Gilla Increases Margins by 25% While Continuing to Win Awards

KALISPELL, MT / ACCESSWIRE / August 18, 2016 / Gilla Inc. (OTCQB: GLLA), the fast-growing designer, manufacturer and marketer of E-liquid for vaporizers, recently announced their Q2 2016 results. In the filing, significant improvements were made in gross margins, as they jumped from 37% in Q1 2016 to 62% this quarter. This is partly attributable to a higher percentage of sales being from their own product portfolio of premium E-liquid products.

The Company also announced yet another award for their Coil Glaze E-liquid brand, which has been honored at recent industry trade shows in Oklahoma City and Las Vegas. Coil Glaze’s flavor Whipped Dreamz took “Best All-Around Flavor” and “Best Custard Flavor”, while Coil Glaze’s flavor Them Applez took top honor as the “Best Bakery Flavor” at the Oklahoma VapeJam 2016, held August 12th – 14th. Whipped Dreamz was also awarded “Best Cream/Custard Flavor” at the Las Vegas Vape Nights contest held on July 31st
– August 3rd.

This is the fifth award received by the Coil Glaze brand, which was produced by Gilla’s own team of mixologists based out of Florida. By having the ability to create their own award winning product line, the company is able to sell more of their own higher margin products, which directly leads to being able to increase gross margins by 25% in a single quarter. Graham Simmonds, Chairman and CEO of Gilla, had this to say in the release, “We are pleased that consumers across the country are enjoying these great E-liquids and it further demonstrates the strength of the Gilla product development and design team.”

Company Focus

Gilla’s attention has been on international markets, where in the last year they have inked deals in Hungary, China, and the UK. The international portion of sales now accounts for 43% of total sales, reflecting positive results from the company’s focus on said markets. With some 400 million combustible cigarette smokers in Asia alone, the international market for vaping is orders of magnitude larger then the US market.

During Q2, Gilla also introduced four new proprietary brands and additional flavors to existing brands “in order to have marketed and sold such new products in the market prior to the regulatory grandfather dates in both Europe and U.S.” While many see the regulatory date as a hindrance to the industry, Gilla instead welcomes the regulations and realizes that with their existing product portfolio already in place, they have a first mover advantage as the industry becomes increasingly regulated and barriers to entry stiffen.

Looking Ahead To The Second Half of 2016

While net loss was larger in Q2 than it was in Q1, this was primarily attributable to the increased administrative expenses from handling the multiple acquisitions already completed in 2015. As time goes forward, it is “anticipated that the Company will see significant cost savings from the consolidation of certain operating activities now that the acquisitions have been fully integrated.”

In the release, the company does give a key piece of guidance for investors, “The Company is reiterating its expectation for cash flow breakeven from operations in the second half of 2016.” Additionally, guidance on corporate strategy is given by Graham Simmonds, who is CEO and Chairman of the Company, “The Company’s strategic plan is coming to fruition very quickly and it’s exciting to see our broad brand portfolio now enjoying success across multiple markets, from Asia to North America and from Europe to Africa. Our growth in international sales demonstrates Gilla’s significant progress in becoming a leading player in the global vape market. The higher margin business has been our primary focus and our numbers demonstrate major growth in the second quarter for that segment of our operations. This will be our continued focus into the second half of the year as we continue to grow sales domestically while also exploring the opportunities to expand our global footprint.”

Summary:

With increased gross margins to 62%, Gilla is executing on their long-term plan to have their own product portfolio be a higher percentage of overall sales. With Gilla’s highest margin products being in the 80-85% range, it would appear that Gilla still has room to make these gross margins even higher in the future. To put the 62% gross margins into perspective, let’s look at other companies in the same industry; Electronic Cigarettes International (OTCQB: ECIG) for example had gross margins of 56% in their latest filing, mCig, Inc. (OTCQB: MCIG) most recently had 21% gross margins, and 22nd Century Group, Inc. (NYSE: XXII) actually had gross margins of negative 5% in their latest filing.

Looking beyond just the OTC space, Gilla’s gross margins are ahead of combustible cigarette giants such as the Altria Group, Inc. (NYSE: MO), who had 45% gross margins or Philip Morris International, Inc. (NYSE: PM) who reported 23% gross margins in their latest quarterly report.

Gilla’s ability to markedly increase their gross margins by 25% in a single quarter shows that the company’s long-term plans and goals are being executed on. With guidance being given that the company expects to be cash flow breakeven by the end of 2016, investors may want to take a closer loo at Gilla Inc. going forward.

For additional information on
Gilla Inc. please visit http://gilla.com/?page_id=4124.

Disclaimer:

Except for the historical
information presented herein, matters discussed in this release contain
forward-looking statements that are subject to certain risks and uncertainties
that could cause actual results to differ materially from any future results,
performance or achievements expressed or implied by such statements. Tamarack
Advisors is not registered with any financial or securities regulatory
authority, and does not provide nor claims to provide investment advice or
recommendations to readers of this release. For making specific investment
decisions, readers should seek their own advice.

SOURCE: Tamarack Advisors

ReleaseID: 443959