Delta 9 Reports Financials for Q2 2020

WINNIPEG, MB – August 17, 2020 – DELTA 9 CANNABIS INC. (TSX: DN) (OTCQX: VRNDF) (“Delta 9” or the “Company”), is pleased to announce financial and operating results for the three-month and six-month period ending June 30, 2020.

Financial Highlights for the three-month period ending June 30, 2020

  • Net revenue of $13.0 million for the second quarter of 2020, an increase of 46%, from $8.9 million for the same quarter last year.
    • Sequential net revenue increased 11% versus $11.8 million for the three-month period ending March 31, 2020
  • Gross profit of $4.6 million for the second quarter of 2020, an increase of 57%, from $2.9 million for the same quarter last year.
  • Net income from operations of $1.7 million for the second quarter of 2020 versus a loss from operations of ($1.1 million) for the same quarter last year.
  • Adjusted EBITDA of $0.7 million for the second quarter of 2020 versus an adjusted EBITDA loss of ($0.7 million) for the same quarter last year.
  • The Company reported earnings per share of $0.01.
  • The Company reported a strong financial position, with working capital of $24.5 million and total assets of $77 million.

 
Financial Highlights for the six-month period ending June 30, 2020

  • Net revenue of $24.8 million for the first six months of 2020, an increase of 71%, from $14.5 million for the same period last year.
  • Gross profit of $9.5 million for the first six months of 2020, an increase of 100%, from $4.7 million for the same period last year.
  • Net income from operations of $4.6 million for the first six months of 2020 versus a loss from operations of ($2.1 million) for the same period last year.
  • Adjusted EBITDA of $2.4 million for the first six months of 2020 versus an adjusted EBITDA loss of ($2.6 million) for the same period last year.
  • Cash flows from operations of $4.0 million for the first six months of 2020 versus negative cash flows from operations of ($9.0 million) for the same period last year.

"We are pleased with the continuation of strong growth in top line revenue from our three main business units," said John Arbuthnot, CEO of Delta 9. “The COVID-19 crisis has had its challenges but our management team and employees have done an incredible job in continuing to execute on our diversified growth strategy. These results not only demonstrate another quarter of profitability, but continued execution on achieving critical milestones which will allow us to continue to grow our business.”

2nd Quarter Operational Highlights

  • The Company entered into a master cannabis supply agreement with the Ontario Cannabis Retail Corporation to provide for the supply of Delta 9 branded cannabis products and accessories for sale in retail cannabis stores in Ontario and online sales of recreational cannabis products and accessories to customers in Ontario.
  • Delta 9 opened cannabis retail stores in the First Alberta Place building in Calgary and in Grande Prairie, Alberta that continue the 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.
  • The Company entered into a partnership agreement with the Manitoba Hotel Association to be their exclusive cannabis partner and to canvass and develop interest in establishing cannabis retail outlets and selling Delta 9 cannabis products on site in Manitoba hotels. Delta 9 offers programs in educational, point-of-sale systems, supply chain and product selection, marketing, procurement, branding and assistance in product ordering to build Delta 9’s brand as the partner of choice for cannabis in Manitoba hotels.
  • Delta 9 has also entered into an agreement with the Province of Newfoundland and Labrador, the Newfoundland and Labrador Liquor Corporation and Oceanic Releaf Inc. (“Oceanic”) pursuant to which Delta 9 will supply cannabis and cannabis-related products in that Province. Delta 9 also entered into a definitive agreement with Oceanic Releaf Inc. and Ms. Taylor Giovannini to acquire a five percent interest in the common stock of Oceanic in exchange for the provision by Delta 9 of certain consulting and training services to Oceanic.
  • The Company received Health Canada approval for its new purpose-built cannabis processing center which will allow for fully automated bottling, packaging, capping and labelling of its consumer-packaged dried cannabis products. The Company anticipates that once the processing center is operating at capacity it will allow for processing of up to 25,000 kg/year of dried cannabis flower material.

Summary of Quarterly Results
 

Consolidated Statement of Net Income (Loss)

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Revenue

$6,662,137

$10,585,484

$11,753,406

$13,013,610

Cost of Sales

4,628,070

7,356,889

6,858,370

8,394,239

Gross Profit Before Unrealized Gain From Changes In Biological Assets

2,034,067

3,228,595

4,895,036

4,619,371

Unrealized gain from changes in fair value of biological assets (Net)

1,388,863

1,991,398

2,761,873

2,460,490

Gross Profit

$3,422,930

$5,219,993

$7,656,909

$7,079,861

 

 

 

 

 

Expenses

 

 

 

 

General and Administrative

2,681,388

3,118,669

3,198,840

3,676,326

Sales and Marketing

1,151,158

1,385,700

1,243,115

1,534,875

Share Based Compensation

215,456

234,503

314,231

174,779

Total Operating Expenses

$4,048,002

$4,738,872

$4,756,186

$5,385,980

 

 

 

 

 

Adjusted EBITDA (Loss) 1

(849,760)

(91,760)

1,650,398

706,469

Income (Loss) from Operations

$(625,072)

$481,121

$2,900,723

$1,693,881

Other Income/ Expenses

(642,190)

(696,667)

(711,538)

(262,364)

Net Income (Loss)

$(1,267,262)

$(215,556)

$2,189,185

$1,431,517

Basic and Diluted Earnings (Loss) Per Share

$(0.02)

($0.01)

$0.02

$0.01

  1. 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.

 
A comprehensive discussion of Delta 9’s financial position and results of operations is provided in the Company’s Management Discussion & Analysis for the three-month and six-month period ending June 30, 2020 filed on SEDAR on August 14, 2020 and can be found at www.sedar.com.

2020 Second Quarter Results Conference Call

A conference call to discuss the above results is scheduled for August 17, 2020, pre-market. The conference call will be hosted that day 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:

August 17, 2020

TIME:

9:00 am Eastern Time

Dial in #

1-888-886-7786

 
REPLAY:

 
1-877-674-6060
Available until 12:00 midnight Eastern Time, November 17, 2020

Replay passcode:

764865 #

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 plans to establish a chain of cannabis retail stores across Canada; and (ii) the anticipated production capacity of the Company’s planned cannabis processing center. 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 March 19, 2020 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.
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