Indus Holdings, Inc. (“Indus” or the “Company”), a leading, vertically-integrated, California-focused cannabis company, announced its financial results for the fourth quarter and fiscal year 2019 (ended December 31, 2019), and the Company provided preliminary results for the first quarter 2020 (ended March 31, 2020). All figures stated are in US Dollars.
Fourth Quarter and Year End Financial and Operational Highlights:
- Revenue generated for the three-month period ended December 31, 2019, was $10.8 million; 73% year-over-year growth. Revenue for the year ended December 31, 2019, was $37.0 million; 115% year-over-year growth.
- EBITDA for the three-month period ended December 31, 2019, was ($13.4 million); EBITDA for the year-end December 31, 2019, was ($36.3 million). EBITDA included ($6.4 million) in write-offs of certain inventory in net loss, foregoing any future remediation, labor, and sales costs required. The inventory adjustments included revaluation and write-offs driven by the Company’s decision to discontinue certain amending processes as a result of enhancing internal quality metrics. See “Use of Non-IFRS Financial Information” below.
- Operating expenses were $12.0 million for the three-month period ended December 31, 2019, compared to $12.4 million in the prior quarter.
“The fourth quarter was a pivotal quarter to create efficiencies. We had a lot of learnings last year and they are all valuable as they helped us get to where we are today,” said Mark Ainsworth, Chief Executive Officer for Indus Holdings, Inc.
On April 13, 2020, Indus Holdings, Inc. announced the closing of US$15.1 Million Convertible Debenture Financing along with management and board changes
- Indus entered into a debenture and warrant purchase agreement (“Purchase Agreement”) and closed a US$15.1 million financing of senior secured convertible debentures (“Convertible Debentures”), which are convertible into an aggregate of 75.3 million subordinate voting shares of the Company (“Subordinate Voting Shares”), and warrants (“Warrants”) to purchase an aggregate of 75.3 million Subordinate Voting Shares.
- A further US$0.9 million of Convertible Debentures and associated Warrants may be issued in subsequent tranches pursuant to the Purchase Agreement.
- The Convertible Debentures bear a fixed interest rate of 5.5% per annum and will mature 42 months after closing. Indus may prepay the Convertible Debentures without penalty or premium any time after the 24-month anniversary of the closing.
- The entire amount of all bridge loans previously announced by the Company were repaid in full from the proceeds of the Financing yielding net cash to the Company of approximately US$10.5 million after factoring in external transaction related expenses of approximately US$0.6 million.
Leadership Changes:
Concurrently with the Financing, the following management and board changes occurred:
- Robert Weakley resigned as Chief Executive Officer and Chairman of the board of Indus and remained on the board as a Director.
- Mark Ainsworth, Chief Operating Officer and Executive Vice President, was appointed Chief Executive Officer of the Company.
- Steve Neil was appointed Chief Financial Officer for the Company.
- Kelly Crampton was appointed Senior Vice President of Distribution for the Company.
Board of Director Changes:
- George Allen, founder of Geronimo Capital, was appointed Chairman of the board of Indus.
- Brian Shure was appointed to the Company’s board of directors.
- Kevin McGrath was appointed to the Company’s board of directors.
- Arthur Maxwell resigned from the Company’s board of directors.
“With George’s guidance at the helm of the board and our new partners being bullish on California, our team is laser focused on delivering on the promise we made to our investors,” said Ainsworth. “We are thankful for this opportunity to showcase everyone that has supported Indus Holdings, Inc., both since inception or recently.”
Preliminary First Quarter Financial Results:
- Preliminary revenue generated for the three-month period ended March 31, 2020, was $9.4 million; 46.7% year-over-year growth and a decrease of 12.6% from the prior quarter. The decline was due to planned reduction in lower margin agency brand sales. As a percentage of revenues, owned brands grew from 51% in the prior quarter to 55% in the first quarter while agency brands declined from 41% to 29% in the corresponding quarters.
- Preliminary net loss for the three-month period ended March 31, 2020, was ($4.0) million, compared to ($18.3) million in the prior quarter. This $14.3 million improvement was due to cost reduction initiatives, strategic product mix improvements, a favorable biological asset fair value change, and elimination of certain charges that impacted the prior quarter.
Operational Highlights and Initiatives Underway in 2020:
The Company remains focused on the most profitable parts of its business. Its top priorities are finalizing the cultivation and becoming self-sustainable, improving operational efficiency, and focusing on the most profitable parts of the business.
- California Cultivation Facility Build-out:
– The renovation of two greenhouses will be completed by May 2020, adding 110,000 square feet of additional cultivation; resulting in an annual rate of 45,000 pounds by the first quarter of this year from an annual rate of 9,000 pounds last year.
– Resulting in an increased flower production from 1,000 pounds per month exiting 2019 to 4,000 pounds per month, while reducing the cost of growing flower by approximately 40%.
– This will not only increase margins in all owned brands but it will provide the ability to control inventory and become self-sustainable.
- Cultivation Capacity:
– The Company aims to achieve full cultivation capacity in the 2020 calendar year, increasing its overall production from eight grow rooms and four and half turns a year to 30 grow rooms and six turns a year. The Company plans to grow its production from approximately 25,000 pounds in 2020 to 45,000 pounds in 2021.
- Indus-Owned Core Brand Positioning:
– Cypress Cannabis, a flower brand, is now the 6th highest volume flower brand in the California market according to BDS Analytics.
– Moon, an edibles brand, increased revenue sales by 49% from the fourth quarter 2019 to the first quarter 2020.
– Since bringing Kaizen Medicinals online, a concentrate brand, in the third quarter 2019, revenue sales have increased by 74% in the first quarter 2020.
- Distribution Capabilities:
– Increased daily deliveries by 265% quarter over quarter going from an average of 31 to 113 while delivering to approximately 85% of the licensed dispensaries in California.
- Accounts Receivable:
– Improved collection processes has resulted in a reduction of past due balances by over $1M in the first quarter.
- Operational Efficiencies:
– Indus transitioned to a sales-driven forecast production plan in manufacturing, which now forecasts seven weeks out for visibility while creating little to no waste.
– The purchasing strategy has been refined to only carry four weeks’ worth of raw materials and ingredients and an eight to 10 weeks maximum of packaging at a given time.
Ainsworth noted, “We are in a positive trajectory and believe we have positioned ourselves to be cash-flow positive and profitable in the second half of the year. In looking at the fourth quarter and this first few months of 2020, we know the trend is there and we are moving in the right direction.
“There have been massive improvements and that was driven by the team’s dedication to plan, produce, and sell. We have assembled an incredible team and are pulling out the best of everyone, maximizing their full capabilities.” Ainsworth further commented, “We are having to make a lot of smaller decisions to achieve our ultimate goal of being profitable. I am reenergized and believe that we are more disciplined, more efficient, and more streamlined than ever for a cash-positive future.”
Q4 and Year End 2019 Audited Financial Results Earnings Conference Call Details:
Indus Holdings, Inc. plans to host a conference call with management Thursday, April 30 at 4:30 p.m. EDT.
The call can be accessed using the following dial-in information:
U.S and Canadian Toll-free: +1 877-876-9173
International: +1 785-424-1667
Conference ID: INDUS419
Please dial-in at least 15 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, Acme, 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.
Investor Relations Contact |
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Media Contact |
Bill Mitoulas |
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Renata Follmann |
Indus Holdings, Inc. |
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Rossetti Public Relations |
ir@indusholdingco.com |
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pr@indusholdingco.com |
Office: 1.416.479.9547 |
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