VRNDF - Delta 9 Reports Year End and Q4 2019 Results
WINNIPEG, Manitoba, March 19, 2020 (GLOBE NEWSWIRE) -- DELTA 9 CANNABIS INC. (TSX: DN) (OTCQX: VRNDF) (“Delta 9” or the “Company”), is pleased to announce financial and operating results for the fourth quarter and full year ending December 31, 2019.
| Financial Highlights for the Year 2019 |
| • |
| Record operating revenues of $31.8 million in 2019, up 315% in 2019 compared to $7.6 million for the same period last year, including: |
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| Retail revenue up 390% to $15.4 million in 2019 |
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| Wholesale revenue up 336% to $9.5 million in 2019 |
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| Business to business revenue up 574% to $6.2 million in 2019 |
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| Gross profit1 of $10.0 million in 2019 was up 399% compared to $2.0 million last year. |
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| Gross profit margin was 32% for the full year of 2019 compared to 27% last year. |
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| Working capital was $22.8 million as at December 31, 2019. |
| Financial Highlights for Fourth Quarter of 2019 |
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| Operating revenues of $10.6 million for the fourth quarter of 2019, up 101% compared to $5.3 million for the same quarter last year. |
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| Sequentially net revenues increased 59% for the fourth quarter of 2019 compared to $6.7 million in the third quarter of 2019. |
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| Gross profit1 of $3.2 million for the fourth quarter of 2019, up 157% compared to $1.2 million for the same quarter last year. |
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| Sequentially gross profit was up 59% in the fourth quarter of 2019 compared to $2.0 million in the third quarter of 2019. |
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| Gross profit margin was 31% for the fourth quarter of 2019. |
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| Sequentially Adjusted EBITDA2 (loss) improved 89% to $(91,760) in the fourth quarter of 2019 compared to $(849,760) in the third quarter of 2019. |
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| Profit from Operations was $481,121 in the fourth quarter compared to a loss from operations $(625,072) in the third quarter of 2019. |
“We are pleased with our record year over year and sequential revenue results,” said John Arbuthnot, CEO. “We have seen a significant increase in sequential quarterly revenue with a strong performance in our retail and business to business segments. We believe that given the relative novelty and uncertainty of the global cannabis industry, that our diversified revenue strategy and vertical integration approaches will allow us to better react to market challenges than our competitors with single business strategies. Most notably the Company achieved its first quarterly profit from operations in the Company’s history in the fourth quarter of 2019.”
1 The Company’s “gross profit” Is calculated before adjustments for changes in biological assets.
2 The Company’s “Adjusted EBITDA” is a measure used by management that does not have any standardized meaning prescribed by International Financial Reporting Standards and may not be comparable to similar measures presented by other companies. Management defines the Adjusted EBITDA as the income (loss) from operations, as reported, before interest and tax, adjusted for removing share-based compensation expense, depreciation and amortization, and the fair value effects of accounting for biological assets and inventories. Management believes that Adjusted EBITDA, and the attribution of Adjusted EBITDA in the manner described above, provides meaningful and useful financial information as these measures demonstrate the performance of the Company’s operating businesses.
| 2019 Operational Highlights |
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| Delta 9 received an extract sales authorization from Health Canada to sell cannabis extracts, cannabis topicals, and edible cannabis products as defined under the Cannabis Regulations (Canada). As a result of this authorization, Delta 9 plans to sell nine (9) new derivative cannabis products in 2020. |
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| Delta 9 received Health Canada approval to place 95 new Grow Pods from its Phase II expansion of its production facility into service. This increased production capacity by an estimated 56% and brought the total number of Grow Pods licensed and approved by Health Canada in service to 297. These additional Grow Pods are anticipated to add approximately 2,975 kilograms in dried cannabis flower production per year, bringing Delta 9’s overall anticipated production capacity of dried cannabis to approximately 8,325 kilograms per year. |
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| Delta 9 entered into a definitive agreement to acquire two Alberta retail cannabis stores. Following completion of this acquisition the company will have a total of six operating retail stores in Western Canada. The Company continues to implement its strategy of establishing a chain of Delta 9 branded retail stores across Canada. Delta 9’s goal is to add an additional 12 retail stores over the next 24 months. |
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| After successfully passing all inspections, Delta 9 received a renewal of its cannabis cultivation license for a three-year term after fulfilling Health Canada's rigorous specifications. |
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| Delta 9 received approval to list its securities on the Toronto Stock Exchange (“TSX”) under the symbol “DN”. With the increased visibility that trading on the TSX provides to the retail and institutional investor base, the up listing will help to increase trading liquidity and provide access a growing investor base interested in the cannabis industry. |
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| Delta 9 closed a $11.8 million public offering of convertible debenture units (“Debenture Units”). Each Debenture Unit consisted of one unsecured convertible debenture in the principal amount of $1,000 (a “Debenture”) and 826 common share purchase warrants. The Debentures bear interest at the rate of 8.5% per year for a three-year term. |
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| Delta 9 has supply agreements in place with Manitoba, Saskatchewan, Alberta, and British Columbia and is currently in active negotiations with provincial regulators and wholesalers in Ontario and the rest of Eastern Canada to secure additional distribution markets. Delta 9’s strategy is to become a national distributor of high-quality cannabis products across Canada. |
Summary of Quarterly Results:
| Consolidated Statement of Net Loss |
| Q1 2019 |
| Q2 2019 |
| Q3 2019 |
| Q4 2019 |
| Revenue |
| $5,632,184 |
| $8,886,155 |
| $6,662,137 |
| $10,585,484 |
| Cost of Sales |
| 3,815,930 |
| 5,936,975 |
| 4,628,070 |
| 7,356,889 |
| Gross Profit Before Unrealized Gain from Changes in Biological Assets |
| 1,816,254 |
| 2,949,180 |
| 2,034,067 |
| 3,228,595 |
| Unrealized gain from changes in fair value of biological assets (net) |
| 2,406,735 |
| 586,366 |
| 1,388,863 |
| 1,991,398 |
| Gross Profit |
| $4,222,989 |
| $3,535,546 |
| $3,422,930 |
| $5,219,993 |
| Expenses |
| General and Administrative |
| 3,451,900 |
| 3,075,803 |
| 2,681,388 |
| 3,118,669 |
| Sales and Marketing |
| 969,202 |
| 1,324,537 |
| 1,151,158 |
| 1,385,700 |
| Share Based Compensation |
| 748,067 |
| 244,848 |
| 215,456 |
| 234,503 |
| Total Operating Expenses |
| $5,169,169 |
| $4,645,188 |
| $4,048,002 |
| $4,738,872 |
| Adjusted EBITDA (Loss) 1 |
| (1,978,778) |
| (663,705) |
| (849,760) |
| (91,760) |
| Income (Loss) from Operations |
| $(946,180) |
| $(1,109,642) |
| $(625,072) |
| $481,121 |
| Other Income/ Expenses |
| $17,260,525 |
| $(206,231) |
| $(642,190) |
| $(696,667) |
| Net Income (Loss) |
| $16,314,345 |
| $(1,315,873) |
| $(1,267,262) |
| $(215,556) |
| Basic and Diluted Earnings (Loss) Per Share |
| $0.19 |
| $(0.01) |
| $(0.02) |
| $(0.01) |
- Adjusted EBITDA is a non-IFRS measure, and is calculated as earnings before interest, tax, depreciation and amortization, share-based compensation expense, fair value changes and other non-cash items.
The following chart provides a breakdown of the Company’s revenue by segment:
| Revenue from the Sale of Cannabis |
| Year Ending December 31, 2018 |
| Year Ending December 31, 2019 |
| Three-month period ending September 30, 2019 |
| Three-month period ending December 31, 2019 |
| Wholesale Cannabis Revenue |
| $2,187,043 |
| $9,535,789 |
| $2,233,509 |
| $1,448,992 |
| Retail Cannabis Revenue |
| 3,137,133 |
| 15,366,804 |
| 4,359,614 |
| 5,050,690 |
| Medicinal Cannabis Revenue |
| 767,990 |
| 299,657 |
| 66,770 |
| 48,911 |
| Revenue from Other categories |
| Business to business activities |
| 924,359 |
| 6,226,670 |
| 222,944 |
| 3,793,559 |
| Merchandise and cannabis devices |
| 426,739 |
| 718,300 |
| 158,721 |
| 220,344 |
| Other |
| 185,127 |
| 194,174 |
| 31,010 |
| 53,451 |
| Sub total |
| $7,628,391 |
| $32,341,394 |
| $7,072,568 |
| $10,615,947 |
| (Less) Excise Taxes |
| (59,108) |
| (575,434) |
| (410,431) |
| (30,463) |
| Net Revenue |
| $7,569,283 |
| $31,765,960 |
| $6,662,137 |
| $10,585,484 |
Discussion of Operations:
| Key Performance Indicators |
| For the three-month period ending September 30, 2019 |
| For the three-month period ending December 31, 2019 |
| Production/ Wholesale Unit |
| Total Grams Produced |
| 871,516 |
| 1,305,806 |
| Direct Production Cost Per Gram* |
| $1.08 |
| $0.91 |
| Total Cost Per Gram** |
| $1.21 |
| $1.04 |
| Total Grams Released for Sale |
| 519,596 |
| 718,353 |
| Total Grams Sold (Medical and Recreational) |
| 548,981 |
| 416,729 |
| Avg Selling Price per Gram |
| $4.19 |
| $3.59 |
| Retail Unit |
| Total Grams Sold (Retail) |
| 349,410 |
| 491,941 |
| Avg Selling Price per Gram |
| $12.47 |
| $10.27 |
| Number of Transactions Processed |
| 108,438 |
| 134,132 |
| Avg Transaction Size |
| $41.67 |
| $39.29 |
| Unique Website Visitors (delta9.ca) |
| 150,279 |
| 165,415 |
*Direct Production Cost per gram includes direct labour, nutrients, utilities, growing materials and supplies costs
**Total Cost per gram includes Direct Production Cost per gram plus processing labour, packaging, bottling, and labelling costs
A comprehensive discussion of Delta 9’s financial position and results of operations is provided in the Company’s Management Discussion & Analysis for the fourth quarter and year ending December 31, 2019 filed on SEDAR and can be found at www.sedar.com.
Q4 Results 2019 Conference Call
Delta 9 has scheduled a conference call to discuss the results of the fourth quarter and full year ending December 31, 2019. The conference call will be hosted March 20, 2020 at 9:00 a.m. Eastern Time by John Arbuthnot, Chief Executive Officer and Jim Lawson, Chief Financial Officer, followed by a question and answer period.
| DATE: |
| March 20, 2020 |
| TIME: |
| 9:00 a.m. Eastern Time |
| DIAL IN # |
| 1-888-886-7786 |
| REPLAY: |
| 1-877-674-6060 |
| Available until 12:00 midnight Eastern Time, June 30, 2020 |
| REPLAY PASSCODE: |
| 382536 # |
For more information contact:
Investor & Media Contact:
Ian Chadsey VP Corporate Affairs
Mobile: 204-898-7722
E-mail: ian.chadsey@delta9.ca
About Delta 9 Cannabis Inc.
Delta 9 Cannabis Inc. is a vertically integrated cannabis company focused on bringing the highest quality cannabis products to market. The company sells cannabis products through its wholesale and retail sales channels and sells its cannabis grow pods to other businesses. Delta 9's wholly-owned subsidiary, Delta 9 Bio-Tech Inc., is a licensed producer of medical and recreational cannabis and operates an 80,000 square foot production facility in Winnipeg, Manitoba, Canada. Delta 9 owns and operates a chain of retail stores under the Delta 9 Cannabis Store brand. Delta 9's shares trade on the Toronto Stock Exchange under the symbol "DN" and on the OTCQX under the symbol "VRNDF". For more information, please visit www.delta9.ca.
Disclaimer for Forward-Looking Information
Certain statements in this release are forward-looking statements, which reflect the expectations of management regarding the Company’s future business plans and other matters. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future. Forward looking statements in this news release include statements relating to (i) the Company’s expansion plans; and (ii) the Company’s cannabis production. Such statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements, including all risk factors set forth in the annual information form of Delta 9 dated April 30, 2019 which has been filed on SEDAR. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. Readers are urged to consider these factors carefully in evaluating the forward-looking statements contained in this news release and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by these cautionary statements. These forward-looking statements are made as of the date hereof and the Company disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable securities laws.