Exclusive Interview with CEA Industries Chairman and CEO Tony McDonald
Over the course of its 16 years in business, CEA Industries (NASDAQ: CEAD, CEADW) has designed and engineered more than 200 indoor cultivation facilities in Canada and the U.S. Chairman and CEO Tony McDonald spoke with New Cannabis Ventures about the controlled environment agriculture company’s business model, its name change and how it plans to continue growing.
Listen to the entire interview or read the summary below:
CEA Industries provides a comprehensive range of services including engineering, equipment and technology for indoor controlled environment agriculture facilities. The company has a proprietary system for controlling facility conditions, and it offers ongoing maintenance services to facilities.
The company was named Surna back when it went public via a reverse merger in 2014, according to McDonald. Last year, the company updated its name to Surna Cultivation Technologies to better reflect the company’s offerings. Surna Cultivation Technologies has a strong brand name, which now lives under the umbrella of the overall company: CEA Industries, according to McDonald.
Cannabis has been CEA Industries’ primary market, but the company is now expanding into more industries as well. The company will continue offering services in the true sealed environment while also broadening its reach to include other controlled environment facilities, such as greenhouses.
The CEA Industries Team
McDonald trained as an engineer at West Point and served as an Army officer before going to Harvard Business School. He worked in the cleantech and HVAC space, experience that brought him to CEA Industries. He first served on the board before stepping into the CEO role. He is joined on the team by industry veterans with experience in HVAC and engineering. The company’s co-founder Brandy Keen remains with the company as a technical advisor. In March, Ian Patel joined the company as its new CFO. McDonald also pointed to the strength of the company’s board.
Customers
CEA Industries has primarily worked in the U.S. and Canada, serving mid-size MSOs and companies just entering the cannabis sector. It has worked with a number of customers on their first facilities and then their subsequent expansion projects.
The company partners with its customers on the facility process, guiding them through the engineering and technology requirements and connecting them to its vendor network. The company can also have a hand in the architecture phase before moving onto engineering and equipment. A cannabis facility project can take six to 18 months to complete, according to McDonald.
The Competition
CEA Industries competes against other controlled environment agriculture companies in the cannabis space, but local mechanical engineering firms are some of its top competitors. A cannabis company might reach out to a local firm, but most of those companies do not have CEA Industries’ in-depth experience designing cannabis facilities, according to McDonald.
Funding
In February, CEA Industries completed a $24 million public offering and uplisted to the NASDAQ. Looking ahead, the team plans to leverage its funding to pursue both organic growth and M&A. CEA Industries will be fleshing out its sales and marketing operations and enhancing its capabilities to better serve clients. On the M&A side, the team will be looking for accretive deals what will help drive revenue and cash flow.
CEA Industries had been trading on the OTC for eight years, which drew a lot of retail investors to the company, according to McDonald. Now, on the NASDAQ, the company has attracted more institutional investors. Some investors bring capital as well as contacts and insight to the table.
Growth Ahead
The company ended 2021 with $13.6 million in revenue and a strong pipeline. McDonald joined the company at the end of 2018. In 2019, his first full year onboard, CEA Industries had approximately 60 percent revenue growth. The team grew bookings considerably, and the company had its first profitable year. In the first half of 2020, CEA Industries was significantly impacted by the COVID-19 pandemic. Bookings bounced back in the second half of the year, and recovery continued in 2021, according to McDonald. The company is moving forward and working through the strong backlog it had at the end of last year.
Like many companies, CEA Industries is contending with supply chain issues and delays, but McDonald anticipates those challenges will ease with time. Likewise, the stock market remains unpredictable, but the company is focused on serving its customers and building a strong business. McDonald anticipates that hard work will eventually be reflected in the stock price.
