Alibaba stock has underperformed other e-commerce stocks recently due to soft earnings and regulatory concerns. How nervous should you be? Namaste Technologies Inc. ("Namaste" or the "Company") (TSXV: N) (FRANKFURT: M5BQ) (OTCMKTS: NXTTF), an online platform for cannabis products, accessories, and responsible education, today reported its financial results for the second quarter ended May 31, 2020. All financial figures League lays out itinerary for camps, specifics for opt-out provisions and a way to spread expected financial losses over future salary caps.
Alibaba (NYSE:BABA) stock is having an alright year. With shares at about $246 now, the company is up a little over 10% from its January levels. That’s certainly a fine result given the general economic uncertainty.
Still Alibaba’s investors might have expected more. Shares did hit an all-time high of $268 recently but slipped again. And they greatly trail other leading e-commerce plays such as Amazon (NASDAQ:AMZN) and MercadoLibre (NASDAQ:MELI), whose stocks have blasted off following the pandemic outbreak.
What’s holding back Alibaba stock? There are a variety of factors. The impact of the novel coronavirus on the Chinese population was certainly a disruption. Financial market volatility led to a weak earnings report last quarter for Alibaba as well. However, the biggest concern at this point comes from regulators.
Here’s what you need to know about Alibaba stock now.
In May, Alibaba reported its weakest quarter in a long time. Revenue growth dipped to 22% for the quarter. That actually beat estimates and sounds good given Covid-19 and global economic quagmire. However, it’s still Alibaba’s slowest revenue growth rate in four years.
More shockingly, the company’s headline net income plunged 99%. Interestingly, this was largely due to a decline in investment income. Many investors don’t realize it, however much of Alibaba’s reported profits in recent years come from the value of its investments in other companies appreciating.
This is a bone of contention. Short-sellers allege that Alibaba is using murky accounting to inflate its reported profitability. It’s certainly complicated. And as we saw this past quarter, when markets stop appreciating, Alibaba’s reported net income will slump.
Alibaba’s weak earnings reiterated a key risk around the stock: Much of its apparent success is due to profitable investments, not its core operations. If Chinese tech companies started to drop, then, Alibaba stock would get hit with a double-whammy. Its share price would drop due to the change in sentiment, and it would also report lower earnings thanks to its investment portfolio plunging. Those lower earnings, in turn, would cause sentiment to worsen, triggering a downward spiral.
And now there’s a potential catalyst on the horizon. In May, the Senate passed legislation that would crackdown on Chinese firms listed in the U.S. Companies that didn’t provide adequate financial transparency would be forced to remove their listings from the New York and Nasdaq stock exchanges, and thus lose access to American capital markets.
You may think this is just a few politicians grandstanding. However, some serious investors back the move. Ned Sherwood, a private equity fund manager who lost $20 million on fraudulent Chinese companies recently said:
“I would never put another dime in any Chinese company, and I would never trust a financial statement of a Chinese company in any way as being accurate […] They want to let Chinese companies list here and go public here, but I think they shouldn’t be allowed unless they follow the rules and open their books.”
Of course, there’s a big difference between proposed legislation and actual law. Most Congressional initiatives die on the vine. And it appears this one may may not make it to the finish line either.
The bill’s key backer, U.S. Senator John N. Kennedy (R-LA), admitted as much recently, saying, “Wall Street has unleashed hell lobbying against it in the House, and that makes no sense to me.”
Still, China hawkishness continues, despite the counter-efforts. Just this week, we’ve seen a major diplomatic row break out over the Chinese consulate in Houston. The U.S. forced it to close, claiming that it was a hot spot for corporate espionage in the United States. Pundits suggest that this is more evidence that the U.S. is now actually taking a hard line on China, whereas most of the previous spats were merely verbal.
I doubt that the United States truly has the political will to delist Alibaba and other Chinese stocks. While it may play well with voters, the actual reputational harm to the financial system and the country’s capital markets could be considerable. As such, it seems more like a dramatic threat useful for negotiating, rather than an end goal.
And even if Alibaba stock were to get delisted, it’s not like the company’s value would implode overnight. Alibaba’s other listing in Hong Kong gives it sufficient liquidity and international access to maintain a fair valuation. U.S.-based investors would likely be able to transfer their shares to the Hong Kong listing, or sell them at a reasonable price prior to any forced liquidation.
That said, this political question reinforces a broader concern around Alibaba stock The company’s accounting remains complicated, and it’s hard for outsiders to get a good grip on just how profitable the core business is.
The Q1 earnings release, with its dramatic profitability decline due to investments, shows how much of a financial machine Alibaba is.
With the U.S. tightening the screws on the Chinese financial system, this puts Alibaba’s business model at risk. In other words, don’t panic about delisting. But do keep a watchful eye on the U.S.-China diplomatic relations.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek. At the time of this writing, he held no positions in any of the aforementioned securities.
Author: By Ian Bezek, InvestorPlace Contributor
Namaste Technologies Reports Second Quarter 2020 Financial Results
~Company reports record quarter with 73% increase in year over year net revenue~
TORONTO, July 24, 2020 /PRNewswire/ – Namaste Technologies Inc. (“Namaste” or the “Company”) (TSXV: N) (FRANKFURT: M5BQ) (OTCMKTS: NXTTF), an online platform for cannabis products, accessories, and responsible education, today reported its financial results for the second quarter ended May 31, 2020. All financial figures are in Canadian dollars unless otherwise indicated.
Namaste’s second quarter results continue to build on the revenue growth success posted in the first quarter as the Company solidifies its position within the cannabis value chain. On a year over year basis for the second quarter ended May 31, 2020, revenue increased and net loss decreased significantly. On a sequential basis, second quarter revenue, gross margin and the net loss improved over the first quarter of 2020.
CannMart Inc. (“CannMart”), a wholly owned subsidiary of Namaste Technologies, has demonstrated its ability to attract premium brands, value added suppliers, and provincial agencies thanks to its expertise in e-commerce, production, packaging, and distribution in this highly competitive and regulated industry. As reflected in the Q2 2020 results, CannMart’s expanded product catalogue grew in both its business to business (“B2B”) and business to consumer (“B2C”) channels. CannMart continues to strengthen its competitive position in the Cannabis industry as the space matures and shifts into consumer packaged goods.
Second quarter highlights:
Record net revenues for the Company of $6.9 million for the second quarter ended May 31, 2020, a 73% increase over the same period last year, and a 31% sequential increase over the first quarter of 2020.
The net segment revenue for CannMart, Namaste’s core growth engine, increased approximately 1500% to over $2.4 million compared to the comparable period in 2019, excluding excise tax.
CannMart’s revenue increased 82% on a sequential basis from Q1 to Q2 2020.
Over 33% of second quarter 2020 revenue was derived from cannabis and cannabis products compared to under 5% for the same period in 2019.
48% of second quarter 2020 net revenues were derived from Canadian clients compared to 19% from the same period in 2019, a 338% increase in quarter over quarter revenue, reflecting efforts made to focus on growing the Company’s market share within the Canadian market.
Reported Q2 2020 net loss of $4.8 million compared to $8.6 million in the same quarter last year. The improvement reflects CannMart’s introduction of new distribution channels, restructuring efforts in 2019, and resulting business improvements in 2020.
“The introduction of B2B distribution channels by CannMart has made a significant contribution to Namaste’s revenue stream and bottom line,” said Meni Morim, CEO of Namaste. “For the second consecutive quarter, we have seen considerable revenue growth and have just recorded the highest quarterly revenue for the Company to date. As stated in the first quarter, the strategic decisions we made in 2019 and early 2020 are beginning to be reflected in our results. Our efforts have resulted in significant growth for cannabis and cannabis products sales in Canada but there is more work for us to do. We have shown that we can grow our revenue and as we expand our product lines, improve operational efficiencies, and increase our gross margins in coming quarters to coincide with revenue growth.”
“As Canada is leading the way with respect to the rollout of regulations around a legal cannabis market, and with other countries paying close attention to this rollout, we set out to refine and perfect the scalability of our business model within this legal framework. The work and investment that we have made and will continue to make in Canada will provide a playbook for eventual expansion into other markets and verticals as regulations allow,” added Morim.
“We continue to sign agreements with well-known international cannabis brands. These are endorsements of our value proposition as a leader in development, manufacturing and distribution of consumer packaged goods in the cannabis sector. As brand loyalty becomes more important in a maturing industry, we place great value in working with well-known brands looking to leverage our expertise and distribution channels and, at the same time, have invested in creating products under our own brand. It will be brands that will drive customer loyalty, product development and ultimately sales. We have experienced early success with major brands through both CannMart’s B2B and B2C sales channels.”
“We also received approval from Alberta Gaming, Liquor & Cannabis (“AGLC”) and the Ontario Cannabis Retail Corporation operating as the Ontario Cannabis Store (“OCS”) to begin offering Cannabis 2.0 products, another significant milestone for Namaste. The Cannabis 2.0 market is gaining momentum as new and innovative products are being introduced. Alberta and Ontario are important markets for CannMart and we will work to gain market share in these and other provinces.”
Summary of Consolidated Financial Results
Net revenue for the second quarter ended May 31, 2020 was $6.9 million, an improvement of 73% compared to $4.0 million for the second quarter of 2019. Gross margin as a percentage of net revenue (before inventory adjustment) for the second quarter ended May 31, 2020 was 9% compared to 18% for the previous period. As illustrated on the chart below, cannabis revenue is demonstrating strong growth and becoming a major component of total revenues.
Overall expenses decreased by $241,913 or 4% for the second quarter ended May 31, 2020 in comparison to the same period last year. The change reflects a decrease in share-based compensation and selling and marketing expenses offset by an increase in office and general costs.
Adjusted EBITDA for the second quarter ended May 31, 2020 was a loss of $4.7 million, compared to a loss of $3.9 million for the second quarter ended May 31, 2019. Net loss for the second quarter ended May 31, 2020 was $4.8 million compared to $8.6 million in the same period last year. The improvement in the net loss is primarily attributed to a decrease in restructuring and other related costs.
For further details, the complete Financial Statements for the second quarter ended May 31, 2020 and the related Management’s Discussion & Analysis can be accessed on the Company’s SEDAR profile at www.sedar.com.
Annual General Meeting of Shareholders
The Company intends to hold its annual general meeting of shareholders (“AGM”) virtually on September 29, 2020. The Company requested and has received a four-day extension to the date on which it is required to hold its AGM from the British Columbia Registrar of Companies in accordance with section 182(4) of the Business Corporations Act (BC). The Company will provide further details regarding the AGM, including how shareholders can attend and vote at the virtual AGM, in due course.
COVID-19 continues to be an unprecedented challenge for the global community. In response to this very serious health risk, management employed procedures to mitigate its effects on the business and ensure the continued health and safety of its employees, vendors, partners and customers as the first quarter was coming to a close. Although these challenges still persist, management believes that appropriate actions have been taken and the business is well positioned to operate with limited disruption.
NON IFRS FINANCIAL MEASURES
Management evaluates the Company’s performance using a variety of measures, including “EBITDA” and “Adjusted EBITDA”. The non-IFRS measures discussed below should not be construed as an alternative to other financial measures determined in accordance with IFRS. These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies.
The Company believes these non-IFRS financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Company.
Management uses these and other non-IFRS financial measures to exclude the impact of certain expenses recognized under IFRS when analyzing underlying operating performance and cash impact. From time to time, the Company may exclude additional items if it believes doing so would result in a more effective analysis. The exclusion of certain items does not imply they are non-recurring.
Three months ended
Six months ended
Depreciation and amortization
Restructuring and other costs
Impairment of goodwill and intangibles
Impairment loss on loans receivable
Impairment of investment in associate
Share of associates’ loss, net of tax
(i) Current and deferred income taxes, depreciation and amortization, and share-based compensation were excluded from the Adjusted EBITDA calculation as they do not represent cash expenditures.
(ii) Other income consisting of gain on disposal of subsidiary, interest income, realized gain on disposition of AFS investments, unrealized gain on derivatives and other miscellaneous non-recurring income were excluded from Adjusted EBITDA calculation.
(iii) Non-recurring costs related to restructuring and legacy issues were excluded from Adjusted EBITDA calculation.
(iv) Share of associates loss, net of tax, is excluded due to lack of control.
About Namaste Technologies Inc.
With headquarters in Toronto, ON, and offices in both B.C. and around the globe, Namaste Technologies is a leading online platform for cannabis products, accessories, and responsible education. The company’s ‘everything cannabis store’, CannMart.com, provides customers with a diverse selection of hand-picked products from a multitude of federally-licensed cultivators, all on one convenient site. Namaste’s global technology and continuous innovation address local needs in a burgeoning cannabis industry requiring smart solutions.
Information on the Company and its many products can be accessed through the links below:
FORWARD-LOOKING INFORMATION – This news release contains “forward-looking information” within the meaning of applicable securities laws. All statements contained herein that are not historical in nature contain forward-looking information. Forward-looking information can be identified by words or phrases such as “may”, “expect”, “likely”, “should”, “would”, “plan”, “anticipate”, “intend”, “potential”, “proposed”, “estimate”, “believe” or the negative of these terms, or other similar words, expressions and grammatical variations thereof, or statements that certain events or conditions “may” or “will” happen. The forward-looking information contained herein, (including statements relating to the expected continued increases in revenue and gross margins in coming quarters, expansion into other regulated markets, and the gains in market share expected to be achieved with the introduction of Cannabis 2.0 products for sale in Alberta, Ontario and other provinces) is made as of the date of this press release and is based on assumptions management believed to be reasonable at the time such statements were made, including management’s perceptions of Namaste’s standing in the online marketplace for cannabis products, the Company’s transition into a growth phase with a focus on increasing revenues and gross margins while reducing costs, the Company’s goal of becoming a leading procurement, processing and distribution company focusing on the Canadian cannabis market, Namaste’s beliefs regarding the quality of its management, the strides the Company has taken in its operations and the quality of the brands offered by CannMart, the Company’s focus on growing the business profitably, reducing operational burn and continuing to master the mechanism of moving cannabis into the market, safely and reliably, the expected demand for Cannabis 2.0 products and the growth of that market and the results of operations, operational matters, historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances. While we consider these assumptions to be reasonable based on information currently available to management, there is no assurance that such expectations will prove to be correct. By their nature, forward-looking information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, including known and unknown risks, many of which are beyond our control, could cause actual results to differ materially from the forward-looking information in this press release. Such factors include, without limitation: risks relating to the Company’s ability to execute its business strategy and the benefits realizable therefrom, risks specifically related to the Company’s international operations, and risks relating to the market price of Namaste’s common shares. Additional risk factors can also be found in the Company’s current MD&A which has been filed under the Company’s SEDAR profile at www.sedar.com. Readers are cautioned not to put undue reliance on forward-looking information. The Company undertakes no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable law. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release or has in any way approved or disapproved of the contents of this press release.
View original content to download multimedia:http://www.prnewswire.com/news-releases/namaste-technologies-reports-second-quarter-2020-financial-results-301099263.html
SOURCE Namaste Technologies Inc.
NFL owners, players reach financial and practice agreements that will allow 2020 training camps to start on time
The NFL has ensured that training camps will start on time next week.
On Friday, owners and leaders of the players union reached an agreement on the parameters of the preseason acclimation window and changes to the collective bargaining agreement that will help ease the financial shortfall caused by the COVID-19 pandemic. Hours after the owners voted to ratify the agreement, the NFLPA executive committee unanimously approved the pact.
The matter was then passed on to the 32-member board of player representatives, which also approved the deal.
“We have worked collaboratively to develop a comprehensive set of protocols designed to minimize risk for fans, players, and club and league personnel,” NFL Commissioner Roger Goodell said in a statement. “These plans have been guided by the medical directors of the NFL and the NFLPA and have been reviewed and endorsed by independent medical and public health experts, including the CDC, and many state and local public health officials.
“The season will undoubtedly present new and additional challenges, but we are committed to playing a safe and complete 2020 season, culminating with the Super Bowl.”
The following guidelines will be implemented in time for training camps to begin by July 28:
– Camps will now feature a 20-day ramp-up period to help players get back into football shape with the objective of minimizing injuries.
– The first eight days following required coronavirus testing and physicals will consist of strength and conditioning training.
– Non-contact practices will begin on the 16th day of camp. The first padded practices will begin on day 21.
– As expected, all preseason games have been eliminated.
– Given the pandemic’s potential impact on depth charts, practice squad sizes will expand from 12 to 16 players. (Earlier this week, the sides agreed to reduce roster sizes from 90 to 80 players, a number that must be reached before the first padded practice.)
More:Winners and losers with NFL’s 2020 preseason canceled
Masks:NFL will require all fans attending games in 2020 to wear face coverings
Ron Rivera:Washington NFL team ‘not close’ on new name, process will take 16-18 months
Owners and the union also agreed to two different opt-out provisions, one for players who fall into a high-risk category and another for those at lower risk. They will have one week from the time the agreement is finalized to make their decisions. The stipend is expected to be around $300,000 per player. No other pro sports league currently offers an opt-out stipend.
Terms of the agreement also include a provision in which the players would be paid prorated portions of their base salaries if the season begins but cannot be completed. The settlement includes arrangements that enables them to recoup guaranteed money in the event of a shortened season.
After previously proposing to decrease the salary cap this season and the next two years in attempt to make up for the expected revenue loss associated with the likelihood of having to play without the normal complement of fans in their stadiums, owners proposed leaving the 2020 salary cap of $198.2 million untouched and spread the potential losses (estimated at around $3 billion, which would equate to $70 million against each team’s cap) over the next four years.
The 2021 cap will be set at a $175 million, and the remainder of the losses will be spread out from 2022 to 2024.
Follow USA TODAY Sports NFL columnist Mike Jones on Twitter @ByMikeJones and listen to the Football Jones podcast on iTunes