Delta 9 Reports Financials for Q2 2020

Published: August 19, 2020

Delta 9 Reports Financials for Q2 2020

Delta 9 Cannabis announced 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.