Indus Holdings, Inc. Reports Record Third Quarter 2020 Results

Company delivers strong results despite being adversely affected by California Wildfires
Vertically-integrated California cannabis leader reports highest revenue quarter since its inceptionSALINAS, Calif., Nov. 09, 2020 (GLOBE NEWSWIRE) — Indus Holdings, Inc. (“Indus” or the “Company”) (CSE:INDS; OTCQX: INDXF), a leading, vertically-integrated, California-focused cannabis company, announces its financial results for the third quarter ended September 30, 2020 following the previously released preliminary financial highlights. All figures stated are in US Dollars.Third Quarter Financial Highlights:Revenue generated for the three-month period ended September 30, 2020, was $14.1 million; a 40% year-over-year growth from the third quarter last year and an increase of 43% from the prior quarter. As a percentage of revenues, owned brands grew from 73% in the prior quarter to 84% in the third quarter.EBITDA for the three-month period ended September 30, 2020, was $2.3 million; EBITDA for the previous quarter ended June 30, 2020, was ($3.9 million). Note that previously reported negative EBITDA for the quarter ended June 30, 2020 was ($3.3 million), which has been corrected to properly reflect investment gains in the quarter. See “Use of Non-IFRS Financial Information” below.Net income for the three-month period ended September 30, 2020, was $2.4 million, compared to a net loss of ($4.8 million) in the second quarter.Adjusted gross margin (before net change in fair value of biological assets) of 41.5% compared to negative margin of (9%) in Q2 2020. See “Use of Non-IFRS Financial Information” below.Operating income before net change in fair value of biological assets of $1.0 million compared to operating loss of ($5.2 million) in Q2 2020. See “Use of Non-IFRS Financial Information” below.Operating result improvements from the previous quarter reflects strategic product mix improvements as increased flower volumes were realized and the continuing impact from cost reduction efforts.Impact of California WildfiresDuring Q3 the Company experienced harvest weights that were on average 20% below Q2 levels. The company attributes the declines to remediation measures the Company adopted to avoid crop-loss during the wildfires.The Company did increase in total flower harvest volumes during the quarter due to the increased number of harvests resulting from the expansion efforts in the first half of the year.The Company is implementing automated environmental controls to mitigate similar losses in the future.Indus expects that harvest yields will remain suppressed into the fourth quarter as we work through the plants in the greenhouse that were impacted by the remediation measures.“Despite the headwinds caused by the wildfires, our Q3 results are the direct result of a strategy that prioritizes increased cultivation output and the Indus family of owned products,” says Mark Ainsworth, Chief Executive Officer for Indus Holdings, Inc. “While exceeding our expectations for the quarter, our performance was well short of where we could have been but for the impact of the wildfires and we are taking steps to be better prepared in the future.”Operational Highlights and Ongoing Initiatives in 2020:
The Company showcased expected positive results due to the focus and strategic planning of key initiatives that are continuing to drive sustainable profitable growth, with top priorities of finalizing renovation of its cultivation facilities, improving operational efficiency, and refinement of biological assets.California Cultivation Facility Build-out:  The Company has completed its greenhouse renovations bringing it to 29 active flower rooms. These renovations added 110,000 square feet bringing the current total cultivation to approximately 185,000 square feet.The nursery renovation has been completed. This upgrade allows Indus to maximize square footage in the flowering rooms and maintain consistency throughout.Successfully completed the majority of electrical, mechanical, and environmental upgrades with final approval from the county.Plans for renovation of processing space underway and new dry rooms have been submitted for permitting with the county.Cultivation Quality and Efficiency:Indus portfolio of strains coming from the newly improved cultivation have consistently tested in the mid to high 20’s and low 30’s for THC potency.Continued improved cultivation processes, refined genetics, and enhanced facilities and systems have led to a consistent increase in potency and yields.Indus is actively exploring tissue culture clones in order to expand and refine its strain selection.The Company is implementing advanced Environmental Control systems that are customized and adaptable. Expected completion is December 2020.Continued yield improvements are expected to be seen as the environmental control system is installed.In October, Indus commissioned our automated flower packaging line which will improve production time and speed to market while reducing labor costs.Indus Owned Core Brands:Indus owned brands continue to gain market share by strategically expanding in a variety of categories in the third the quarter of 2020:Flavor grew 71% from Q2 to Q3.Original Pot Co. successfully launched two additional new baked good SKUs in Q3 and grew 42% from Q2. Allowing the team to penetrate in over 70 net-new dispensaries and garnered the highest month of revenue for the brand to date.Moon, a chocolate edible brand, continues its position in the top three highest selling brands in cannabis-infused chocolates according to BDS Analytics.Moon launched four different SKU’s from its highly anticipated gummy line, the first expansion into gummies for the brand.Cypress brand sales grew by 42% from Q2 to Q3.Due to our cultivation producing higher quality flower, Indus’ flower continues to fill the void in the market for a higher demand in potency at a competitive price.Indus’ expanding portfolio of brands:Indus is working on expanding existing brands into new categories while also growing its brand portfolio to engage with new consumers and create additional revenue streams.Distribution Capabilities:Since bringing distribution technologies in house, Indus has improved its processing and ordering technology to maximize revenue and provide world-class service.Deliveries to dispensaries per day increased by 11% from Q2 to Q3.Average delivery value increased by 19% from Q2 to Q3.In order to process the increased flower from its renovated cultivation, Indus has submitted for a cultivation and processing license application for warehouse facilities. Plans for construction of the post-harvest processing space have been submitted to the City.“The turnaround at Indus has been the result of huge efforts by a highly talented team,” said George Allen, Chairman of the Board of Indus Holdings, Inc. “Not only has Indus solidified its market position as a dominant force in the cannabis industry, but the organization has positioned itself for greater success in the coming fiscal year.Q3 Financial Results Earnings Conference Call Details:
The conference call with management at 8:30 a.m. ET on Tuesday, November 10 can be accessed using the following dial-in information:Please dial-in at least 10 minutes before the call to register.
The conference call will be webcast live and archived on the investor relations section of the Indus Holdings, Inc. website at https://ir.indusholdingco.com/.ABOUT INDUS HOLDINGS, INC
Indus Holdings, Inc. (CSE: INDS; OTCQX: INDXF) is a vertically-integrated cannabis company with advanced production capabilities, including cultivation, extraction, manufacturing, brand sales & marketing, and distribution. Founded in 2014 and based in Salinas, California, Indus offers services supporting every step of the supply chain and an extensive portfolio of award-winning brands, including Cypress Cannabis, House Weed, The Original Pot Co., MOON, Humble Flower, and Kaizen Medicinals. Indus Distribution, a division of Indus Holdings, Inc., is a leading distributor of cannabis products, servicing an extensive portfolio of brands and licensed retailers.Investor Relations Contact
Bill Mitoulas
416.479.9547
bill@indusholdingco.comMedia Contact
Renata Follmann
pr@indusholdingco.comCompany Contact
Mark Ainsworth
ir@indusholdingco.comForward-Looking Information and Statements and non-IFRS Financial MeasuresThis press release contains certain “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only Indus’ beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of Indus’ control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or may contain statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “will continue”, “will occur” or “will be achieved.” The forward-looking information and forward-looking statements contained herein may include, but are not limited to, the ability of the Company to successfully achieve business objectives (including completion of renovations and increasing production capacity), and expectations for other economic, business, and/or competitive factors. There can be no assurance that such forward-looking information will prove to be accurate, and actual results and future events could differ materially from those anticipated in such forward-looking information. This forward-looking information reflects Indus’ current beliefs and is based on information currently available to Indus and on assumptions Indus believes are reasonable.Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Indus to be materially different from those expressed or implied by such forward-looking information. Such risks and other factors may include, but are not limited to: general business, economic, competitive, political and social uncertainties; general capital market conditions and market prices for securities; delay or failure to receive board or regulatory approvals; the actual results of future operations; operating and development costs; competition; changes in legislation or regulations affecting Indus; the timing and availability of external financing on acceptable terms; the available funds of Indus and the anticipated use of such funds; delay or inability to complete an acquisition; favorable production levels and outputs; the stability of pricing of cannabis products; the level of demand for cannabis product; the availability of third-party service providers and other inputs for Indus’ operations; lack of qualified, skilled labor or loss of key individuals; and risks and delays resulting from the COVID-19 pandemic. A description of additional assumptions used to develop such forward-looking information and a description of additional risk factors that may cause actual results to differ materially from forward-looking information can be found in Indus’ disclosure documents, such as Indus’ listing statement filed on the SEDAR website at www.sedar.com. Although Indus has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. Readers are cautioned that the foregoing list of factors is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking information as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Forward-looking information contained in this news release is expressly qualified by this cautionary statement.This press release includes non-IFRS financial measures, specifically adjusted EBITDA, which is not a measure of financial performance under IFRS and should not be considered superior to, as a substitute for or as an alternative to, and should only be considered in conjunction with IFRS financial measures.The forward-looking information contained in this news release represents the expectations of Indus as of the date of this news release and, accordingly, is subject to change after such date. However, Indus expressly disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable securities law. Neither the Canadian Securities Exchange nor its Regulation Service Provider has reviewed, or accepts responsibility for the adequacy or accuracy of, the content of this news release.

The table below reconciles Gross Profit (Loss) and Gross Margin to Adjusted Gross Profit (Loss) and Adjusted Gross Margin for the periods indicated.
The table below reconciles Net Loss to Adjusted EBITDA for the periods indicated.