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INDS - Indus Holdings Inc News Story

C$1.83 -0.3  -13.3%

Last Trade - 04/03/21

Sector
Healthcare
Size
Small Cap
Market Cap £71.4m
Enterprise Value £92.0m
Revenue £30.9m
Position in Universe 792nd / 2711

Indus Holdings, Inc. Reports Record Third Quarter 2020 Results

Mon 9th November, 2020 11:27pm
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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,” says Mark Ainsworth, Chief Executive
Officer for Indus Holdings, Inc. “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.”

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.
 
* Distribution Capabilities: * 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,” said George Allen, Chairman of the Board of Indus Holdings,
Inc. “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.

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  
 International :                1-201-689-8562  
 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.

Investor Relations Contact
Bill Mitoulas
416.479.9547
bill@indusholdingco.com

Media Contact
Renata Follmann
pr@indusholdingco.com

Company Contact
Mark Ainsworth 
ir@indusholdingco.com

Forward-Looking Information and Statements and non-IFRS Financial Measures

This press release contains certain "forward-looking information" within the
meaning of applicable Canadian securities legislation and may also contain
statements that may constitute "forward-looking statements" within the meaning
of the safe harbor provisions of the United States Private Securities
Litigation Reform Act of 1995. Such forward-looking information and
forward-looking statements are not representative of historical facts or
information or current condition, but instead represent only Indus’ beliefs
regarding future events, plans or objectives, many of which, by their nature,
are inherently uncertain and outside of Indus’ control. Generally, such
forward-looking information or forward-looking statements can be identified by
the use of forward-looking terminology such as "plans", "expects" or "does not
expect", "is expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not anticipate", or "believes", or
variations of such words and phrases or may contain statements that certain
actions, events or results "may", "could", "would", "might" or "will be
taken", "will continue", "will occur" or "will be achieved.” The
forward-looking information and forward-looking statements contained herein
may include, but are not limited to, the ability of the Company to
successfully achieve business objectives (including completion of renovations
and increasing production capacity), and expectations for other economic,
business, and/or competitive factors. There can be no assurance that such
forward-looking information will prove to be accurate, and actual results and
future events could differ materially from those anticipated in such
forward-looking information. This forward-looking information reflects
Indus’ current beliefs and is based on information currently available to
Indus and on assumptions Indus believes are reasonable.

Forward-looking information is subject to known and unknown risks,
uncertainties and other factors that may cause the actual results, level of
activity, performance or achievements of Indus to be materially different from
those expressed or implied by such forward-looking information. Such risks and
other factors may include, but are not limited to: general business, economic,
competitive, political and social uncertainties; general capital market
conditions and market prices for securities; delay or failure to receive board
or regulatory approvals; the actual results of future operations; operating
and development costs; competition; changes in legislation or regulations
affecting Indus; the timing and availability of external financing on
acceptable terms; the available funds of Indus and the anticipated use of such
funds; delay or inability to complete an acquisition; favorable production
levels and outputs; the stability of pricing of cannabis products; the level
of demand for cannabis product; the availability of third-party service
providers and other inputs for Indus’ operations; lack of qualified, skilled
labor or loss of key individuals; and risks and delays resulting from the
COVID-19 pandemic. A description of additional assumptions used to develop
such forward-looking information and a description of additional risk factors
that may cause actual results to differ materially from forward-looking
information can be found in Indus’ disclosure documents, such as Indus’
listing statement filed on the SEDAR website at www.sedar.com. Although Indus
has attempted to identify important factors that could cause actual results to
differ materially from those contained in forward-looking information, there
may be other factors that cause results not to be as anticipated, estimated or
intended. Readers are cautioned that the foregoing list of factors is not
exhaustive. Readers are further cautioned not to place undue reliance on
forward-looking information as there can be no assurance that the plans,
intentions or expectations upon which they are placed will occur.
Forward-looking information contained in this news release is expressly
qualified by this cautionary statement.

This press release includes non-IFRS financial measures, specifically adjusted
EBITDA, which is not a measure of financial performance under IFRS and should
not be considered superior to, as a substitute for or as an alternative to,
and should only be considered in conjunction with IFRS financial measures.

The forward-looking information contained in this news release represents the
expectations of Indus as of the date of this news release and, accordingly, is
subject to change after such date. However, Indus expressly disclaims any
intention or obligation to update or revise any forward-looking information,
whether as a result of new information, future events or otherwise, except as
expressly required by applicable securities law. Neither the Canadian
Securities Exchange nor its Regulation Service Provider has reviewed, or
accepts responsibility for the adequacy or accuracy of, the content of this
news release.

 I NDUS H OLDINGS, I NC. AND A FFILIATES                                                                                                                                                 
 C ONSOLIDATED S TATEMENTS OF F INANCIAL P OSITION                                                                                                                                       
 (Unaudited)                                                                                                                                                                             
                                                                                                                                                                                         
                                                                                                                                         September 30,            December 31,           
 (in thousands)                                                                                                                  Note           2020                     2019            
 ASSETS                                                                                                                                                                                  
 Current assets:                                                                                                                                                                         
 Cash and cash equivalents                                                                                                               $      6,487             $      1,344           
 Accounts Receivable—net of allowance for doubtful accounts of $1,196 at September 30, 2020 and $2,595 at December 31, 2019                     4,167                    6,890           
 Inventory                                                                                                                       6              11,150                   9,376           
 Biological assets                                                                                                               7              10,323                   1,716           
 Prepaid expenses and other current assets                                                                                       5              5,796                    2,729           
 Total current assets                                                                                                                           37,923                   22,055          
 Long-term investments                                                                                                           10             652                      397             
 Property and equipment, net                                                                                                     8              41,717                   42,972          
 Goodwill                                                                                                                        9              357                      357             
 Other intangibles, net                                                                                                          9              567                      1,153           
 Other assets                                                                                                                                   274                      2,274           
                                                                                                                                                                                         
 Total assets                                                                                                                            $      81,490            $      69,208          
                                                                                                                                                                                         
 LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                    
 Current liabilities:                                                                                                                                                                    
 Accounts payable                                                                                                                        $      1,178             $      7,127           
 Accrued payroll and benefits                                                                                                                   985                      531             
 Notes payable, current portion                                                                                                  12             1,091                    135             
 Lease obligation, current portion                                                                                               13             2,870                    2,325           
 Other current liabilities                                                                                                                      10,230                   1,933           
 Total current liabilities                                                                                                                      16,354                   12,051          
 Notes payable                                                                                                                   12             508                      371             
 Lease obligation                                                                                                                13             29,260                   31,480          
 Convertible debentures                                                                                                          12             13,829                   -               
 Other long-term liabilities                                                                                                                    -                        946             
 Total liabilities                                                                                                                              59,951                   44,848          
                                                                                                                                                                                         
 STOCKHOLDERS' EQUITY                                                                                                                                                                    
 Share capital                                                                                                                                  99,908                   96,160          
 Accumulated deficit                                                                                                                            (78,369  )               (71,800  )      
 Total stockholders' equity                                                                                                                     21,539                   24,360          
                                                                                                                                                                                         
 Total liabilities and stockholders' equity                                                                                              $      81,490            $      69,208          
                                                                                                                                                                                         
                                                                                                                                                                                         
                                                                                                                                                                                         
 See accompanying notes to interim consolidated financial statements.                                                                                                                    



 I NDUS H OLDINGS, I NC. AND A FFILIATES                                                                                                               
 C ONSOLIDATED S TATEMENTS OF O PERATIONS                                                                                                              
 (Unaudited)                                                                                                                                           
                                                                                                                                                       
                                                                                                                                                       
 Periods Ended September 30,                                             Three Months                            Nine Months                           
 (in thousands except per share amounts)                         Note        2020                 2019               2020                 2019         
 Net revenue                                                             $   14,131           $   10,119         $   33,467           $   26,242       
 Cost of goods sold                                                          8,269                17,738             29,652               31,004       
 Gross profit before biological asset adjustments                            5,862                (7,618   )         3,815                (4,762   )   
                                                                                                                                                       
 Net effect of change in fair value of biological assets         7           (3,350   )           (2,103   )         (11,359  )           (241     )   
                                                                                                                                                       
 Gross profit                                                                9,212                (5,515   )         15,174               (4,522   )   
                                                                                                                                                       
 Operating expenses                                                                                                                                    
 General and administrative                                      18          2,559                8,787              8,575                16,754       
 Sales and marketing                                                         1,274                2,606              3,684                6,016        
 Depreciation and amortization                                   8           1,044                985                2,806                2,444        
 Total operating expenses                                                    4,878                12,378             15,066               25,214       
                                                                                                                                                       
 Income/(Loss) from operations                                               4,334                (17,893  )         108                  (29,735  )   
                                                                                                                                                       
 Other income/(expense)                                                                                                                                
 Other income/(expense)                                                      56                   (104     )         81                   (17      )   
 Loss on termination of investment                               4           (843     )           -                  (4,367   )           -            
 Unrealized gain/(loss) on change in fair value of investment    10          (199     )           (1,554   )         192                  (712     )   
 Gain/(Loss) on foreign currency                                             -                    (21      )         -                    161          
 Interest expense                                                13          (838     )           (525     )         (2,414   )           (2,066   )   
 Total other income/(expense)                                                (1,824   )           (2,204   )         (6,509   )           (2,633   )   
                                                                                                                                                       
 Income/(Loss) before provision for income taxes                             2,510                (20,097  )         (6,400   )           (32,369  )   
 Provision for income taxes                                      15          119                  (459     )         169                  44           
 Net income/(loss)                                                       $   2,391            $   (19,638  )     $   (6,569   )       $   (32,412  )   
                                                                                                                                                       
 Net income/(loss) per share - basic                             16      $   0.07             $   (0.61    )     $   (0.20    )       $   (1.01    )   
 Net income/(loss) per share - diluted                           16      $   0.01             $   (0.61    )     $   (0.20    )       $   (1.01    )   
                                                                                                                                                       
 Weighted average shares outstanding - basic                     16          33,398               32,228             33,048               32,199       
 Weighted average shares outstanding - diluted                   16          174,043              32,228             33,048               32,199       
                                                                                                                                                       



 I NDUS H OLDINGS, I NC . AND A FFILIATES                                                                                   
 CONSOLIDATED STATEMENT OF CASH FLOW                                                                                        
 (Unaudited)                                                                                                                
                                                                                                                            
 Periods Ended September 30,                                                           Nine Months                          
 (in thousands)                                                                            2020                2019         
 CASH FLOW FROM OPERATING ACTIVITIES                                                                                        
 Net loss                                                                              $   (6,569  )       $   (32,412  )   
 Adjustments to reconcile net loss to net cash used in operating activities:                                                
 Depreciation and amortization                                                             3,044               2,901        
 Debt issuance cost amortization                                                           352                 -            
 Loss on termination of investment                                                         4,367               -            
 Share-based compensation expense                                                          2,012               2,123        
 Provision for doubtful accounts                                                           1,000               230          
 Unrealized gain on change in fair value of investments                                    (192    )           712          
 Changes in operating assets and liabilities:                                                                               
 Accounts receivable                                                                       1,523               (7,307   )   
 Inventory                                                                                 (1,774  )           (1,206   )   
 Biological assets                                                                         (8,607  )           (698     )   
 Prepaid expenses and other assets                                                         (430    )           (1,740   )   
 Accounts payable and accrued expenses                                                     2,344               6,430        
 Other long-term liabilities                                                               (90     )           (304     )   
 Net cash used in operating activities                                                     (3,019  )           (31,270  )   
 CASH FLOW FROM INVESTING ACTIVITIES                                                                                        
 Purchases of property and equipment                                                       (5,784  )           (5,379   )   
 Net cash received from disposition of business interest                                   500                 -            
 Investment in corporate interests                                                         -                   (1,500   )   
 Net cash used in investing activities                                                     (5,284  )           (6,879   )   
 CASH FLOW FROM FINANCING ACTIVITIES                                                                                        
 Principal payments on lease obligations                                                   (1,795  )           (1,082   )   
 Payments on notes payable                                                                 (3,990  )           (83      )   
 Payments from lease obligations                                                           120                 -            
 Proceeds from notes payable                                                               3,800               106          
 Proceeds from convertible notes, net of financing costs                                   15,219              -            
 Issuance of subordinate voting shares associated with convertible notes offering          62                  -            
 Proceeds from brokered private placement                                                  -                   40,150       
 Fees on public brokered private placement                                                 -                   (1,875   )   
 Proceeds from series B ofering                                                            -                   3,200        
 Proceeds from exercise of warrants                                                        30                  -            
 Proceeds from exercise of options                                                         -                   127          
 Issuance of subordinate voting shares                                                     -                   4            
 Net cash provided by financing activities                                                 13,446              40,547       
 Change in cash and cash equivalents                                                       5,143               2,398        
 Cash and cash equivalents—beginning of year                                               1,344               10,310       
 Cash, cash equivalents and restricted cash—end of period                              $   6,487           $   12,708       
                                                                                                                            
 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                                                           
 Cash paid during the period for interest                                              $   2,062           $   1,247        
 Cash paid during the period for income taxes                                          $   102             $   5            
                                                                                                                            
 OTHER NONCASH INVESTING AND FINANCING ACTIVITIES                                                                           
 Purchase of property and equipment not yet paid for                                   $   688             $   -            
 Disposition of business interests                                                     $   500             $   -            
 Issuance of warrants                                                                  $   1,556           $   2,291        
 Shares issued for services in connection with convertible debenture offering          $   62              $   -            
 Shares issued to acquiree in connection with reverse takeover                         $   -               $   1,513        
 Issuance of supervoting shares                                                        $   -               $   40           
 Acquisition of private entities                                                       $   -               $   1,028        
 Issuance of subordinate voting shares in exchange for acqusition of private entity    $   -               $   240          
                                                                                                                            

The table below reconciles Gross Profit (Loss) and Gross Margin to Adjusted
Gross Profit (Loss) and Adjusted Gross Margin for the periods indicated.

 Periods Ended September 30,                                              Three Months                          Nine Months                          
 (in thousands)                                                               2020                2019              2020                 2019        
 Net revenue                                                              $   14,131          $   10,119        $   33,467           $   26,242      
 Cost of goods sold                                                       $   8,269           $   17,738        $   29,652           $   31,004      
 Net effect of change in fair value of biological assets                  $   (3,350  )       $   (2,103  )     $   (11,359  )       $   (241    )   
 Gross profit (loss)                                                      $   9,212           $   (5,515  )     $   15,174           $   (4,522  )   
 Gross margin                                                                 65.2    %           -54.5   %         45.3     %           -17.2   %   
 Adjusted gross profit (loss) ((1))                                       $   5,862           $   (7,618  )     $   3,815            $   (4,762  )   
 Adjusted gross margin ((1))                                                  41.5    %           -75.3   %         11.4     %           -18.1   %   
 ((1))Non-IFRS measure - see Non-IFRS Financial Measures in this MD&A.                                                                               

The table below reconciles Net Loss to Adjusted EBITDA for the periods
indicated.

 Adjusted EBITDA                                                                                                                                                                                                                               
                                                                                                                                                                                                                                               
                                                                                                                                                                                                                                               
 Periods Ended September 30,                                                                         Three Months                                                                                        Nine Months                           
 (in thousands)                                                                                                    2020                                                    2019                              2020                 2019         
 Net income/(loss) attributable to Indus Holdings, Inc. (IFRS)                                       $             2,391                                     $             (19,638       )               $   (6,569   )       $   (32,412  )   
 Interest expense                                                                                                  838                                                     525                               2,414                2,066        
 Provision for income taxes                                                                                        119                                                     (459          )                   169                  44           
 Depreciation in cost of goods sold                                                                                13                                                      207                               238                  458          
 Depreciation and amortization in operating expenses                                                               1,044                                                   985                               2,806                2,444        
 Investment and currency (gains)/ losses ((2))                                                                     199                                                     1,575                             (192     )           551          
 Share-based compensation                                                                                          187                                                     1,613                             2,012                2,123        
 Transaction and other special charges                                                                             843                                                     500                               4,367                2,111        
 Net effect of change in fair value of biological assets                                                           (3,350        )                                         (2,103        )                   (11,359  )           (241     )   
 Adjusted EBITDA ((1))                                                                               $             2,285                                     $             (16,795       )               $   (6,113   )       $   (22,857  )   
 ((1))Non-IFRS measure - see Non-IFRS Financial Measures in this MD&A.                                                                                                                                                                         
 ((2))Nine month Adjusted EBITDA for the period ended September 30, 2020 reflects a correction of investment and currency (gains)/losses                                                                                                       
 for the quarter ended June 30, 2020 which inadvertently reflected a $306 gain in the quarter as a loss.                                                                                                                                       



                                                                                                                                         
 Periods Ended September 30,                                Three Months                           Nine Months                           
 (in thousands)                                                 2020                2019               2020                 2019         
 Income/(Loss) from operations                              $   4,334           $   (17,893  )     $   108              $   (29,735  )   
 Net effect of change in fair value of biological assets        (3,350  )           (2,103   )         (11,359  )           (241     )   
 Adjusted income/(loss) from operations                     $   984             $   (19,996  )     $   (11,251  )       $   (29,976  )   


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