $(1.377)M; cash decreased only $38K in the quarter despite a $750K IGH note repayment, reflecting improved cash flows .
  • No formal numerical guidance was issued; management emphasized momentum and City Trees rebrand as catalysts for continued growth. Wall Street consensus (S&P Global) estimates were unavailable for CLSH at this time.

What Went Well and What Went Wrong

What Went Well

  • Record quarterly revenue and margin: “setting historic company records for revenue and gross margin,” with total revenues $3.781M and gross margin 53% .
  • Strong retail execution: Oasis processed ~595 transactions/day (+4% YoY) with average basket up 41.6% to $56.34; average daily sales increased to $41,096 .
    Quote: “Outpacing the annual growth of the Nevada cannabis industry…illustrates how hard our team has worked” — Andrew Glashow, President & COO .
  • Cash discipline: total net cash decrease only $38,466 in Q1 including a $750K note repayment; cash from investing was +$665K on IGH note receipt .
    Quote: “We are poised to experience another year of substantial growth” — Andrew Glashow .

What Went Wrong

  • Wholesale softness: Production revenue fell 10% YoY to $695K as many customers were closed/reopening during COVID; wholesale demand declined before the September rebrand .
  • Ongoing litigation risk: IGH option dispute remains in litigation, with default interest claimed; creates uncertainty and potential costs .
  • Elevated SG&A ratio: SG&A at 64% of revenue (though improved YoY) reflects added COVID-related costs and facility expansions, pressuring profitability .

Financial Results

MetricQ1 2019 (Aug 31, 2019)Q3 2020 (Feb 29, 2020)Q1 2021 (Aug 31, 2020)
Revenue ($USD)$2,859,015 $3,224,170 $3,780,869
Net Income - (IS) ($USD)$(1,376,500) $(1,251,999) $(1,145,036)
Diluted EPS - Continuing Operations ($USD)$(0.01) $(0.01) $(0.01)
Gross Margin %51% 52% 53%
Operating Income (EBIT) ($USD)$(850,871) $(526,996) $(412,434)

Segment revenue breakdown:

SegmentQ1 2019 ($USD)Q1 2021 ($USD)
Cannabis Dispensary$2,085,900 $3,085,525
Cannabis Production$773,115 $695,344
Total$2,859,015 $3,780,869

KPIs:

KPIQ1 2019Q1 2021
Avg $ per transaction (retail)$39.79 $56.34
Transactions per day (Oasis)~573 (implied baseline) 595
Customers served (quarter)52,448 54,738
Avg daily sales (retail)$31,076 $41,096
Net change in cash$(4,617,892) prior year quarter $(38,466)

Monthly revenue context (from press release):

MonthNet Revenue 2019Net Revenue 2020Gross Margin 2019Gross Margin 2020
June$895,580 $1,039,826 51% 55%
July$916,839 $1,346,072 50% 53%
August$1,046,596 $1,394,971 51% 51%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2021 / Q2-Q4Not providedNot providedMaintained (no formal guidance)
Gross Margin %FY2021Not providedNot providedMaintained (no formal guidance)
OpExFY2021Not providedNot providedMaintained (no formal guidance)
Other items (tax rate, OI&E, dividends)FY2021Not providedNot providedMaintained

Management commentary emphasized momentum and City Trees rebrand but did not issue quantitative guidance ranges .

Earnings Call Themes & Trends

Note: A Q1 FY2021 earnings call transcript was not available; themes compiled from filings and press releases.

TopicPrevious Mentions (Q3 2020 / FY2020)Current Period (Q1 2021)Trend
COVID operating modelShift to delivery-only (Mar 2020), curbside, limited in-store; wholesale initially declined; local base ~80% mitigated tourism collapse Continued delivery/curbside, reduced hours (-30%); robust throughput and basket growth Operational adaptations sustained; retail growth despite constraints
Product performanceDispensary revenue +36% YoY in Q3; wholesale mix changes during lab construction Retail records; Production improving ahead of rebrand; monthly revenue highs Jun-Aug Retail accelerating; wholesale positioned for recovery
Technology/extractionState-of-the-art processing facility completed; proprietary ethanol extraction; patent coverage City Trees rebrand, curated catalog, sustainability; proprietary process testing noted in newsletter Advancing brand and process commercialization
Regulatory/legalIGH option exercised; dispute litigated; default interest asserted Litigation ongoing, payment receipts and classification as current assets noted Ongoing legal overhang
Macro/tourismCasinos re-opened; tourist business below pre-COVID; competition for locals intensifies Local demand drove growth; e-commerce website improved conversions Local resilience continues

Management Commentary

  • “We’re honored to have the support of our local community…The continued growth at Oasis and renewed excitement around our wholesale brand, City Trees, has given us great momentum” — Andrew Glashow, President & COO .
  • “We are poised to experience another year of substantial growth from our platform and look forward to sharing our achievements” — Andrew Glashow (FY2020 release) .
  • “To witness growth under conditions which forced us to change our business model twice…is a testament to the 80+ people who work for this amazing company” — Jeff Binder, Chairman/CEO .

Q&A Highlights

No Q1 FY2021 earnings call transcript was available; no Q&A items to report.

Estimates Context

S&P Global (Capital IQ) Wall Street consensus estimates for CLSH were unavailable; no EPS or revenue consensus could be retrieved for Q1 FY2021. Results should be evaluated without an estimates comparison at this time.

MetricQ1 2021 ConsensusActual
Revenue ($USD)Not available$3,780,869
EPS ($USD)Not available$(0.01)

Key Takeaways for Investors

  • Retail-led growth: Oasis delivered record revenue with higher average baskets and daily sales; retail remains the primary earnings driver near-term .
  • Margin improvement: Gross margin expanded to 53% (+2pp YoY) through better purchasing and process improvements; sustainability depends on mix and wholesale recovery .
  • Wholesale inflection potential: City Trees’ September rebrand and expanded sustainability positioning aim to revive production revenues; watch subsequent quarterly prints for traction .
  • Cash discipline amid debt load: Minimal cash burn ($38K) in Q1 despite $750K note repayment; convertible debentures remain substantial and are due in late 2021—monitor refinancing/conversion developments .
  • Legal overhang: The IGH litigation continues; while partial repayments were received, outcomes could affect cash flows and strategic expansion plans .
  • COVID resilience via locals and e-commerce: Local customer base and improved web/e-commerce capabilities supported growth despite reduced hours; delivery/curbside likely remain part of a durable mix .
  • Near-term catalysts: City Trees rebrand performance, continued retail share gains, and any resolution of IGH dispute; absence of formal guidance suggests tracking monthly/quarterly operational updates for momentum .