Indiva Limited (the "Company" or "Indiva")
(TSXV:NDVA), the leading Canadian producer of cannabis edibles, is
pleased to announce its financial and operating results for the
third fiscal quarter ended September 30, 2023. All figures are
reported in Canadian dollars ($), unless otherwise indicated.
Indiva's financial statements are prepared in accordance with
International Financial Reporting Standards ("IFRS"). For a
more comprehensive overview of the corporate and financial
highlights presented in this news release, please refer to Indiva's
Management's Discussion and Analysis of Financial Condition and
Results of Operations for the Three and Nine Months Ended September
30, 2023, and the Company's Condensed Consolidated Interim
Financial Statements for the Three and Nine Months Ended September
30, 2023 and 2022, which are filed on SEDAR+ and available on the
Company's website, www.indiva.com.
"We are delighted to announce the best financial results in
Indiva’s corporate history, driven entirely by organic growth,
including record net revenue, record gross profit and gross margin,
as well as positive EBITDA and positive income from operations.
Results benefitted from the introduction and initial sales of No
Future gummies and vapes, purchase orders of Wana gummies under our
contract manufacturing agreement, and continued growth in Pearls by
Gr�n gummies. We are very pleased with the growth in the Pearls
gummy brand since the product first hit shelves in Canada in
September 2022, as Pearls is now the number one gummy in Ontario
and British Columbia, and is quickly gaining market share in
Alberta. Additionally, total purchase orders received since
inception in July 2023 for No Future gummies have now exceeded 1.3
million units, marking one of the fastest growth trajectories of
any new product introduction in Indiva’s history,” said Niel
Marotta, President and Chief Executive Officer of Indiva. “We
continue to urge regulators to increase per-package THC limits on
legal edibles so we can, as an industry, eliminate public safety
risk by providing a safe, legal, competitive alternative to illegal
‘copycat edibles’. Until that day comes, Indiva will continue to
leverage its robust new-product pipeline and position as the
largest, low-cost producer of edibles in Canada, as we continue to
delight of-age consumers with the quality and innovation we are
known for."
HIGHLIGHTS
Quarterly Performance
- Gross revenue in Q3 2023 was a record $10.9 million,
representing a 33.7% sequential increase from Q2 2023, and a 23.7%
increase year-over-year from Q3 2022. Year-to-date, gross revenue
increased 7.3% year-over-year to a record $29.4 million.
- Net revenue in Q3 2023 was a record $9.8 million, representing
a 30.4% sequential increase from Q2 2023, and a 21.0% increase
year-over-year from Q3 2022, driven primarily by the continued
growth in Pearls by Gr�n gummies, initial orders of Wana and the
introduction of No Future gummies and vapes. Year-to-date, net
revenue increased 6.4% year-over-year to a record $26.7
million.
- Net revenue in Q3 from edible products increased to a record
$9.0 million, up 32.0% from $6.9 million in Q2 2023 and up 24.2%
from $7.3 million in the prior year period. Edible products sales
represent 92.5% of net revenue in Q3 2023. Year-to-date net revenue
from edible products increased 0.8% year-over-year to a record
$23.2 million or 86.9% of net revenue.
- Gross profit before impairments increased year-over-year by
55.3% and increased sequentially by 64.7%, to a record $3.6
million, or 37.1% of net revenue, versus 28.9% in Q3 2022 and 29.3%
in Q2 2023. The increase in gross margin percentage was due
primarily to higher sales, a mix shift to higher margin products
and lower unit costs driven by the implementation of automated
equipment in edibles processing and packaging. Year-to-date, gross
profit before impairments increased to a record $9.0 million, or
33.7% of net revenue, versus $7.7 million or 30.5% of net revenue
in the corresponding period last year.
- In Q3 2023, Indiva sold products containing 151.7 million
milligrams of cannabinoids, the active ingredient in edible and
vape products, which represents an 84.5% increase when compared to
the 82.2 million milligrams in products sold in Q2 2023, and a
157.1% increase compared to 59.0 million milligrams sold in Q3
2022. The increase was primarily a function of new product
introductions.
- Inventory impairment charges in the quarter totaled $0.6
million and $2.1 million cumulatively year-to-date related
primarily to bulk lozenges and packaging which cannot be sold due
to Health Canada's order to halt production and sale of these
products, the write off of aged and out of spec bulk and finished
goods, as well as certain marketing, packaging and raw materials.
The Company will continue to work to monetize any impaired
inventory which remains saleable.
- Operating expenses in the quarter decreased 6.1% sequentially,
and decreased 10.3% year-over-year, representing a record low at
31.0% of net revenue, versus 43.1% in Q2 2023 and 41.8% in Q3 2022.
Operating expenses decreased sequentially primarily due to lower
marketing, research and development and share based compensation
costs. Year-to-date, operating expenses decreased by 8.4% to $9.5
million primarily due to lower marketing costs and share based
compensation costs, partially offset by increased general and
administrative costs.
- EBITDA was a positive $0.7 million in the quarter. Adjusted
EBITDA increased sequentially in Q3 2023 to a profit of $1.0
million, versus a loss of $0.6 million in Q2 2023, and a loss of
$0.5 million in Q3 2022 due to higher sales and higher gross
margins. Year-to-date, EBITDA was a profit of $0.7 million versus a
loss of $3.5 million, and adjusted EBITDA was a profit of $0.8
million versus a loss of $1.0 million in the corresponding period
last year. See "Non-IFRS Measures", below.
- Pre-tax operating income was a profit of $0.01 million in the
quarter and a loss of $2.6 million year-to date.
- Comprehensive net loss was $0.9 million in the quarter,
including non-cash charges for impairment of inventory of $0.6
million and a $0.3 million gain on debt modification. Year-to-date,
comprehensive net loss was $4.1 million, and included a one-time
gain of $2.1 million on the sale of license rights and a $0.3
million gain on the modification of debt offset by non-cash charges
for impairment of inventory and assets held for sale totaling $2.3
million. Excluding these amounts, comprehensive loss increased to
$0.6 million versus an adjusted loss of $2.3 million in Q2 2023 and
$2.2 million in Q3 2022. Year-to-date adjusted loss decreased to
$4.2 million versus year over year of $6.1 million in 2022.
Operational Highlights for the Third Quarter 2023
- Indiva launched a new value-focused brand called No Future,
including four gummy SKUs and three 1.2g vape SKUs. The Company
shipped product to British Columbia and Alberta in the third
quarter, as well as initial shipments to Ontario in late September,
and has since fulfilled replenishment orders in all three
provinces. Since the introduction and initial shipments of No
Future gummies in July, Indiva has received POs exceeding 1.3
million units.
- Indiva rebranded the Indiva Life Sandwich Cookies as Indiva
Doppio Sandwich Cookies.
- The Company received acceptance of 13 new SKUs for listing, the
majority of which were derived from in-house innovation, including
four No Future Gummies in Ontario, Alberta, and British Columbia
and three No Future 1.2g vape products in Ontario and Alberta along
with one No Future vape in British Columbia. Six additional SKUs
received acceptance across multiple brands including Bhang, Doppio,
Indiva 1432 and a 25-pack CBD gummy SKU under the Pearls by Gr�n
brand.
- Indiva amended the terms of its existing non-revolving term
loan facility (the "Amended Term Loan") with SNDL Inc.
("SNDL"), and has also entered into a supply agreement with
SNDL (the "Supply Agreement") whereby SNDL will supply the
Company with certain distillate products on an exclusive basis. The
Supply Agreement provides for minimum monthly purchase commitments
by the Company (the "Minimum Purchase Commitment"). The
prices of all products supplied under the Supply Agreement are
subject to periodic adjustments depending on prevailing market
pricing. The Supply Agreement has an initial term of thirty (30)
months, which automatically renews for successive twelve (12) month
periods, unless earlier terminated. Provided that the aggregate
minimum purchase commitment under the Supply Agreement has been
met, the Supply Agreement will automatically terminate upon
re-payment of the Amended Term Loan, unless the Company elects
otherwise. The Amended Term Loan extended the maturity date to
February 24, 2026 and extended the existing security interest in
favour of SNDL under the Amended Term Loan to the Minimum Purchase
Commitment. The interest rate and other terms of the Amended Term
Loan remain the same except for the addition of an event of
default, whereby a default under the Supply Agreement (which if not
cured by the applicable time period set out in the Supply
Agreement) would constitute an event of default under the Amended
Term Loan.
Events Subsequent to Quarter End
- No Future products became available in stores across Ontario,
including four gummy SKUs and three vape SKUs. The Company also
received three additional No Future 1.2 gram vapes for listing with
the OCS including Grape Ape Indica, Peach Punch Sativa and Pink
Grapefruit Kush Indica. Additional SKUs accepted for listing which
will hit shelves in Q4 in Ontario include, Pearls Peach Mango CBD
25-pack, Indiva 1432 chocolates in Milk 1:1 CBG/THC, Dark 1:1
CBN/THC and Cookies and Cream 1:1 THC/CBD flavours, Doppio Pumpkin
Spice Latte Sandwich Cookie 1:1 CBD/THC, and Doppio Candy Cane
Sandwich Cookie.
- The Company received acceptance of three new No Future gummy
SKUs for listing in Alberta, including the Red One, the Pink One,
and the Yellow One, which are expected to be in market by late
November. Additionally, the Company also received three additional
No Future 1.2 gram vape listings in Alberta including Grape Ape
Indica, Peach Punch Sativa and Pink Grapefruit Kush Indica.
- Indiva completed its initial production and deliveries of Wana
gummies to Canopy under the Supply Agreement signed in May
2023.
Market Share
- Data from Hifyre Inc. for the third quarter of 2023 shows
strong sell-through of Indiva's edible products. With 18.5% share
of sales across British Columbia, Alberta, Saskatchewan, Manitoba,
and Ontario, Indiva holds the No. 1 ranking SKU by sales and units
sold in the Edibles category with Indiva’s Pearls by Gr�n gummies:
Blue Razzleberry 3:1 CBG/THC. Further, product ranking in Q3 2023
showed three of the Top 10 edible SKUs are from Indiva’s Pearls by
Gr�n gummies.
- Due to the exclusion of sales of Wana for the entirety of the
third quarter, INDIVA dropped to the #2 market share position in
the edibles category on an aggregate basis for the three-month
period. However, monthly data from September and October show that
Indiva has regained and maintained the #1 market share position in
the edibles category, driven by the introduction of No Future
gummies and the continued growth in Pearls by Gr�n gummies.
Further, in October, measured by unit sales, four of the top ten
cannabis products across all categories at the OCS were Indiva
products, including Pearls Blue Razzleberry, which was the highest
volume SKU in Ontario.
- Q3 2023 edibles market share:
- Ontario: #1 with 23.1% market share.
- Alberta: #4 with 14.4% market share.
- British Columbia: #1 with 20.3% market share.
- Saskatchewan: #8 with 4.1% market share.
- Manitoba: #6 with 6.6% market share.
- Gummies: Indiva’s Pearls by Gr�n gummies ranked as #2 in the
edibles category with 12.8% share based on sales and ranked as #1
with 17.1% share based on units sold. Further, No Future gummies
launched in late Q3 and already ranked #20 in the edibles category
based on sales and ranked #15 based on units sold.
- Chocolate: Indiva held 37.1% total sub-category share, as
Bhang® continued to lead the chocolate category with 30.4%
sub-category share.
- Baked Goods: Indiva led the baked goods category with 65.7%
sub-category share, driven by the success of Doppio Sandwich
Cookies.
- Based on data from British Columbia, Alberta, Ontario, Manitoba
and Saskatchewan, the edibles category decreased by 7.8% in Q3 2023
to $61.9 million in retail sales from $67.2 million in Q2 2023, and
increased by 6.5% versus $58.1 million in Q3 2022.
Outlook
- The Company expects Q4 2023 net revenue, excluding contract
manufacturing, to improve sequentially driven by new product
introduction, including our first full quarter of No Future sales
across Canada. New SKUs coming to market include additional No
Future gummies and vapes, Blips, as well as new 5-count and
25-count Pearls gummies. Gross margins are expected to continue to
trend higher over time as the Company benefits from a mix shift to
higher margin products and continues to achieve further production
efficiencies driven by greater utilization of automation in
production and packaging activities.
OPERATING AND FINANCIAL RESULTS FOR THE THREE AND NINE MONTHS
ENDED SEPTEMBER 30, 2023 AND 2022
Three months ended September
30
Nine months ended September
30
(in thousands of $, except gross margin
% and per share figures)
2023
2022
2023
2022
Gross revenue
10,871.3
8,791.9
29,373.7
27,382.0
Net revenue
9,786.7
8,090.9
26,704.9
25,096.0
Gross margin before impairments
3,626.2
2,335.4
8,989.5
7,654.6
Gross margin before impairments (%)
37.1%
28.9%
33.7%
30.5%
Loss and comprehensive loss
(902.2)
(2,565.5)
(4,149.5)
(8,141.4)
Adjusted EBITDA1
1,042.1
(496.8)
846.6
(1,024.9)
Net and comprehensive earnings per share –
basic and diluted
0.00
(0.02)
(0.02)
(0.06)
1 See "Non-IFRS Measures", below.
Operating Expenses
Three months ended September
30
Nine months ended September
30
(in thousands of $)
2023
2022
2023
2022
General and administrative
1,433.3
1,276.4
4,493.3
4,084.3
Marketing and sales
1,261.7
1,528.1
3,879.0
4,884.2
Research and development
207.2
332.6
699.1
668.4
Share-based compensation
29.2
141.6
129.4
429.7
Expected credit loss (recovery)
4.8
(0.7)
4.0
(1.2)
Depreciation of property, plant, and
equipment
45.8
52.1
143.3
150.9
Amortization of intangible assets
51.9
51.9
155.6
155.6
Total operating expenses
3,033.8
3,382.0
9,503.8
10,371.9
CONFERENCE CALL - Tuesday, November 21, 2023 at 10:30 a.m.
(EST):
The Company will host a conference call to discuss its results
on Tuesday, November 21, 2023 at 10:30 a.m. (EST). Interested
participants can join by dialing 416-764-8658 or 1-888-886-7786.
The conference ID is 45967367.
A recording of the conference call will be available for replay
following the call. To access the recording please dial
416-764-8691 or 1-877-674-6060. The replay ID is 967367#. The
recording will remain available until Thursday, December 21,
2023.
ABOUT INDIVA
Indiva is proud to be Canada's #1 producer of cannabis edibles.
We set the gold standard for quality and innovation with our
award-winning products, across a wide range of brands including
Pearls by Gr�n, Bhang Chocolate, Indiva Doppio Sandwich Cookies,
Indiva 1432 Chocolate, and No Future Gummies and Vapes, as well as
other Indiva branded extracts. Indiva manufactures its top-quality
products in its state-of-the-art facility in London, Ontario, and
has a corporate workforce remotely distributed across Canada. Click
here to connect with Indiva on LinkedIn, Instagram, and here to
find more information on the Company and its products.
DISCLAIMER AND READER ADVISORY
General
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) has in any way passed upon the merits of the
contents of this news release and neither of the foregoing entities
accepts responsibility for the adequacy or accuracy of this news
release or has in any way approved or disapproved of the contents
of this news release.
Certain statements contained in this news release constitute
forward-looking information. These statements relate to future
events or future performance. The use of any of the words "could",
"intend", "expect", "believe", "will", "projected", "estimated" and
similar expressions and statements relating to matters that are not
historical facts are intended to identify forward-looking
information and are based on the parties' current belief or
assumptions as to the outcome and timing of such future events.
Actual future results may differ materially. In particular, this
news release contains forward-looking information relating to,
among other things, (i) the Company's outlook for and expected
operating margins and future financial results, including the
Company's ability to achieve a sequential growth of net revenue and
to achieve higher gross margins over time due to new product
introduction, higher margin products and production efficiencies,
(ii) the projected growth of its business and operations (including
existing and new segments thereof), and the future business
activities of, and developments related to, the Company within such
segments after the date of this news release, including the
anticipated introduction of new product offerings (iii) the
Company's ability to capture and/or maintain its market share in
any jurisdiction, (iv) the Company's ability to deliver on its
commitments for existing or new listings of products, including
scaling of existing products on a national basis, (v) the Company's
ability to shift its revenue mix away from licensed products and
towards products developed by the Company, (vi) the Company's
ability to monetize any impaired saleable inventory, (vii) the
Company's ability to introduce new planned SKUs and products to the
market, and (viii) the proposed telephone conference call expected
to be held by the Company on November 21, 2023. Various assumptions
or factors are typically applied in drawing conclusions or making
the forecasts or projections set out in forward-looking
information. Those assumptions and factors are based on information
currently available to the Company, and include, without
limitation, assumptions about the Company's future business
objectives, goals, and capabilities, the cannabis market, the
regulatory framework applicable to the Company and its operations,
and the Company's financial resources. Although the Company
believes that the assumptions underlying, and the expectations
reflected in, forward-looking statements in this news release are
reasonable, it can give no assurance that such expectations will
prove to have been correct. A number of factors could cause actual
events, performance or results to differ materially from what is
projected in the forward-looking statements. Specifically, readers
are cautioned that forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company, as
applicable, to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements, including, but not limited to, risks
and uncertainties related to: (i) the available funds of the
Company and the anticipated use of such funds, (ii) the
availability of financing opportunities, (iii) legal and regulatory
risks inherent in the cannabis industry, (iv) risks associated with
economic conditions, (v) dependence on management, (vi) public
opinion and perception of the cannabis industry, (vii) risks
related to contracts with third-party service providers, (vii)
risks related to the enforceability of contracts, (viii) reliance
on the expertise and judgment of senior management of the Company,
and ability to retain such senior management, (ix) risks related to
proprietary intellectual property and potential infringement by
third-parties, (x) risks relating to the management of growth
and/or increasing competition in the industry, (xi) risks
associated to cannabis products manufactured for human consumption,
including potential product recalls, (xii) risks related to the
economy generally, and (xiii) risk of litigation.
The forward-looking information contained in this news release
is made as of the date hereof and the Company is not obligated to,
and does not undertake to, update or revise any forward-looking
information, whether as a result of new information, future events
or otherwise, except as required by applicable securities laws.
Because of the risks, uncertainties and assumptions inherent in
forward-looking information, investors should not place undue
reliance on forward looking information. The foregoing statements
expressly qualify any forward-looking information contained
herein.
This news release contains future-oriented financial information
and financial outlook information (collectively, "FOFI")
about the Company's prospective results of operations, which are
subject to the same assumptions, risk factors, limitations, and
qualifications as set out in the above paragraph. FOFI contained in
this news release was approved by management as of the date of this
news release and was provided for the purpose of providing further
information about the Company's future business operations. The
Company disclaims any intention or obligation to update or revise
any FOFI contained in this news release, whether as a result of new
information, future events or otherwise, unless required pursuant
to applicable law. Readers are cautioned that the FOFI contained in
this document should not be used for purposes other than for which
it is disclosed herein.
Non-IFRS Measures
This news release makes reference to certain non-IFRS measures.
These measures are not recognized measures under IFRS, do not have
a standardized meaning prescribed by IFRS, and are therefore
unlikely to be comparable to similar measures presented by other
companies. Rather, these measures are provided as additional
information to complement those IFRS measures by providing further
understanding of our results of operations from management's
perspective. Accordingly, these measures should not be considered
in isolation nor as a substitute for analysis of our financial
information reported under IFRS.
The non-IFRS measure used in this news release includes
"Adjusted EBITDA". The Company calculates Adjusted EBITDA as a sum
of net revenue, other income, cost of inventory sold, production
salaries and wages, production supplies and expense, general and
administrative expense, and sales and marketing expense, as
determined by management. Adjusted license fee eliminates 50% of
the fee which is equivalent to the Company's share of the joint
venture company to which the license fee is paid. Adjusted EBITDA
is provided to assist readers in determining the ability of the
Company to generate cash from operations and to cover financial
charges. Management believes that Adjusted EBITDA provides useful
information to investors as it is an important indicator of an
issuer's ability to generate liquidity through cash flow from
operating activities and equity accounted investees. Adjusted
EBITDA is also used by investors and analysts for assessing
financial performance and for the purpose of valuing an issuer,
including calculating financial and leverage ratios. The most
directly comparable financial measure that is disclosed in the
financial statements of the Company to which the non-IFRS measure
relates is income (loss) from operations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231121079553/en/
INVESTOR CONTACT Anthony Simone Phone: 416-881-5154 Email:
ir@indiva.com
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