Indiva Limited (NDVA), a leader in the cannabis edibles market, announced its first-quarter financial results for the period ended March 31, 2024, during its earnings call on May 23, 2024. The company highlighted a positive adjusted EBITDA and a significant increase in net revenue from its core brands, despite facing regulatory hurdles and a transition to contract manufacturing that affected its net revenue.
Indiva's CEO, Neil Marotta, and CFO, Jennifer Welsh, discussed the company's financial performance, operational highlights, and the outlook for the future.
Key Takeaways
- Indiva reported positive adjusted EBITDA in its seasonally weakest quarter.
- The company remains the leader in edibles, with over 30% of net revenue from in-house brands.
- Despite a 50% drop in net revenue due to regulatory rulings and a shift to contract manufacturing, Indiva saw a 124% increase in net revenue from core brands year-over-year.
- Gross profit improved by 18%, with gross profit margin increasing to 30% of net revenue.
- Indiva holds a significant market share in the edibles category across key Canadian provinces.
- New product introductions and a strong start to Q2 2024 indicate potential for increased net revenue and margins.
Company Outlook
- Indiva expects Q2 2024 net revenue to surpass the previous year and to improve sequentially.
- Margins are anticipated to improve in Q2 2024.
- The company is on track for record net revenue and margins for the full year 2024.
- Indiva has retained SSC advisors to evaluate potential strategic alternatives to maximize shareholder value.
Bearish Highlights
- Net revenue was impacted by the loss of revenue from Lozenges and the transition of Wana to contract manufacturing.
- Comprehensive net loss for Q1 2024 was $1.8 million, although this was an improvement from the previous year.
Bullish Highlights
- Indiva's core brands experienced substantial growth, with Pearls Gummies net revenue increasing by 166% year-over-year.
- The company maintains a strong market share in the edibles category in key Canadian provinces.
- Positive net income was achieved in April 2024.
Misses
- Net revenue decreased slightly by 0.9% year-over-year to $9.3 million in Q1 2024.
- Adjusted EBITDA for Q1 2024 decreased compared to Q1 2023.
Q&A Highlights
- No specific questions or answers were highlighted in the provided summary.
Indiva's resilience in the face of regulatory challenges and its ability to adapt to market changes have positioned the company well for the future. With strong market share, the introduction of new products, and strategic financial management, Indiva is poised to continue its growth trajectory in the competitive cannabis market. The company's leadership expressed gratitude to its employees and looks forward to sharing further updates in the next earnings call.
InvestingPro Insights
Indiva Limited's (NDVA) latest financial results shed light on the company's current position and future prospects in the cannabis edibles market. To provide additional context to these results, here are some relevant metrics and tips from InvestingPro.
InvestingPro Data:
- The company's market capitalization stands at $9.25 million USD, reflecting the market's current valuation of the company.
- Indiva's price-to-earnings (P/E) ratio is at -2.24, with an adjusted P/E for the last twelve months as of Q4 2023 at -1.88, indicating that the company is not generating net income relative to its share price.
- Revenue growth for the last twelve months as of Q4 2023 was 9.21%, with a quarterly increase of 16.75% in Q4 2023, showing that despite challenges, the company has managed to grow its revenue.
InvestingPro Tips:
- Indiva operates with a significant debt burden, which may impact its financial flexibility and ability to invest in growth opportunities.
- Analysts do not anticipate the company will be profitable this year, which aligns with the reported comprehensive net loss for Q1 2024.
For investors seeking a deeper analysis of Indiva Limited, there are additional InvestingPro Tips available that could provide further insights into the company's financial health and operational strategies. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/NDVAF. There are 6 more InvestingPro Tips listed on InvestingPro that could help investors make informed decisions about their investments in Indiva.
Full transcript - Indiva PK (NDVAF) Q1 2024:
Operator: Good morning, ladies and gentlemen, and welcome to the Indiva Limited Q1 2024 Earnings Conference Call. [Operator Instructions] This call is being recorded on Tuesday, May 23, 2024. I would now like to hand the conference over to Neil Marotta, CEO of Indiva. Please go ahead.
Neil Marotta: Thank you, operator. Welcome, everyone. Thank you for joining us this morning to discuss Indiva's financial results for the first quarter ended March 31, 2024. Matters discussed in this conference call include forward-looking statements. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Certain material factors and assumptions were considered and applied in making these forward-looking statements. Additional information regarding these forward-looking statements, factors and assumptions is available in our earnings press release issued today as well as in the Risk Factors section of the annual MD&A and other public disclosure documents available on Indiva's SEDAR+ profile. We're pleased to announce our first quarter results, including positive adjusted EBITDA in our seasonally weakest quarter. Indiva remains the leader in edibles and greater than 30% of our net revenue was derived from in-house brands, including No Future Gummies and vapes, Indiva Blips Tablets, Dopio Sandwich Cookies and 1432 chocolate. Q1 results were driven by continued growth in Pearls Gummies as well as the introduction of new products including No Future Gummies in base. On a year-over-year basis, we overcame a 50% drop in net revenue from the loss of all of our loss in revenue and a very large decline in Water revenue as it transition to contract manufacturing. Specifically, the decline in net revenue contribution from moving to contract manufacturing Wana, combined with the loss of Lawson's revenue due to Health Canada's regulatory ruling on losses cost $4.9 million or 52% of net revenue in the first quarter when compared with the same period last year. This decline was more than offset by a $5.2 million incremental net revenue contribution from Pearls and No Future. I'm very proud of the resiliency and Indiva team and our ability to overcome adversity, particularly driven by events out of our control. We compare our core brands year-over-year and exclude the impact from Lozenges and Wana, our net revenue was up 124% compared to Q1 2023. And on a year-over-year basis, net revenue from Pearls Gummies, our largest contributor to net revenue increased by 166%. The strength in Pearls continued into Q2 as depletions of perpetual wholesalers continue to grow by more than 100% versus last year. We also continue to see strength in No Future Gummies where depletions continue to trend higher sequentially. Gross profit in the quarter improved by 18% versus last year. Lower impairments and write-downs also helped gross profit margin, which improved to 30% of net revenue, up from 25% of net revenue in the year ago period. The result was driven by process improvements at our production facility in London, Ontario. Turning to market share. Data from perpetual wholesalers for the first quarter of 2024 show Indiva's leadership in the animal category continues. Indiva holds the number one ranking in market share by dollars and units sold in the animals category across British Columbia with 31.5% share, Alberta and Ontario with 27.6% share. I'll now turn to a review of some key operational highlights for the first quarter ended March 31, 2024. For new product introductions, no future -- no future rather than even shipped a new gummy called No Feature Stupidly Sour Gummies to Alberta and British Columbia with Ontario set to launch in August and September. Stupidly Sour Gummies come in 3 flavors, including Arctic Meltdown Blues, Key Lime Cherry Revolt and Citrus Chaos. These additions bring total life dummy SKUs in market to 10. We also introduced new blips under the Indiva brand. Indiva broadened its offering deep tablets with -- 2 new 20 count SKUs, one with examinate ratio of 1 to 2 THC to CBG, which will shift to British Columbia and Alberta in May and the other with 1 to 1 TCB ratio, which will also shift to Alberta in month of May. For Pearls Gummies, Indiva shipped a new 5-pack Pro SKU called Red Basel berry with a cannabinol ratio of 1:1:1 THC, CBD to CBG is piggyback on the success of the best-selling cannabis products in Canada namely Pearl's Blue Razelbury. Subsequent to quarter end, Indiva announced a further loan amendment with [Sundal] and Indiva repaid $2 million of the principal amount outstanding pursuant to the promissory note and shall work to reduce other current liabilities in the near term. Consideration for the repayment of the $2 million ending agreement removed the company's covenant under the promissory note to insure a $2 million minimum unrestricted cash balance at all times. Maturity date of provisory note continues to be February 24, 2026. The company has also retained SSC advisers as its financial adviser to assist the company in evaluation of potential strategic alternatives intended to maximize shareholder value. including financing alternatives, merger, amalgamation, plan of arrangement, consolidation, reorganization or other similar transactions. Please note, we will not be providing any further update on this process at this time. We will provide other updates when appropriate. Looking ahead to Q2 2024, we're off to a great start, and Indiva's business has never been stronger. We achieved record net revenue of $4.3 million in the month of April 2024, and we achieved positive net income in the month as well. On a year-over-year basis, net revenue to date through April and May is already ahead of the $7.5 million we achieved in the full quarter in Q2 of 2023 with wonderful month to go. So we're confident that our second quarter net revenue will be higher year-over-year and sequentially. We expect to see improved margins in Q2 as well, and we remain on track for record net revenue and margins for the full year 2024. Finally, I'd like to thank all of Indiva's employees, including our dedicated staff at our facility in London, Ontario. Our sales and marketing staff as well as our talented innovation team who have all worked tirelessly to support the launch of new and Viva brands in product across Canada. Thank you. I'm sure cannabis enthusiast everywhere in Canada. Thank you, too. I'll now turn it over to Indiva Chief Financial Officer, Jennifer Welsh to review the financial results in great detail.
Jennifer Welsh: Thank you, Neil. I'll review Indiva's financial performance for fiscal Q1 ended March 31, 2024. Gross revenue in the first quarter increased 2.6% year-over-year to $10.6 million. Net revenue decreased 0.9% year-over-year to $9.3 million in the quarter, driven mainly by the strength in pros coming to no future coming and tapes, offset by lower revenue from Wana and a loss of loss and revenue. Overall edibles accounted for 90% of net revenue in the quarter. In Q1 2024, Indiva's products containing 186 million milligrams of cannabinoids, which represents a 66% increase when compared to the 112 million milligrams in products sold in Q1 2023. Gross profit increased 18% to $2.8 million or 30% of net revenue compared to $2.3 million or 25% of net revenue in Q1 2023 due to lower impairments of inventory and a positive mix impact. Impairment charges in the quarter totaled $17,000 and a record low driven by process improvements and an impairment recovery related to raw materials. Operating expenses in the quarter remained flat year-over-year at $3.2 million or 34.4% of net revenue versus a slight increase compared to $3.1 million or 28.9% of net revenue in Q4 2023. Adjusted EBITDA decreased in Q1 2024 to a profit of $120,000 and versus a profit of $415,000 in Q1 2023. Comprehensive net loss in Q1 2024 was $1.8 million and included onetime expenses and noncash charges, including inventory impairments of $200,000. This is an improvement from a loss of $2.3 million in Q1 2023. Excluding these charges, comprehensive net loss declined to $1.6 million in Q1 in 2024 versus a loss of $1.3 million in Q1 2023. The cash balance at the end of the quarter was $3 million.
Neil Marotta: Thank you, John. Operator, I think with that, we'll open it up to questions, please.
Operator:
Neil Marotta: Okay. Thank you, everyone, for attending the call. We're going to get back to work and look forward to speaking to all again in August when we release our second quarter results for 2024. Thank you, everybody.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for joining, and you may now disconnect your lines. Thank you.
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