DionyMed Reports Q1 Revenue of $14.4 Million

DionyMed Brands Inc. Announces First Quarter 2019 Financial Results and Provides Financial Outlook for the Second Quarter of 2019

Expansion of operational footprint and brand portfolio strengthens Company’s position in premium cannabis markets in 2019

TORONTO, May 31, 2019–(BUSINESS WIRE)–DionyMed Brands Inc. (“DionyMed”, “DYME” or the “Company”) (CSE: DYME) (OTCQB: DYMEF), a multi-state cannabis brands, distribution and direct-to-consumer delivery platform, announced today its financial and operational results for its first fiscal quarter of 2019. All financial information presented in this release is in U.S. dollars, unless otherwise noted.

DionyMed develops and markets its award-winning, wholly owned “house” brands and sells a curated portfolio of third-party brands. DionyMed reaches customers through its Distribution and Direct-to-Consumer platforms. The Distribution business distributes and sells to over 900 retail dispensaries in California and Oregon. The Direct-to-Consumer platform sells products online and delivers directly to customers.

1 Based on contractual arrangements with certain distribution customers, the Company only recognizes as revenue the net service fees of the product values processed through its distribution network. The Company is adjusting these contracts to recognize the full value of products with an expected completion date by the end of Q2 2019.
2 Hometown Heart revenue earned prior to Master Services Agreement being effective on December 13, 2018

For the three-month period ended March 31, 2019, the Company recognized record revenue of $14.4 million, in addition to $5.0 million of gross value of product processed through the Company’s Distribution business but not recorded in the above revenue, for a total of $19.4 million of product revenue for the quarter.

1 Based on contractual arrangements with certain distribution customers, the Company only recognizes as revenue the net service fees of the product values processed through its distribution network. The Company is adjusting these contracts to recognize the full value of products with an expected completion date by the end of Q2 2019.

The Distribution business recorded revenue of $5.9 million for the first quarter of 2019. An additional $5.0 million gross value of product was processed through the Company’s distribution network for a total of $10.9 million product sales by or through the Company. Revenue from the Distribution business increased 56% from the fourth quarter of 2018 and 546% from the first quarter of 2018 due to increased dispensaries being serviced, increased portfolio of brands being marketed and the positive impact of bringing the Winberry product line to the California market. Gross margin generated from the Distribution business was 19.9% for the first quarter ended March 31, 2019, compared to 12.5% in the fourth quarter ended December 31, 2018. The Company continues to focus on increasing the share of sales from higher margin house brands and additional portfolio brands.

The Direct-to-Consumer business recorded revenue of $8.5 million, generated by Hometown Heart fulfilling orders generated by customer acquisition provider Eaze. The Company, through Hometown Heart, terminated its relationship with Eaze at the end of the first quarter of 2019 and is now expanding its proprietary Chill platform (www.orderchill.com), to scale its Direct-to-Consumer customer base.

Based on the week ending May 26, 2019, Chill generated gross sales of $200,000 for the week equating to month sales of $857,000 and annual sales of $10.3 million. Annual revenue run-rates assume that revenues being annualized are representative and will be achieved in future periods. The Chill platform is operating at a higher contribution margin than what was earned under the Eaze contract.

Our continued growth, both financial and operational, is a direct result of our ability to deliver today’s leading cannabis brands to consumers through the industry’s most efficient cannabis brands platform. Our first quarter financial results demonstrate the success of our efforts to scale our Direct-to-Consumer and retail distribution businesses through organic growth initiatives.

Edward Fields, CEO of DionyMed

These initiatives enhance our Chill e-commerce platform; support accelerating expansion into new Direct-to-Consumer growth markets; and build an industry leading portfolio of award-winning cannabis products. As our margins continue to improve, we will continue to drive improvements in our top and bottom-line results.

First Quarter 2019 Financial Highlights

  • First quarter products sales through our platforms totaled $19.4 million, including $5.0 million of products processed through the Company’s Distribution business but not recorded as Company revenue
  • Gross margins expanded to 33.5% in the first quarter of 2019 from 21.8% in the fourth quarter of 2018, due to an increase in the share of higher margin wholly owned brand products sold and direct-to-consumer delivery
  • First quarter Adjusted EBITDA loss was $6.5 million as a result of increasing platform costs to support the Company’s growth activities1
  • The Company’s Chill platform, as discussed above, is currently operating at a $10.3 million run-rate, is continuing to grow at high rates and is earning gross margins in excess of 55%

First Quarter 2019 Operational Highlights

Expansion of DYME’s Brand Portfolio

  • Expanded its wholly owned, award-winning house brand “Winberry Farms” with the launch of 12 new CBD-focused products
  • DYME house brand “Gardener’s” was launched in Oregon, expanding house brand sales outside of California
  • DYME house brands represented more than 50% of wholesale distribution revenue in March, accelerating product sales margin expansion
  • Announced exclusive distribution agreements with five THC- and CBD-focused brands, including Défoncé Chocolatier and CBD Alive

Growth of DYME’s “Chill” Direct-To-Consumer Delivery Platform

  • DYME expanded the “Chill” Bay Area delivery territory to include San Francisco, Hayward, Fremont and Cupertino in response to favorable changes in California’s direct-to-consumer regulations
  • Enhanced the Chill product offering adding more than 150 stock keeping units, including products from award winning brands like Winberry Farms, Gardener’s, Dosist, Kiva, Canndescent, Plus Products and PAX
  • Relaunched the Chill online user experience at the beginning of April, driving contribution margin expansion new user adoption six fold and revenue growth up ten times

Expansion into New Markets

  • Announced a strategic product manufacturing and distribution partnership with Acres Cannabis (recently acquired by Curaleaf)
  • Signed a binding term sheet to acquire a 1.83 acre Los Angeles cannabis campus including distribution, direct-to-consumer fulfillment, manufacturing space and a retail dispensary storefront. The transaction is scheduled to close on June 30, 2019 with a combination of equity and real estate financing, as previously disclosed on March 20, 2019
  • Signed a definitive agreement to acquire Pioneer Valley Extracts, LLC, a licensed product manufacturer in Massachusetts, with consideration for the transaction to be paid in equity and nominal cash, as previously disclosed
  • Signed a term sheet to acquire Virginia’s Kitchen, LLC dba Blue Kudu, an award-winning edibles brand and wholesale platform that services more than 250 dispensaries that is based in Denver, Colorado

Financial Outlook for the Second Quarter 2019

For the second quarter ending June 30, 2019, the Company is expecting total revenue between $12.0 million and $13.0 million, of which $10.0 to $11.0 million is revenue from the Distribution business including full value of product run through the Company, and $1.0 to $2.0 million is revenue from the Direct-to-Consumer business. These expectations are based on the Company recording the revenue for April and May and assuming the growth rate for the remainder of the quarter is maintained at the current rates experienced during the first two months of the quarter. The Company expects gross margins to be in the range of 28%, based on historical performance of the different revenue streams. The Company’s Distribution business is expected to increase its margins from 20% in the first quarter to 25% and the Direct-to-Consumer business is expected to have margins in excess of 55%. As the Chill platform continues to increase its revenue contribution, overall gross margins are expected to increase due to the increased mix of higher-margin revenue in the Direct-to-Consumer business.

To be added to the DionyMed e-mail distribution list, please e-mail DionyMed@kcsa.com with DionyMed in the subject line.

About DionyMed

Founded in 2017, DionyMed is a multi-state cannabis brands platform, supporting cultivators, manufacturers and award-winning brands in the medical and adult-use cannabis markets. DionyMed sells branded products in every category from flower to vape cartridges, concentrates and edibles. DionyMed serves cannabis consumers through retail dispensary distribution and direct-to-consumer fulfillment with its growing portfolio of award-winning brands. Learn more at dionymed.com and follow @DYME_Inc on Twitter and LinkedIn.

1 Adjusted EBITDA is a non-IFRS measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. The Company believes that Adjusted EBITDA is a realistic indicator of operating performance and is useful in performing year-over-year comparisons. However, this non-IFRS financial measure should be viewed as a supplement to, and not a substitute for, the Company’s results of operations reported under IFRS. Adjusted EBITDA is defined and reconciled in the Company’s management discussion and analysis for the fiscal year ended December 31, 2018 and quarter ended March 31, 2019, available at www.sedar.com.

Original press release

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