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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 inception
SALINAS, 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 Wildfires
- During 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. 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.
Mark Ainsworth, Chief Executive Officer for Indus Holdings, Inc.
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.
- 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 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.
George Allen, Chairman of the Board of Indus Holdings, Inc.
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:
U.S. and Canadian Toll-free: 1-877-407-0789
Conference ID: 13712405
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.
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