Delta 9 Cannabis Inc.

For Q3 2023, Delta 9 reported record net revenue of $18.4 million, up 18% year over year, and nine-month revenue of $53.6 million, up 17%. Gross profit before fair value changes was $4.9 million, or a 27% gross margin, versus $1.9 million, or 12%, in the prior year quarter; nine-month gross profit was $14.4 million, also a 27% margin, versus $9.5 million, or 25%, last year. Operating expenses excluding share-based compensation were $7.2 million, down 15% year over year, and adjusted EBITDA was $1.0 million for Q3 and $1.9 million for the nine-month period, versus losses of $1.6 million and $3.8 million a year ago. Management did not provide formal next-quarter or full-year guidance, but said it expects continued improvement from cost cuts, retail growth, international shipments, and B2B projects; it also said the company is working to improve adjusted EBITDA further and bring debt covenants back into compliance.

John Arbuthnot framed the quarter as evidence that industry conditions are stabilizing and Delta 9’s restructuring is starting to show through. He emphasized higher-potency cultivation, pre-roll automation, LED upgrades, and retail expansion as core strategic levers, while also highlighting international opportunities such as Australia and potential GACP certification. His tone was constructive and forward-looking, but he acknowledged the market remains challenged by wholesale price compression, oversupply, and investor sentiment that may take time to recover.

The CFO commentary centered on balance-sheet repair and operating leverage. Delta 9 ended Q3 with $2.4 million in cash, up from $1.7 million at the end of Q1, and reported a $22.7 million working capital deficiency tied in part to a debt service coverage covenant breach at CFCU that forced current classification of the debt. Management said it repaid almost $2 million in borrowings during the first nine months of 2023, creating annualized interest savings north of $100,000, and raised about $2.05 million gross through its at-the-market facility. He also pointed to improved unit economics, including production cost per gram of $0.58 versus $0.77 in Q2, and said cash generated from operations was $2.7 million in the first nine months of 2023 versus $6.3 million cash burned a year earlier.

The main analyst question was about the impact of the biological asset mark-to-market on EPS. Management said the fair value change created a $2.2 million loss for the quarter, and that excluding it would have reduced the operating loss to about $2.2 million and improved loss per share by about $0.015 on an initiative and outstanding basis. They attributed the mark-to-market pressure to lower output capacity, while saying the underlying inputs such as average yield and average selling price per plant remained stable and that the unrealized loss should stabilize over time.