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YERB.U: Recent Announcements Reaffirm Investment Thesis

What you need to know:
• Yerbaé announced the closing of the first tranche of its celebrity investment round, including various prominent athletes and entertainers.
• YERB.U expanded into an additional 75 Costco locations across the Southeastern U.S. and announced record sales on Amazon Prime Day.
• We are expecting continued strong financials for Q2, including $4.2M in net revenue (+128% YoY).

Yerbaé Brands Corp. (YERB.U:TSXV, YERBF:OTC) has reported multiple updates over the last month that further reaffirm our confidence in the Company and its management team. The announcements include closing the first tranche of its celebrity investment round, an expansion into Costco, and record sales on Amazon Prime Day. We are maintaining our BUY rating and $2.50/share target price on YERB.U based on 5.5x 2024E sales.

Celebrity Investment Round
This morning, YERB.U announced that it has closed the first tranche of its celebrity investment round, raising ~$4M. This includes a group of prominent athletes and entertainers that recognize Yerbaé’s potential brand. The first tranche was for 2.2M shares at $1.83/share including a full warrant at $2.15/share for 24 months. The funds will be used for continued expansion through increased production, product innovation, distribution growth, and marketing strategies. Including today’s announcement, Yerbaé’s in-the-money warrants can be exercised for ~$20M in proceeds, limiting the need for additional equity financing.

The Company also announced that it has formed a Sports & Entertainment Board. The board will play a role in Yerbaé’s strategic decisions, brand positioning, marketing campaigns, and product innovation. The group includes a soccer player, CrossFit champion, country music sensation, and four football stars.

Costco Expansion
On July 19th, YERB.U announced an expansion into the Southeast region of Costco stores in the United States. This included 75 additional stores across eight states: Florida, Georgia, Alabama, North Carolina, South Carolina, Tennessee, Mississippi, and Puerto Rico. The stores will feature YERB.U’s variety pack which includes Mango Passionfruit, Watermelon Strawberry, and Black Cherry Pineapple. This ties into Yerbae’s ongoing strategy to reach a wider audience and make its products more accessible to consumers.

Record Sales on Amazon Prime Day
On July 14th, Yerbaé reported that it experienced a 30% YoY increase in sales during Amazon Prime Day. YERB.U capitalized on the opportunity to showcase its diverse range of products to a large audience of customers, resulting in the extraordinary surge in sales. Yerbaé utilized a new advertising strategy for Amazon Prime Day that proved fruitful.

Q2 Financials Preview
YERB.U will be reporting Q2 financials towards month end, which we expect to show continued stellar growth. We are expecting $4.2M in net revenue (+128% YoY, +20% QoQ), 54% gross margin, and -$2.2M in adjusted EBITDA (improving as a percent of sales). While Yerbaé stock has performed exceptionally well over the last six months (up ~50%), we think that it is well deserved given its operational progress and that a strong Q2 will excite investors further.