Sammy the Bull

C21 continues to execute.

Sammy Armenia, V.P. of Corporate Development at C21 Investments ($CXXIF) joined Mack for today’s Alpha Nooner, where he shared the following insights.

CXXI is working on M&A every day.

Get closed to the finish line, 9/10 times it doesn’t make it.

^ not appreciated how often companies are engaged in this.

C21 took a different route, while everyone else was pursuing generic growth (new states, M&A), C21 head was down fixing balance sheet and right-sizing company.

^ the types of things many companies are doing now.

Had a $30m senior note; substantial for this size of company.

Wasn’t previously in a position to grow, so focused on operational efficiency.

Only publicly traded cannabis company w/ 5 consecutive years of FCF+

^ even adjusted to taxes.

Only company that did no financings from ’19 – ’24.

Completely delevered balance sheet.

paid off $30m senior note (size of market cap, substantial) via FCF 👀

In last 12-18mo focused on what’s next.

New wave of growth for the company.

First expanded cultivation in NV (2x’d cultivation) to set up for adding new retail.

Were close to a number of dispensary M&A over last 18mo.

Announced in March acquired dispensary in South Reno.

Purpose built, great location, adjacent to Walmart/Supercenter, newest area of Reno.

Currently running $12.5m R/R, almost 2x the state average ($7m). 👀

Reno just approved store a few days ago, final notice for closing.

Grand opening in next week.

If $7m on new store, can see how much operational efficiency available in new store.

Could supply this store + more stores.

60% of product sold is in-house / low COGS. Margin / profit beneficial.

Light opex on new store.

Think a significant amount flows to bottom line.

Paid under 7% dilution for 50% increased opportunity.

Very much actively pursuing the next acquisition.

Will continue retail acquisitions in NV.

Probably ½ of 100 dispensaries in the state are run by big MSOs.

Looking at independent / privates to find a good fit.

Vegas is 5-6 hours away, will need a second team.

Wouldn’t want to buy a $2m R/R store on fringes of Vegas.

Looking for scale in that type of next move to support a full second location / team.

Almost current stores and Vegas are far away.

Reno is growing.

2nd for building permits in the US.

A lot of opportunity there.

Tesla gigafactory is between 2 current CXXI stores. 👀

Constantly talking to other companies w/ footprints in other states.

Positioned really well to be on offense.

Don’t want to make mistakes in this industry.

Have explored mergers/M&A multiple (10+ times).

Looking at everything you can think of.

Industry will go through consolidation at some point.

People expected sooner.

Where CXXI stands, capital is too expensive.

At least 50% of the companies have balance sheet problems right now.

CXXI one of the only small teams that fully books 280e.

Paid $7.3m in last 3 years in 280e.

Accrued just as much.

Looking around the landscape, seeing companies looking at refunds.

In most recent filing, CXXI did note they are looking at that strategy.

Don’t want to take a refund and spend it, strong possibility on having to pay it back.

Cautious approach.

CXXI generated 4th most FCF in the last 5 years.

Punch way above weight class.

CXXI lowest leverage in credit rankings.

^ published by Viridian today.

Striving for 10-15% market share in NV.

Did a synthetic buyback on earnouts of the company last year.

Used FCF to buy back approx. 4% dilution.

A very shareholder friendly company.

Have the same shares outstanding as did at all time highs.

A leading steward of capital in the space.

Very cautious and careful for shareholders.

Yesterday (Juneteenth), entire industry traded $800k on Canadian exchanges.

Market is telling us there is no clarity on the path right now.

Market doesn’t like uncertainty.

There is some outperformance / bifurcation in the equities, some showing more growth are outperforming.

90-95% of investors don’t know about cannabis / don’t have access.

Logically assume hemp farm bill loophole has to close / industry gets regulated / beverages regulated differently.

Can’t have two versions of the same plant selling the same product, where one is synthetic / untested / maybe unsafe, and that version is shipped around the country. Doesn’t make any sense.

NV very tourist driven.

Was very impacted by COVID.

NV numbers still not back to the same tourist levels.

CXXI still maintained 500k customers/year, despite that.

Pain a massive market / large opportunity for cannabis.

Nvidia added $2T mcap YTD.

Cannabis traded $800k yesterday.

Massive disparity.

No access.

Lack of buyers.

Need uplisting / safe harbor before buyers change.

/end.

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CB1 has positions in / advises C21 Investments and Todd Harrison is a member of the Board of Directors; nothing contained herein should be considered advice