Earnings Labs

CEA Industries Inc. Common Stock (BNC)

Q3 2021 Earnings Call· Wed, Nov 10, 2021

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Transcript

Operator

Operator

Good afternoon, ladies and gentlemen and welcome to the Surna Inc. Q3 2021 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions after the presentation. It is now my pleasure to turn the floor over to your host, Surna’s CEO, Tony McDonald. Sir, the floor is yours.

Tony McDonald

Management

Thank you and good afternoon. Welcome to Surna's third quarter 2021 earnings call. My name is Tony McDonald. I'm the Company's Chairman and CEO and I'm joined today by our Chief Financial Officer, Brian Knaley. Before we begin, please be advised this call may contain statements of a forward-looking nature relating to future events. These forward-looking statements are subject to the inherit uncertainties in predicting future results and conditions. These statements reflect our current beliefs and a number of important factors could cause actual results to differ materially from those expressed in this call, including the risk factors set forth in our Form 10-K, which we filed with the SEC in March. Please refer to our SEC filings for more detailed discussion of the risks and uncertainties associated with our business. Please note that we filed our quarterly report on Form 10-Q and issued a press release announcing third quarter 2021 results earlier today. These documents can be found on our website at www.surna.com/investor-relations. If you would like to be on our e-mail distribution list, send an e-mail to investor@surna.com. While we will highlight some key information contained in the press release, the primary purpose of this call is to provide an update on our recently updated strategic and organic growth plans and our key operating metrics. On May 4thof this year, we filed a press release that's updated our organic growth strategy which consists of three components, new markets, new products and services and new trading. The market we have historically served is for indoor cannabis cultivation, which is forecast to continue to grow aggressively for the foreseeable future. Well, that is still a strong in growing market in which we are well known, respected and continue to serve. We also have begun to serve the non-cannabis controlled environment…

Brian Knaley

Management

Thank you, Tony. Our third for demonstrated continued sales traction due to our execution against our organic growth strategy. Our bookings, which we will discuss a little later were the second highest in the company history and represent a significant increase over the second quarter. Our revenue which was $3.7 million in the third quarter, represents a 127% increase over the third quarter of last year. Revenue was impacted in the quarter by disruptions in our supply chain, which delayed shipments into the fourth quarter. Our third quarter 2021 gross profit margin was 20.2% compared to 32.2% for the third quarter of 2020, a decrease of 12 percentage points. The primary drivers for the decrease in year-over-year margin wherever reversal of our excess and obsolete inventory reserved and a credit received from a vendor in 2020. Neither of these impacts recurred in 2021 If the prior year's gross profit is adjusted for these two items, we have actually improved by two percentage points year-over-year in the quarter. Operating loss for the quarter was $443,000. This represents a 57% increase as compared to the prior year. Net loss was $408,000 in the third quarter, this represents a 51% increase as compared to last year. Adjusted net loss was $363,000 in the third quarter. This represented a 95% increase as compared to third quarter of last year. The year-over-year comparison for operating loss, net loss and adjusted net loss were all negatively impacted in the third quarter of a non recurring benefits that came through our gross profit in 2020. On a year-to-date basis through September 30 2021, our revenue was $10.6 million versus $5.1 million for the same period last year or 106% increase. Year-to-date through September 30 2021, our gross profit margin was 22.4% compared to 24.5% for the same…

Tony McDonald

Management

Thank you, Brian. The financial results just reported further reinforce the validation of our business model and our market opportunity within CEA. We are confident that our organic growth strategy is gaining traction in the market, and will continue to bear fruit in the second half of this year. The Surna team greatly appreciates all of the support from our shareholders. This concludes today's prepared remarks, and we will open the floor for questions.

Operator

Operator

Thank you. As we wait for people to enter the queue. I will field some questions received by email and the webcast.

Unidentified Analyst

Management

Question, your recent press release or preventative maintenance mentioned you have signed contracts. Why is this important for you in your customers?

Tony McDonald

Management

Answer. We believe that our customers will benefit from our preventative maintenance for maximizing their uptime in optimal growth environment. For us, it is critical that we continue to support our customers throughout the project from concept to grow. We view these maintenance contracts as part of this continual.

Unidentified Analyst

Management

Question. Earlier in your remarks and in previous quarters, you state that you want to uplift, can you provide an update of where Surna is in these efforts?

Tony McDonald

Management

Answer. In this quarter we completed our pipe financing. This was a necessary first step to uplisting, it is still our intention to pursue an uplifting to national exchange.

Unidentified Analyst

Management

Question. E remarks you stated that your supply was disrupted in the quarter. How much from both the dollar perspective and timing has this disruption impacted you in the third quarter?

Tony McDonald

Management

Answer. Well, we won't go into specifics on the dollar front, we believe that the delays experienced in the third quarter from a revenue perspective will push into fourth quarter and possibly into the first quarter of 2022. Operator, do we have any questions?

Operator

Operator