Good Natured Products Inc (GDNP.V) produces and distributes one of North America's widest assortments of better everyday products® made from the highest possible percentage of renewable, plant-based materials and no BPAs, phthalates or other chemicals of concern potentially harmful to human health and the environment.
GDNP.V offers over 400 products and services through wholesale and retail channels, including e-commerce stores. From plant-based home organization products to compostable food containers, bioplastic industrial supplies and medical packaging, we're focused on delivering a great customer experience to make more plant-based products readily accessible to more people as the path to deliver meaningful environmental and social impact..
Jan. 9 - Announces Appointment of Chief Financial Officer: Kerry Biggs as CFO effective January 9, 2023.
Jan. 31 - Announces Preliminary Unaudited Results for the Fourth Quarter and Full Year Ended December 31, 2022: Forecast Q4 2022 revenue is 20.9-22.9M (-8.6% YOY) - FY2022 98.6M to 1000M (61-65% YOY). The Company’s cash balance at December 31, 2022 is anticipated to be approximately $11.8 million, compared to $10.6 million for FY2021.
Feb 8 - Makes Eco-Impact in Hawaii with New Distributor: Announced its distribution through Sustainable Island Products, the primary distributor of compostable packaging products in Hawaii.
Mar. 7 - Flax4Life Double Down with their Latest Sweet Launch: The functional food market is projected to reach $260 billion by 2027 and is anticipated to grow at a CAGR of over 8.5% per year.
Equity Incentive: Options to purchase 1,051,753 common shares were granted at $0.27 per common share. Twenty-five percent (25%) of each grant vests on March 3, 2024 with the rest in equal increments over the next three years.
2,453,568 PSUs, of which 1,601,818 PSUs were issued to executive management, vesting in accordance with certain peer group share price performance criteria for the 2023 calendar year established by the Board of Directors.
2,878,121 RSUs, of which 1,692,121 were issued to members of the board of directors and executive management, vesting 1/3 per year on each of March 3, 2024, March 3, 2025 and March 3, 2026;
1,053,781 additional PSUs, of which 685,479 PSUs were issued to executive management, vesting in accordance with certain peer group share price performance criteria for the 2023 calendar year
Wells Fargo Credit Agreements: Amendments: On December 31, 2022, the Company entered into an agreement (the "Waiver and Consent") with Wells Fargo that provided consent to an intercompany reorganization and waived compliance with minimum EBITDA financial covenant for the four fiscal quarters ended December 31, 2022, as previously disclosed under the Credit Agreement. In addition, on February 28, 2023, the Company entered into an agreement (the "Second Amendment") with Wells Fargo amending the Credit Agreement to lower the minimum EBITDA requirement for the four fiscal quarters ending March 31, 2023, June 30, 2023, September 30, 2023, and December 31, 2023. The Second Amendment also increased the minimum liquidity requirement, as previously disclosed in the Credit Agreement, for the period commencing March 31, 2023 until December 31, 2024.
Apr. 30 - Beacon Price Targe lowered from 0.70 cents to 0.55 cents based on 101M Revenue for FY2023: https://www.cantechletter.com/2023/04/good-natured-products-has-target-trimmed-by-beacon/
May 4 - GoodToGo™ Microwavable - A Biotech Breakthrough in Plant-based Take-out Containers: the first CMA-certified compostable, high-clarity take-out containers that are heat-resistant, made with 97% plant-based materials.
May 18 -Multi-Year Contract Signed with Texas-based Food Producer: signed a commercial contract with a regional US snack food producer that distributes across several prominent Texas retailers. The contract outlines a two-year agreement whereby good natured® will supply packaging based on the Company’s proprietary GoodGuardTM tamper-evident design. The packaging will be produced at the Company’s Houston, Texas facility using a customized Bio-PET formulation that is curbside recyclable alongside traditional petroleum-based PET, rPET or PCR packaging.
Revenue of USD $1.2 million is anticipated in year one, with the first shipment to the customer expected in Q3 2023.
May 24 - Announces First Quarter 2023 Results: The Company's Packaging business group was robust in Q1 2023 and delivered 46% year-over-year revenue growth. A year-over-year decrease in Industrial business group revenue was driven by continued customer de-stocking from high inventory levels in prior quarters due in part to unpredictable demand cycles from their end users, as well as an overall industry shift to just-in-time ordering. This was concentrated amongst the Company's commodity petroleum-based industrial products inherited through its acquisitions, where a combination of increased competitive pressure and declines in average selling prices.
June 5 - Appoints New Board Member: Tami Kozikowski, CPA, to the good natured® board of directors and as Chair of the Audit Committee, effective June 5, 2023. Concurrent with this announcement, the Company would like to announce that Mr. Jim Zadra is stepping down from the Company’s board of directors, effective June 5, 2023.
June 7 -Engages ICP Securities Inc. for Market Making Services: engaged the services of ICP Securities Inc. ("ICP"), a Canadian advisory firm, to provide market-making services in accordance with TSXV policies. ICP will trade shares of the Company on the TSXV and all other trading venues with the objectives of maintaining a reasonable market and improving the liquidity of the Company's common shares. Under the agreement, ICP will receive compensation of $7,500 plus applicable taxes per month in advance. The agreement is for an initial term of four months, renewable thereafter on a month-to-month basis, and may be terminated by either party with 30 days' notice.
June 8 - Announces $3 Million Brokered Private Placement: Beacon Securities Limited and Integral Wealth Securities Limited as joint bookrunners on behalf of a syndicate of agents with a minimum of 21,430,000 units of the Company at a price of $0.14 per Unit (Warrant 0.19 cents) for $3 million. The net proceeds of the Offering are expected to be used by the Company to fund working capital to support organic growth initiatives and strategic acquisitions. The Offering is subject to a number of conditions, including without limitation, approval of the TSX Venture Exchange.
June 21 -Closing of $5 Million Brokered Private Placement with Participation of Strategic Investor and Insiders: issued 35,714,285 units at $0.14 per Unit (Warrant 0.19 cents; 30 months) for $5,000,000.
Notably, an existing strategic investor (the "Strategic Investor") subscribed as the lead order in the Offering, for total of 21,428,570 Units and total gross proceeds of $3 million. Upon completion of the Offering, the Strategic Investor owns approximately 12.94% of the issued and outstanding common shares of the Company on a non-diluted basis. Insiders subscribed for a total of 779,000 Units for total gross proceeds of $109,060 under the Offering.
June 21 - Issues Clarification to June 5, 2023 Press Release: announcement on June 5, 2023 regarding the appointment of Tami Kozikowski to the good natured® board of directors and as Chair of the Audit Committee.
June 26 - Announces Amendment to Wells Fargo Credit Agreement: On June 23, 2023, the Company entered into an agreement with Wells Fargo that fully waives the minimum EBITDA financial covenant for the three fiscal quarters ending June 30, 2023, September 30, 2023, and December 31, 2023 that was previously required under the Credit Agreement. As part of the Third Amendment, GDNP.V agreed with Wells Fargo to increase the minimum liquidity requirement as outlined in the Credit Agreement from the Effective Date until at least March 31, 2024.
July 14 - Appoints New Board Member : Karl Sanft to the good natured® board of directors, effective July 14, 2023.
Karl currently serves as President & CEO of 24 Hour Fitness, an industry-leading group operating close to 300 locations throughout the U.S., having originally joined in April 2019 as COO. He is known for his track record of delivering significant business growth, leadership and expertise in sales, operational effectiveness and P&L management. Starting his career at K-Mart and Office Depot, Mr. Sanft later joined Best Buy and rose to Senior Vice President of U.S. Retail Operations over his 20-year tenure with the company.
July 14 - Announces AGM Results
Aug. 10 -Announces Multi-Year Deal with Pharmaceutical Packaging Company: Signed a letter of intent for a three-year commercial agreement with an existing pharmaceutical packaging customer to expand their product assortment. The Company expects to sign the full commercial agreement by the end of 2023, which will outline a multi-year program to produce approximately 100 million packages over a three-year term.
The Company anticipates revenue of approximately CAD $3.5 million in the first year of the agreement, of which CAD $2.7 million will be from new products being added to the customer's existing assortment. Volumes in the first year are expected fluctuate on a quarterly basis to match product seasonality and timing.
Aug. 29 - Announces Second Quarter 2023 Results: Our outlook remains very positive about the continued strong growth in our Packaging business group, and our robust pipeline continues to perform with several new packaging deals expected to enter commercial production in the back half of the third quarter," stated Paul Antoniadis, CEO of good natured®. "We also anticipate third party industrial sales to show signs of improving later this year and continue to proactively lower our SG&A spend through cost reduction initiatives, while we also look for ways to restructure and renegotiate our long-term debt."
As at June 30, 2023, the Company's total asset to liability ratio was 1.21 compared to 1.22 as at December 31, 2022.
A number of strategic Bio-Pet packaging announcements were made in the last eight months: Spring Creek Egg Farm (Jan 2023), Sustainable Island Product as a new distributor in Hawaii (Feb 2023), Flax4Life (Mar 2023), and Karma Baker (Apr. 2023). The GoodToGo™ Microwavable collection launched in May 2023 and was followed with the "Ready-to-Eat" Report publication focusing on convenience eating and sustainable packaging trends (Aug. 2023).
In addition, two multi-year contract were signed (1. Texas-based Food Producer (May 2023) and a Pharmaceutical Packaging Company (Aug. 2023). Both deals represent respective FY2023 revenues of $3.5M + $1.2M roughly $4.8M.
March 2023, amendments to the Wells Fargo Credit Agreement were announced: On December 31, 2022, the Company entered into an agreement with Wells Fargo that provided consent to an intercompany reorganization and waived compliance with minimum EBITDA financial covenant for the four fiscal quarters. In addition, on February 28, 2023, a second amendment was made with Wells Fargo lowering the minimum EBITDA requirement for the four fiscal quarters ending March 31, 2023, June 30, 2023, September 30, 2023, and December 31, 2023. However, the Second Amendment also increased the minimum liquidity requirement from March 31, 2023 until December 31, 2024.
June 2023, a day after market making services deal with ICP Securities, a $3M Brokered Private Placement at $0.14 cents (Warrant 0.19 cents) was announced. Three weeks later $5M was raised at the same terms. A strategic investors contributed $3M and some insiders participation ($0.1M).
Also in June 2023, another amendment to the Wells Fargo Credit Agreement was made this time fully waiving the minimum EBITDA financial covenant for the three fiscal quarters ending June 30, 2023, September 30, 2023, and December 31, 2023 that was previously required. As part of the Third Amendment, GDNP.V agreed with Wells Fargo to increase the minimum liquidity requirement from the Effective Date until at least March 31, 2024.
Equity Incentive Compensation
Roughly 1.05M options were granted at $0.27 over three years. 2.87M RSUs over three years and 2,45M and 1,05M PSUs vesting depending on certain peer group share price criteria for the 2023 calendar year (Mar. 2023).
GDNP.V has increased revenues for four consecutive years to a record 101M in FY2022 from 10M in FY2019.
Year to Date (YTD) comparison indicates a decline in revenue from FY 2022. The normalization of the supply chain and lower revenues from the Industrial stream has been the main drivers. In other words, the confluence of factor that permitted record earning in FY 2022 are no longer present in FY2023,
In addition, quarterly revenue from Q3 2022 has sequentially decreased while the Net loss have not fully stabilized. However, cash balance has been steadily above $10M.
Three appointments were made in the last eight months: Kerry Biggs as CFO (January 2021), Tami Kozikowski as a Board Member and Chair of the Audit Committee (June 2023) and Karl Sanft to Good Natured Board.
Given the recent earnings, the current valuation of GDNP seems significantly disproportional. How could a YTD 2023 24% decline in revenue be aligned with a -68% decline in the stock price in YTD? "Debt?
Overall, through its various acquisitions GDNP.V has a total of roughly $60M in debt. About one third ($20M) is in mortgages secured against land and building which is currently appraised to $30M. Rest is in convertible debentures ($16.3M) and Wells Fargo Credit Facility ($13.7M). Note that there still $25M borrowing capacity of the latter.
It is a lot of debt, but is mortgage debt "bad debt"? The rise in interest rates in the past 12 months has impacted valuation but GDNP.V's timing on the amount and price at which it raised funds has been very costly to shareholders.
The increased liquidity requirements and waiving of EBITDA requirements from Wells Fargo don't come across as bullish signals but it does show that its biggest creditor supports GDNP.V's plan.
Share consolidation is definitely a real concern at these levels but no proposition or vote has taken place to date.
Otherwise, assuming FY2022 was an anomaly, YTD 2023 revenue compared to YTD 2021 still shows an 88% growth.
GDNP.V also has the funds needed to carry out its objectives for the next 12 months and as a current ratio 1.21 (as of June 30th, 2023). The company reports to still be active with M&A but is looking for selective accretive opportunities.
Since the beginning of FY2023, brokerages have lowered their price targets significantly..
Multiples have declined across the venture market but the time required to transition facilities to plant based product (18 Months) seemed to have caught brokerages by surprise (really?). Nonetheless, GDNP.V continues to deliver relatively good earnings performance and has a unique positioning with real assets and ample room for growth.
The question still remains - Is the current valuation sensible?
DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions.