Will INDXF stock finally stop falling after the company reported blockbuster revenue growth on November 30, 2019?
Indus Holdings, Inc. (“Indus”) (CSE:INDS; OTCQX: INDXF), a leading, vertically-integrated cannabis company, today announced its financial results for the fiscal third quarter ending September 30, 2019.
Third Quarter and Year to Date Financial and Business Highlights
- Revenue generated for the three-month period ending September 30, 2019, was $10.1 million; 94% year-over-year growth. Revenue for the nine-month period ending September 30, 2019, was $26.2 million; 140% year-over-year growth.
- EBITDA for the three-month period ending September 30, 2019, was ($16.8 million), EBITDA for the nine-month period ending September 30, 2019, was ($22.9 million). EBITDA included ($5.4 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 emending processes as a result of enhancing internal quality metrics, changes in materials requirements, inconsistent laboratory testing in California, and the overall economics of re-blending and reprocessing.
- Revenue split per segment for the three-month period ending September 30, 2019, was 42% of revenue generated from Owned brands, 40% from Agency, and 18% from Distributed brands.
- Revenue for the three segments grew 38% for Owned brands year over year, Agency brand revenues grew 354% and Distributed brand revenues grew 47% compared to the prior year.
- Operating expenses were $12.4 million for the three-month period ending September 30, 2019, compared to $2.9 million in the same period last year. On a sequential basis, operating expenses at $12.4 million were up $4.0 million from the second quarter.
- Added 21 new dispensaries during the quarter servicing over 500 licensed dispensaries in California.
- Increased deliveries per day by 56% going from 46 to 72 deliveries while covering approximately 90% of the licensed dispensaries in California.
- Had over 12 days in Q3 with 100 or more deliveries compared to just one day in Q2.
- Increased average delivery value by 10%.
- Launched new owned brand Kaizen; and launched recently acquired Humble Flower with new packaging and CBD online ordering capabilities, including mainstream retail.
- Owned-brand Cypress Cannabis became number 18 selling brand in the state of California up from 98 in Q2.
- The Company had a cash position of $12.7 million for the period ended September 30, 2019, of which $10 million has been escrowed for the announced Nevada and Oregon acquisition.
Chief Executive Officer, Robert Weakley, stated, “The Company achieved a new revenue record – $10.1 million in Q3. While that represents a 94 percent year-over-year increase, we did expect more. Our projections were impacted by a cultivation contract that was not fulfilled in Q3 – we had contracted for 2,000 pounds of flower in the quarter, which did not pass our lab tests and pricing agreement, resulting in more than a $3 million negative revenue impact. At the same time, our own harvest, which we planned to have two weeks of sales in Q3, got pushed to the beginning of Q4.”
Weakley further commented, “The issues that we had with our contractors further reinforce the need for Indus to become independent and self-sustaining for the company to achieve profitability. We have not had an issue selling our flower and concentrates, however we have had a supply chain issue in meeting the demand, which will be solved with the completion of our greenhouse in 2020.”
The Company remains focused on the most profitable parts of its business where infrastructure is built with the ability to grow. Top priorities are finishing the improvements at its cultivation facilities, installing an automated packaging line, and exploring opportunities to reduce expenses and preserve cash. Operational improvement initiatives will be dedicated to the Company’s core operating states of California, Nevada, and Oregon.
Key initiatives the Company aims to achieve in 2020:
California Cultivation Facility Build-out:
- Complete renovation of two additional greenhouses, adding 110,000 square feet of additional cultivation, and increase flower production from 1,000 pounds per month to 4,000 pounds per month, while reducing cost of growing flower by 40%. The Company expects the cap-ex required to complete the renovation to be $4.2 million.
- Increase trim production from 1,000 pounds per month to 4,000 pounds per month, reducing dependence on purchasing outside trim and improve margins in all company owned brands.
- Production Capacity: the company aims to achieve full production by Q2 2020, increasing its overall production from eight grow rooms and four and half turns a year to 30 grow rooms six turns a year. The company plans to grow its production from 11,000 pounds in fiscal 2019 to 30,000 pounds in fiscal 2020, and 45,000 lbs in fiscal 2021.
- Infrastructure Upgrade: in August of 2019, the Company received an upgrade to its Power, Gas & Electricity (PG&E) service – from 400 amps to 4,000 amps – to power the new greenhouses, increasing product output while decreasing cost per pound. Additional greenhouses have been renovated with new roofs, sides, and blackout shades that are nearly completed and now the focus can be on the final stages of adding the lights and the positive pressure to complete the renovations.
- Packaging Efficiency Improvement: the Company aims to install a new $1.6 million flower packaging line in Q1 2020, doubling the capacity packaged per day.
- Labor Cost Reduction: the installation of the automated flower packaging line in combination with streamlining its operations is expected to reduce packaging labor requirements from 80 temporary employees to eight employees. The Company expects labor costs savings of more than $2 million on an annual basis.
- Brand Development and Expansion: the Company continues to expands its brand portfolio and focus on improving sales. Humble Flower (both CBD and THC) began sales in late Q3 2019, Kaizen (High-end concentrates) began sales in Q3, Canna Stripe (Gummies) will be released in December 2019, the Shredables (CBD Protein Bar) brand will be released in Q1 2020.
- Restructuring Selling Expenses: the Company has implemented a re-configuration of its commission structure, re-organizing its sales structure, and focusing on reducing the amount of trade discounts. The Company believes that on a pro forma basis for 2020 this could result in as much as $11 million in savings.
- Packaging and Raw Material Cost Reduction: the Company has implemented an analysis of opportunities to reduce costs, having already identified 2020 savings in excess of $300,000.
“Indus Holdings, Inc. has seen tremendous growth since we launched with a handful of employees in 2014, and now our destiny is in our hands,” said Weakley. “We are focused on placing the right people in the right roles and putting our portfolio of original, owned products front-and-center as we edge closer to becoming a sustainable, profitable enterprise.”
Indus Holdings, Inc. plans to host a conference call with management December 2, at 8:30 a.m. EST. The call can be accessed using the following dial-in information:
U.S and Canadian Toll-free: +1 877-407-0789
International: +1 201-689-8562
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.
To be added to the Indus Holdings, Inc. email distribution list, please email email@example.com with Indus in the subject line.
On September 17, 2019, Indus Holdings, Inc. (OTCQX: INDXF; CSE: INDS), a vertically integrated cannabis company with advanced production capabilities, including cultivation, extraction, manufacturing, brand sales, marketing, and distribution, today announced that the OTC Markets Group, Inc. approved the trading of Indus Holdings, Inc. shares on the OTCQX® Best Market, the premium market tier of OTC Markets Group. Shares will commence trading at the opening of the market on September 17, 2019 under the symbol “INDXF.”
“We are very excited to be cross-trading on both the OTCQX and CSE,” says Indus Holdings, Inc. Co-Founder and Chief Executive Officer Robert Weakley. “The OTCQX approval is a tremendous milestone, as it makes our shares accessible to an even broader range of institutional and retail investors, aligning with our goal of increasing the liquidity and convenience of trading Indus shares within the U.S.”
Indus Holdings, Inc. continues to build its reputation with dispensaries through its award-winning portfolio of cannabis brands. The Company’s shares continue to trade on the Canadian Securities Exchange (CSE) under its trading symbol, “INDS.” Additionally, Indus Holdings, Inc. recently expanded its operations into the neighboring states of Nevada and Oregon; and with the acquisitions of Shredibles LLC and The Humble Flower Co. suite of products, it is unlocking new growth opportunities in the rapidly growing CBD market.
The chart of INDXF has been in a strong downtrend for many months. The stock has fallen from $11 per share down to just $0.70.
The stock trades with a market cap of $9.9 million. It did more sales than that just last quarter:
Still, with the INDXF stock in a downtrend, I would prefer to wait on the sidelines for a candle over candle reversal rather than try and catch a falling knife, but that’s just IMO my fellow ganzo knife masters.