Delta 9 Reports Financials for Q3 2019 and Announces Grant of Stock Options
WINNIPEG, Manitoba, Nov. 13, 2019 (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 three-month and nine-month period ending September 30, 2019.
Financial Highlights for Q3, 2019Operating revenues of $6.7 million for the third quarter of 2019, up 432%, from $1,251,213 for the same quarter last year.Adjusted EBITDA1 was $(849,760) compared to $(2,551,710) in Q3, 2018.Gross profit2 of $2.0 million for the third quarter of 2019, up 550%, from $312,480 for the same quarter last year.Gross profit margin was 31% for Q3, 2019.Financial Highlights for the nine months of 2019Record operating revenues of $21.2 million, up 821%, from $2.3 million for the same period last year.Gross profit2 of $6.8 million, up 799%, from $756,644 for the same period last year.Gross profit margin was 32% for the nine months of 2019.“Management would point to the significant year over year increases in net revenue as a positive indication that the Company’s initial quarters of sales in the recreational use cannabis market have been able to contribute significant revenue growth,” said John Arbuthnot, CEO of Delta 9. “Management attributes the decrease in sequential quarterly revenue to a timing issue with revenue in its business to business (B2B) division which was down from the 2nd quarter of 2019.”The Company’s retail division generated $4.4 million in revenue in the 3rd quarter of 2019 which was up 24% or $840,208 sequentially. The wholesale division generated $2.2 million in revenue for the same period and was down 23% or $684,138.“Delta 9 will continue to drive sustainable long-term shareholder value by leveraging its strong brand positioning in Western Canadian markets, expanding our various wholesale supply contracts and scaling up our cultivation operations,” said John Arbuthnot, CEO of Delta 9. “We are taking a responsible and compliant approach to growing our business to build an authentic Delta 9 brand as we pursue retail opportunities in the Western Canadian market place.”1The 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.
2The Company’s “gross profit” Is calculated before adjustments for changes in biological assets.3rd Quarter Operational HighlightsThe company entered into a binding letter of intent to acquire two retail stores in Alberta that continues 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 newest Delta 9 Cannabis Store is the largest cannabis retail store in the Thompson, Manitoba area, offering customers an open and modern shopping décor, highly trained staff and a wide range of products, including dried cannabis flower, cannabis oil and a full assortment of cannabis accessories.The Company installed and began crop production of cannabis in an additional 48 of its proprietary “Grow Pods”, bringing its total number of Grow Pods in production to 202 within its Winnipeg production facility (the “Delta Facility”).The additional 48 Grow Pods will increase production by 1,150 kilograms per year of dried cannabis flower production, bringing the Company’s overall anticipated production capacity to 5,350 kilograms of dried cannabis flower per year.There is another 95 Grow Pods in place and ready for planting once Delta 9 receives approval from Health Canada, which is expected shortly. This will bring the total Grow Pods in production to 297 within the Delta Facility.The Company is continuing with its planned Phase II expansion of the Delta Facility to increase cannabis production to 16,500 kilograms per year.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.Summary of Quarterly Results: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:Discussion of Operations: