Delta 9 Cannabis Inc. brought in $16.5 million in net revenue in the three months ending March 31, 2024 from its retail and wholesale cannabis businesses, but reported a net income loss of nearly $5 million.
The Manitoba-based cannabis company reported $2.4 million in revenue from wholesale cannabis sales into provincial markets and $14 million from its retail cannabis operations. Delta 9 operates 41 retail locations, 21 under the Delta 9 brand and another 20 retail cannabis stores under the Discounted Cannabis, Uncle Sam’s Cannabis, and Garden Variety brands.
Delta 9’s sales of merchandise and cannabis devices accounted for another $345,955 in revenue, along with $83,392 from B2B sales. It paid $583,235 in excise, up from $454,339 in the previous quarter and $589,267 in the same quarter in 2023.
The company reported no income from medical cannabis sales in the most recent quarter, up from a $266,000 loss in the previous quarter.
The cost of sales during the first three months of 2024 was $11.8 million, or 72% of net revenue, down from $12.7 million in the first three months of 2023.
Gross profit, before accounting for changes in the fair value of biological assets, for the three months ending March 31, 2024, was $4.7 million (28% of net revenue) compared to $4.2 (25% of net revenue) for the three months ending March 31, 2023.
Delta 9’s loss from operations for the first three months of 2024 was $3 million, up from $1.2 million for the first three months of 2023 but down from the $4.3 million loss in the last three months of 2023. Its net income loss was $4.9 million.
Adjusted EBITDA for the three-month period ending March 31, 2024, was $1,577, an improvement from the $475,595 loss for the three months ending March 31, 2023, but down from $1.5 million for the three months ending December 31, 2023.
The cost of sales on Delta 9’s $16.5 million in revenue in the first three months of 2024 was $11.8 million. Gross profit was $4.5 million, while total operating expenses were $7.4 million.
As of March 31, 2024, the company had negative working capital of nearly $38.7 million, compared to $27.8 million on December 31, 2023. Although Delta 9 expects to have enough cash to service its liabilities and fund its continued operating costs, if it cannot raise additional debt financing or equity in the current fiscal year, it reports “material uncertainty” over its ability to continue as a going concern.
As of March 31, 2024, Delta 9 was not compliant with its debt service coverage ratio covenant and working capital covenant. Continued non-compliance with these financial covenants in the credit facility could result in its debt becoming due and payable on demand.
Delta 9 is authorized for sale in Manitoba, BC, Saskatchewan, Alberta, Newfoundland and Labrador, Ontario, Yukon, NWT, New Brunswick, and Australia. The company says it completed several shipments to Australia during the period ending March 31, 2023.
Delta 9 also operates distribution and cross-docking services for cannabis producers in Manitoba and operates a mobile cannabis store authorized by the province.
The company produced 1,129,626 grams of cannabis in the first three months of 2024, with a total cost per gram sold of $0.85 and an average selling price of $1.94. The total cost per gram includes Delta 9’s direct production cost per gram as well as its processing labour, packaging, bottling, and labelling costs.
“During the first quarter, we continued to focus on sustaining revenues across our core business units while optimizing our margins,” said John Arbuthnot, CEO of Delta 9. “We will continue our relentless focus on cost and operational efficiencies and strengthening our balance sheet to deliver sustained, profitable growth for our shareholders. We believe that we now have the necessary scale and platform to create sustainable shareholder value. We expect our Canadian retail network to continue to grow at a normalized pace while our internal focus on cost savings continues to produce tangible results. We look forward to updating investors on our improved performance throughout the rest of 2024.”
