Delta 9 Reports Financials for Q3 2022

Delta 9 Reports Financials for Q3 2022

WINNIPEG, MB – November 14, 2022 – DELTA 9 CANNABIS INC. (TSX: DN) (OTCQX: DLTNF) (“Delta 9” or the “Company”), is pleased to announce financial and operating results for the three-month and nine-month period ending September 30, 2022.

Financial Highlights for the three-month period ending September 30, 2022

  • Net revenue of $15.7 million for the third quarter of 2022, an increase of 3%, from $15.2 million for the same quarter last year.
  • Gross profit of $1.9 million for the third quarter of 2022, versus $4.8 million for the same quarter last year.
  • Net income (loss) from operations of $(6.2) million for the third quarter of 2022 versus a net income (loss) from operations of $(55,031) for the same quarter last year.
  • Adjusted EBITDA (loss) of $(1.7) million for the third quarter of 2022 versus an adjusted EBITDA of $191,056 for the same quarter last year.

Financial Highlights for the nine-month period ending September 30, 2022

  • Net revenue of $45.7 million for the first nine months of 2022, an increase of 1%, from $45.2 million for the same period last year.
  • Gross profit of $9.5 million for the first nine months of 2022, versus $13.4 million for the same period last year.
  • Net income (loss) from operations of $(12.6) million for the first nine months of 2022 versus a net income (loss) from operations of $(4.1) million for the same period last year.
  • Adjusted EBITDA (loss) of $(3.8) million for the first nine months of 2022 versus an adjusted EBITDA of $1.4 million for the same period last year.

“In the third quarter of 2022 we have seen a degree of seasonality and timing issues relating to provincial government’s purchasing patterns affecting our wholesale business and B2B businesses and impacting sequential revenue growth,” said John Arbuthnot, CEO of Delta 9. “The Canadian cannabis industry continues to struggle with intense competition resulting in margin compression and affecting overall growth. We remain confident that Delta 9 will be able to navigate the industry challenges and return the Company to growth and profitability in the coming quarters.”

3nd Quarter Operational Highlights

  • Delta 9 announced that it has received a Cannabis Distributor License from the Liquor Gaming and Cannabis Authority (the “LGCA”) of Manitoba, making the Company the first licensed distributor of cannabis products in the province. Under the License, Delta 9 is authorized to acquire, store, sell and deliver cannabis in accordance with The Liquor, Gaming and Cannabis Control Act. The Company’s distribution services will allow out-of-province suppliers to improve logistics efficiencies and reduce shipping costs into the Manitoba market and will provide Delta 9 with additional diversified revenue streams.
  • Delta 9 placed 64th on the 2022 Globe and Mail’s Report on Business ranking of Canada’s Top Growing Companies out of the 430 companies that participated. Based on a three-year revenue growth rate, Delta 9 Cannabis grew 720%, from $7.6 million in 2018 to $62.3 million in 2021.
  • Delta 9 announced that it has purchased Garden Variety’s three branded retail cannabis stores located in Manitoba for $3.25 million in common shares of Delta 9. The Company expects the transaction to be accretive in 2022 and 2023 before synergies. The acquisition represents an attractive revenue multiple of approximately 0.41x annualized revenue. The combination of the Garden Variety cannabis stores and Delta 9’s existing store network will make Delta 9 a leading retailer of cannabis products in Canada with 38 stores.
  • Delta 9 announced the cash repayment of its unsecured 8.5% convertible debentures issued in July. The $11.8 million cash repayment represents a full payout of the Convertible Debentures. The Convertible Debentures were previously traded on the Toronto Stock Exchange under the trading symbol “DN.DB”. The Company met the pre-disbursement conditions required to draw-down $11.8 million under its credit facility with ConnectFirst Credit Union and concurrently made the cash repayment of the Convertible Debentures. The Company's $11.8 million draw-down from its credit facility is subject to a 60-month term at a fixed rate of 4.55% per annum, amortized over 144 months.

Summary of Quarterly Results:

Consolidated Statement of Net Income (Loss)

Q4 2021

Q1 2022

Q2 2022

Q3 2022

Revenue

$17,120,932

$12,479,577

$17,495,078

$15,693,969

Cost of Sales

12,247,951

9,515,096

12,850,777

13,772,202

Gross Profit Before Unrealized Gain From Changes In Biological Assets

4,872,981

2,964,481

4,644,301

1,921,767

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

(1,853,245)

874,293

(542,188)

340,602

Gross Profit

$3,019,736

$3,838,774

$4,102,113

$2,262,369

 

 

 

 

 

Expenses

 

 

 

 

General and Administrative

2,972,633

3,810,316

4,043,257

3,668,708

Sales and Marketing

3,212,250

2,713,630

3,381,223

3,710,471

Share Based Compensation

371,433

246,944

107,121

1,086,858

Total Operating Expenses

$6,556,316

$6,770,890

$7,531,601

$8,466,037

 

 

 

 

 

Adjusted EBITDA (Loss) 1

613,562

(1,694,529)

(391,054)

(1,683,018)

Income (Loss) from Operations

$(3,536,580)

$(2,932,116)

$(3,429,488)

$(6,203,668)

Other Income/ Expenses

(1,622,996)

(1,189,730)

(1,402,588)

(1,470,942)

Net Income (Loss)

$(5,159,576)

$(4,121,846)

$(4,832,076)

$(7,674,610)

Basic and Diluted Earnings (Loss) Per Share

$(0.05)

$(0.04)

$(0.04)

$(0.06)

  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 nine-month period ending September 30, 2022 filed on SEDAR on November 14, 2022 and can be found at www.sedar.com.

2022 Third Quarter Results Conference Call

A conference call to discuss the above results is scheduled for November 15, 2022. The conference call will be hosted that day at 10:00 a.m. Eastern Time by John Arbuthnot, Chief Executive Officer, and Jim Lawson, Chief Financial Officer, followed by a question-and-answer period.

DATE:

November 15, 2022

TIME:

10:00 am Eastern Time

Dial in #

1-888-886-7786

REPLAY:

1-877-674-6060
Available until 12:00 midnight Eastern Time, December 15, 2022

Replay passcode:

046070 #

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 "DLTNF". 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 cannabis distribution operations in Manitoba; and (ii) the Company’s plans to continue to expand its retail operations in Canada. 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 30, 2022 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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