Wall Street Signals: IONIC Brands Corp. Announces Record Sales of US$8.3 Million in Second Quarter 2021

IONIC Brands Corp. Announces Record Sales of US$8.3 Million in Second Quarter 2021

Release Highlights Record High Revenue for Second Quarter 2021

(Expressed in US dollars, unless otherwise stated)

  • Record Q2-2021 sales revenues of $8.3M and realized $1.3M in gross profit representing a 16% gross margin for the second quarter 2021, a 1.2% decline on quarter-on-quarter growth due to our combined B2B wholesale business and entrance into the sales of lower margin flower sales compared to our concentrate segments.

  • Record H1 sales revenues of $12.5M which exceeds the entire fiscal year of 2020 revenues by $3.5M, representing a 40% increase in revenue YTD

  • The Company maintains its target on baseline revenues of over $28 million for annual 2021.

IONIC BRANDS CORP. (CSE: IONC)(OTC PINK: IONKF)(FRA: IB3A) ("IONIC BRANDS'' or the "Company") a regional manufacturer of innovative cannabis consumables and concentrate extract products, is pleased to report financial results for the three and six month periods ended June 30, 2021.

For further information on the financial results of the Company, please review the Company's unaudited condensed consolidated interim financial statements (unaudited) and the accompanying MD&A available under the Company's profile on www.SEDAR.com.

John Gorst, CEO of Ionic Brands, commented, "We made a commitment to our shareholders that we would improve the Company's balance sheet and financial performance, and we recently released June 30, 2021 results reinforce that commitment. After Ionic Brands' record revenue growth this quarter and a first-half total revenue that exceeds 2020 fiscal year total revenues by 40%, we are achieving what we set out to do for our shareholders. Total revenues have also exceeded US$12 million for the first 6 months of 2021"

"Our improved top-line and bottom-line results, both year over year and sequentially, were primarily driven by modifications to operations related to our continued goal to drive down manufacturing costs and increase overall operating efficiency in the Washington and Oregon markets. While we are pleased with this quarter's progress, we have clearly laid a path to further enhance our financial performance by continuing to reduce operating expenses and remain hyper-focused on increasing gross margin revenues, improve our cash flows and reach profitability."

Financial Highlights:

  • Revenue for Q2-2021 was $8.3 million, compared to $2.9 million in Q2-2020 and $4.1 million in Q1-2021. The primary driver of the year-over-year growth was the Company entering the flower segment of the cannabis industry with the acquisition of the Cowlitz County Cannabis brand assets, which closed on March 5th, 2021. Furthermore, our growth was driven by the successful launch of new products in both the Washington and Oregon markets.

  • Adjusted EBITDA was ($964.4K) in Q2-2021, compared to ($5.4 million) in Q1-2021, representing a significant improvement of approximately $4.4 million quarter over quarter. The reduction of the Adjusted EBITDA loss is primarily attributable to an increase in overall gross margin revenue. The Company remains committed to prudently managing its operating expense on its mission to improve efficiency throughout the organization.

  • Revenue increased to $8.313 million in the second quarter of 2021, as compared to $4.199 million in the first quarter of 2021, representing a 98% increase. This strong quarter-over-quarter growth was driven primarily by the closing of the Cowlitz County Cannabis (CCC) brand asset acquisition on March 8th of 2021, where the Company acquired 6 additional brands, increasing our total portfolio size to 11 brands in the Washington and Oregon markets.

  • Gross margin revenue was 16.2% in the second quarter of 2021 compared to 17.3% in the first quarter of 2021. The 1.1 basis point reduction quarter over quarter is due to the mix of revenue earned in the quarter. New, lower margin streams of revenue came online during Q1 and continued in Q2 from the CCC acquisition, as well as business-to-business wholesale brokerage sales. The Company expects gross margin revenue will continue to increase in Q3 and beyond due to a mix of the higher-margin product (Concentrates i.e. oil-based products) sales from retail sales and the addition of Ionic Brands' dedicated wholesale partners lowering input costs from the use of contract raw material partners are expected. Furthermore, quarter-on-quarter margin improvement is expected in subsequent quarters of 2021, as biomass yields increase from the Company's exclusive licensed partner-operated assets and further consolidation of purchasing services between CCC in Washington combine to lower raw material input costs for their combined operations.

Operational Highlights:

  • During the first half of 2021 year, the industry experienced aggressive pricing from various competing brands at local retail stores trying to gain market share. The Company's strategy is to maintain pricing to the retail stores, creating price stability to the end-consumer while capturing more significant gross margin revenue. The Company will maintain this pricing strategy by focusing on our premium product lines. As competition thins out and cannabis markets mature, that stabilization of wholesale pricing to retail stores will become the norm. Conversely, the Company further understands the delicate balance between margin enhancement and gaining additional market share, which we monitor monthly and adjust our strategy as required

  • Ionic Brands commenced operations from its newly leased 46,000 square feet facility in June 2021. This manufacturing footprint managed by the Company's exclusive licensed partners will allow the Company to increase its manufacturing output by six times, resulting in increased revenues and margin performance. Due to our recent investments in infrastructure, inventory, and manufacturing equipment, we are beginning to see improved operating leverage throughout the organization. Overall, we continue to execute our growth strategy in 2021. We are excited to build on our momentum from this quarter's results and are already seeing improved operating performance evidenced by continued expansion of our retail distribution network and production and manufacturing footprint.

  • At the beginning of Q2 of 2021, as world economies began to reopen from the COVID pandemic, the Company experienced severe bottlenecks in its supply chains in all product categories as we ramped up sales and inventory production. Raw materials for our Zoots edibles line and packaging for all products experienced a significant increase in lead times by as much as four times. While we continue to manage through this headwind, we saw slower sell-through in retail stores due to our less eco-friendly packaging, which is important to our more eco-conscious cannabis consumers in the Pacific Northwest markets, again slowing top-line revenue growth by as much as 17%. Subsequent to the end of the quarter, we are now in total production with newly designed eco-friendly packaging, and we expect to see an improvement to our sell-through in our retail partner stores, which should result in an immediate increase in top-line sales. The launch of our direct-to-consumer CBD site is delayed due to a certain ingredient for our NRG-CBD energy shot not being readily available. Our new projected launch date is September 15th, 2021. Additionally, the company continues to face challenges in securing labor in both our manufacturing and administrative job openings. As of this quarterly update, there has been no material impact on our ability to meet our manufacturing demand, however, as sales continue to increase the Company will exceed its labor capacity as it relates to manufacturing output. The Company has taken immediate action to raise hourly pay rates to attract more talent which may have a negative impact on gross margin revenue.

  • In Oregon, the Company closed the acquisition of the "OPS" facility on June 16th, 2021, a fully licensed and equipped manufacturing facility in Estacada, Oregon, which now gives Ionic Brands complete operating control over the manufacturing and distribution of our products in the Oregon market. The acquisition of the Oregon facility will allow us to produce up to 3.4 million units per year, which is expected to increase annual revenues in the Oregon market to $12 million by mid-2023, with a projected 4% - 7% increase in gross margin revenue due to improved operating efficiencies. Our excitement and optimism remain strong as we broaden the horizon of IONIC BRANDS 2.0. Direct ownership of a license and state-of-the-art facility will provide a platform for our highly experienced team to propel sales of our portfolio of well-known products to new heights in the Oregon Cannabis Market.

  • Our partner, The Pass, who operates in the Massachusetts market, continues to work towards its goal of having Ionic Brands products on store shelves by the end of Q3. The Company has successfully launched The Pass's product line in the Washington market, extending Ionic Brands' product portfolio. We continue to pursue similar licensing agreements in other limited-license states.

Key Performance Indicators:

The Company realized consistent growth within its concentrates business line with 344,366 Ionic-branded units sold during Q2 of 2021 (an increase of 25%) compared to 276,298 branded units sold in Q1 of 2021; Furthermore, with the entry into the flower sales segment, through the acquisition of the Cowlitz County Cannabis (CCC) brand assets on March 8th, 2021, the license holder and the Company combined to market and sell 1,096,666 units of a packaged flower. The total number of branded units sold in the second quarter was 1,441,032 (an increase of 422%) over the total number of branded units sold in Q1 2021 of 276,298, substantially increasing our overall brand exposure to the end-consumer in the northwest markets.

In the B2B wholesale business unit, the license holder and the Company combined to sell 4,999,422 units (grams) of biomass in Q2 of 2021, increasing 24% over Q1 2021 total units sold of 4,030,641. This strategic business unit provides a greater supply of raw materials at a lower cost, contributing to improved gross margins in our flower and concentrates segments while ensuring that the Company has a secure and adequate supply of raw materials for our manufacturing partner to make and deliver its concentrates and flower products efficiently to the market.

About Ionic Brands Corp.

The Company is dedicated to building a regionally based multi-state consumer packaged goods company with a highly respected cannabis concentrate brand portfolio with strong roots in the premium and luxury segments of vape, concentrates, flower and consumables. The cornerstone Brand of the portfolio, IONIC, is a top concentrates brand in Washington State along with its economy brand Fabulous and has aggressively expanded throughout the Pacific Northwest of the United States. The brand is currently operating in Washington and Oregon. IONIC BRANDS' strategy is to be the leader of the highest-value segments of the cannabis market.


John Gorst

Chairman & Chief Executive Officer

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