Just doing a quick peruse of the 10-Q, here are some things that caught my eye:
-- Net Sales 2014 vs. 2013 Q2 comparison: 1,358,220 vs. 1,330,969
Don't like it! With all the new stores added since 2013 sales of lemonades should have gone UP significantly, not move sideways. Also, the 2013 Q2 sales did not include the coconut water or some of the other lemonades.
-- Gross Profit : 467,511 vs. 501,167
Once again, with all the new stores that came on-line over the past year, that's the best they can do?
-- During Q2-2014, gross revenues, on sales of 125,739 cases of Natural Cabana Lemonade, Limeade and Coconut Water (Q2-2013 - 125,732)
They're selling product at 20,000 different locations, so that averages out to 125,739 / 20,000 = 6.3 cases per location over a 3-month period; that comes out to 0.53 cases (at 24 bottles per case) per week per store. So: (24 bottles per case x 0.53 cases) / 7 days per week = 1.8 bottles per day.
#$%$ -- THAT'S LESS THAN TWO FRACKING BOTTLES PER DAY PER STORE !!!!!!!!!!!!!!!!!! And Q2 includes two prime summertime selling months. Furthermore the 127,739 case figure includes the coconut water, I didn't see a sales breakdown by specific product. They appear to have commingled the lemonades and c-water together, but I'm beginning to suspect that plain old Cabana lemonade ain't carrying its fair share of the sales load anymore.
Remember, most of these stores are located (wisely) in, or near, high-traffic urban centers where one would expect lots of upscale health-conscious consumers with money. You'd think by now most of these stores would be selling at least a half a case per day on average just from word-of-mouth advertising.
Once again: I'm not a pumper (or dumper) and I'm a big fan of Pulse and their products, but something ain't adding up here. More later.
Generally speaking, I agree with pretty much everything you said. Even though I'm a strong supporter of Pulse products there are definitely some yellow flags waving here. As I stated for about a year now, 2014 should show us a maturing company entering it's growth phase -- these guys aren't there yet and I'm finding that a bit frustrating.
Haven't read the 10-Q yet, just the shareholder letter. Here's one point that bother's me re. the functional drinks:
" ... we expect the roll-out of our newly designed and reformulated PULSE® Heart and Body Health functional beverages in September 2014." Huh???!!!!! #$%$? I distinctly recall Yates claiming during the May webcast that the rollout was on schedule for JUNE!, n a recent SEC filing they said "by mid-Summer". Hello-o-o-o?? September is NOT mid-summer. Had Yates stated back in May that the roll-out was scheduled for the August-October timeframe then it wouldn't have bothered me quite as much.
I understand timing these things can be difficult to pin down, but Yates should have known while preparing for the May conference that there was no way in a bag of horse apples he was going to have product rolling out-the-door. Personally, I think the guy was just reading some outdated viewgraphs; you could actually hear someone flipping the foils in the audio -- did anyone catch that, LOL?
Gotta go, will post later tonight re. 10-Q.
Hey Baldy, I just noticed Jones Soda (JSDA) dropped 50% since last Fall. How many years have they been in business?
Hope you scraped all that egg from your face before it dried out, dried egg yoke is really tough to remove. Don't forget to finish up that leftover crow setting in the back of the fridge.
I'm sorry Baldy, apparently you've posted on the wrong board. I believe you meant to post on the JSDA board. I seem to remember you coming over here pumping Jones Soda all the time, sorry for your loss.
"I'm wary of a company that continually increases its distribution network without any meaningful sales."
OK, I see where you're coming from. That's a good point. I'm cutting them some slack until we see how Q3 sales (big summer months) turn out given the introduction of the coconut water. Also concerned over the so-caled roll-out of the functional drinks. Did it start in June as promised? Is iin-progress? A simple one-liner on the website would be helpful.
Another thing that bothers me a bit is they always compare current Q sales to same Q year ago; that's really a bit misleading for a startup company, IMO. That's like saying, "We sold only 200 cases of Product-X in Q2-2014 compared to 50 cases in Q2-2013. a whopping 400% increase in sales! " Mgmt. did address this issue somewhat in one of their filings by claiming they use this method due to the seasonality of the products -- you gotta compare apples-to-apples, so to speak. I don't completely buy into that logic -- people drink what they like year round, we're not talking about chocolate easter bunnies, eggnog or Christmas cookies here.
Why is it so difficult to grasp this concept?
A new food / beverage product lives & dies by customer acceptance. Big companies test market and tweak new products long before formal introduction to the consumer world. It's simply is a waste of money advertising a new product before collecting solid performance metrics; you gotta know what's gonna sell BEFORE you dump millions into advertising -- duh-h-h?!!!
Pulse is a SMALL micro-cap start-up still in its growth phase; they're putting their limited funds into product development, distributors and product placement. I can tell you right now that any future advertising will almost certainly be modest and focused primary in specific urban / upscale regions where the products are well placed. You don't build brand recognition over night. Take a look at what Coke or Pepsi spend on advertising their carbonated colored sugar water. They can afford to spend that much because they spend nearly a century building their brand names and winning customer acceptance.
Pulse Bev. products are focused more towards upscale discriminating health-conscious consumers, not Wall Mart shoppers stuffing Big Macs into their faces. When funds do become available I suspect they'll start advertising in the health & fitness or sports venues first. For starters, I can see posters & static displays in vitamin shops, high-end grocery stores, fitness centers, upscale "health food" eateries and so on. This recent deal with Smash Burger is a modest but excellent starting point IMO from both a sales and advertising standpoint. People will not only see the product, they may be inclined to try one with their meal.
Baldy, don't you have anything better to do than sit at your computer waiting for me to post? I know I'm a popular guy but this is kinda creeping me out. Your reply came about 30 seconds after I posted.
May I suggest you spend more time researching PLSB rather than bashing it. You may be surprised to know that management's intent is to grow the company to point where a larger beverage firm might buy then out. That's yet another reason not to spend a lot of money on advertising right now. All they have to do is prove the products sell and there's a strong consumer interest.
Speaking of therapy: CBT is old news, you sound like a good candidate for that new leading-edge therapy called DAR -- Dumb As Rocks.
Skywriter adds? How old are you, 106?
Had you bothered to read any of the SEC filings, mgmt. clearly stated that advertising budgets are established in proportion to sales. This company is too small right now to be dumping millions into advertising -- this is how Jones Soda got into trouble.
Do you have ANY idea how much television advertising costs per minute? Radio is a lot cheaper but still expensive. Magazines? NEWS FLASH: people don't read magazines anymore, everyone has gone online -- magazines are a dead medium for advertising.
Hi Baldy .... er, I mean Comffret. Sorry, I get the two of you confused!
"The biggest risk to valuation is probably execution ... "
Well gosh-oh-roody, isn't that the case with ANY company? And who gives a bag of horse apples about "the valuation levels presumed in our price target." ? These little no-name micro-cap funds are the ones who pumped up the price to begin with!! And now that they made a few bucks, they're out -- it's call profit-taking, my hairless little friend -- that's what they do -- pump & dump!
Since PLSB slid under a buck and sells at such low volumes, it may not meet the investment criteria for some of these funds.
The webcast was from the Marcum Microcap conference held on 29-MAY and, yes, Gates did say the functionals will roll out in June. In the last Q report I believe they said "mid-summer". There's no reason to believe they've "abandoned" their flagship product line. It's not clear to me as to exactly what's involved in a product rollout -- the process could take some time. I suspect they'll wait until x-number of cases have been sold before announcing. Kinda like what they did for the coconut water.
It could be the rollout process may have STARTED in June but may not be complete until maybe around August; I'm thinking they may be waiting for product to be on the shelves of all the stores, restaurants, etc. Their website really sucks IMO, need to do more at keeping people up-to-date on product development.
Have that report in front of me right now. The information you're quoting is from the Pro Forma Forward Looking data listed on on page 27. Hey sparky, they DO tell you, "YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD LOOKING STATEMENTS"
Maybe you missed this part: "Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements."
How can ANY start-up company reasonably predict sales of a new product three years into the future? PLSB just started their first production runs in 2011! Pro Forma numbers are NEVER to be taken seriously, especially when dealing with a new food / drink product. You're imply management lied when in fact these are just best-guesses based on numerous assumptions.
There WAS one major flaw in their thinking with respect to Cabana sales (as stated by the writer on page 6): "More important: lemonade is not just for summer time anymore—the natural low calorie version has become a year round beverage." Actually, lemonade doesn't sell well in the winter, especially last winter, LOL. Seasonality really crimps their sales for about 6-months out of every year.
Another reason for the blue-sky estimates, IMO, was most likely an unrealistically high expectation for Asian sales and the delayed release of their functional drinks due to relabeling & reformulation. The whole Asia-thing was very premature and has yet to pan out, from what I can tell.
This is STILL an early-stage growth company but they've done an EXCELLENT job at growing their distribution network. Now that they've expanded their product line beyond just the seasonal lemonades, sales should begin to pick up. Sadly, we're still waiting on the new rollout for the functional drinks. Those sales probably won't hit in a meaningful way until next year.
Speaking of "stupid" try reading your own posts sometime. "It would hard to be that stupid ... " ?? Keep up the good work on those night courses -- you'll earn that GED someday.
Sheesh, calm down! Excu-u-u-u-u-use me for living and breathing !!!!!!!!!!!!!!
I said I was just STARTING my DD on this company and simply brought up what I thought was a simple observation. You provided me some stuff to follow-up on -- thank you. That's what I was looking for, no need to be rude.
The first thing I look at are basic financial stats, haven't had a chance to look at much else today -- especially not the 10Q's or all the news articles. Figured someone on this board probably had a simple explanation. Their mrq cash position struck me as tad low for this type of business but there could be any number of perfectly-valid reasons as to why. I was looking for a figure in the +$1M area at the very least. Running an exploration & production operation is costly and burns up cash in a hurry -- always lots of bills to pay. I found a few other E & P companies about the same size as AXAS (KOG, GST, WRES) and all three had better cash positions ($16M, $27M and $2M respectively). THAT'S what prompted me to ask the question in the first place.
Just starting some basic DD on this company, have it on my radar. Looking for the next Stone Energy (SGY) -- under $10 in 2009 to $45 this year -- more than doubled just this past year -- solid company.
Per Yahoo stats, I'm seeing AXAS has just $349K of on-hand cash and a current ratio of only 0.43, that has me a little concerned. A current ratio closer to 1.00 indicates company has plenty of $$ to pay bills. Long term debt seems reasonable relative to operating cash flow. ROE & margins are great!
Price / Sales & Price Book ratios seem awful high compared with other small-cap companies in the G & O exploration group (WRES, GST, SGY, KOG). SGY ($3B enterprise value) is quite a bit larger than AXAS ($623M) & they're more into off-shore work but still considered a small company. I'm guessing the higher P/S & P/B ratios are saying that investors are willing to pay a premium for future growth.
Any thoughts on the cash issue?
Stuff you're NOT going to see or hear on ABC, CBS or NBC news tonight. I'm not sensing a lot of feel-good vibes coming out of Iraq. THIS is the fundamental stuff driving tomorrows PM trading -- not silly charts.
From News Max:
ISIL now controls most of a “central swath” of Iraq, is “solidifying gains” and poses “a legitimate threat to Baghdad,” Rear Admiral John Kirby, the Defense Department spokesman, told reporters in a briefing at the Pentagon.
From DefenseOne (cool site oriented towards the analysis of defense, foreign policy and national security issues). Clips from two different articles:
"ISIL and its allies are proceeding to carve out a Sunni heartland between the Euphrates and Tigris Rivers, stretching from Syria to the gates of Baghdad. The organization has demonstrated meticulous governance and administrative capabilities as it consolidates its gains, suggesting longevity and an ability for self-reliance.
"BP and ExxonMobil have ordered a partial evacuation of oilfields in southern Iraq. And, in a note to clients, Citi’s Seth Kleinman suggests that, even though they do not necessarily face a direct threat, foreign oil companies are less likely to invest the billions of dollars required for new Iraqi production amid such insecurity."
From Reuter's, 2 hrs ago:
"Militants attacked one of Iraq's largest air bases and seized control of several small oilfields on Wednesday"
From CNN late this afternoon:
"Syrian warplanes carried out a cross-border attack on Iraqi towns this week is further evidence of the blurring between the two countries' borders as they face an offensive by Islamic extremists." Watch the video.
Baghdad virtually open to attack, no heavy weapons visible, airport not secured. If Baghdad falls, oil going to spike to the Moon.
Using SmartCharts for this analysis.
I consider a 2 yr. chart of weekly prices to still be of some use with respect to charting. Decided to take a look at S&P-500 via the SPY ETF.
5, 10 and 50 week MA's holding well but Chaikin Money Flow went negative back in April & May for the first time since the Fall of 2012. It has since popped back up a bit but the accumulation / distribution line has gone flat starting back in March. More telling is the sudden drop-off of weekly volume -- under 500M since beginning of April. This could be a hint that SPY is getting tired and price is moving up on lower weekly volumes. Keep an eye on the 5-wk MA of weekly prices; if that breaks, then we could see the start of at least some sort of technical correction on the S&P.
If volume is dropping off on SPY, then where has all that trading gone? Is the new money (the money needed to drive prices upward) going somewhere else? No one sits on cash anymore so where did it go? If you wanted to put new money to work but not in the S&P, where would you put it now? What's under-valued, what's safe? PM's? Commodities?
Just my twisted opinions.