Indiva Launches Pearls by Grön Gummies and
Remains the National Market Share Leader in the Edibles
Category
LONDON,
ON, Aug. 16, 2022 /CNW/ - Indiva Limited (the
"Company" or "Indiva") (TSXV: NDVA) (OTCQX: NDVAF),
the leading Canadian producer of cannabis edibles and other
cannabis products, is pleased to announce its financial and
operating results for the second fiscal quarter ended June 30, 2022. 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 Six Months Ended
June 30, 2022, and the Company's
Condensed Consolidated Interim Financial Statements for the
Three and Six Months Ended June 30,
2022 and 2021, to be filed on SEDAR and made available
on the Company's website, www.indiva.com.
"We are very pleased to report record net revenue and gross
profit on a year-to-date basis, and expect to see further revenue
growth in the second half of 2022, driven by the introduction of
more than 25 new SKUs across Canada," said Niel
Marotta, President and Chief Executive Officer of Indiva.
"The second quarter was extremely busy operationally, as we began
manufacturing new products, including our first commercial batches
of Pearls gummies, which were delivered to the OCS subsequent
to quarter end. We expect to ship Pearls, and many other new
products, to additional provinces in the coming weeks. We are
pleased to see improvement in gross margins in the quarter, however
as per our June 27, 2022, press
release, delays in new product deliveries and lack of provincial
delivery appointments in certain provinces in late June caused
approximately $1 million of sales to
slip into Q3 2022, resulting in declining net revenue on a
year-over-year basis. We are very excited for the launch of
Pearls by Grön, Indiva Life cookies, lozenges and chocolates, and
Dime Vapes. The feedback from key accounts, provincial wholesalers
and budtenders across the country has been very positive, and we
look forward to continuing to delight of-age Canadian cannabis
enthusiasts with the quality and innovation that Indiva products
are known for."
HIGHLIGHTS
Quarterly Performance
- Gross revenue in Q2 2022 was $8.9
million, representing an 8.3% sequential decrease from Q1
2022, and a 9.9% decrease year-over-year from Q2 2021.
Year-to-date, gross revenue increased 11.0% year over year to a
record $18.6 million.
- Net revenue in Q2 2022 was $8.1
million, representing an 8.5% sequential decrease from Q1
2022, and a 9.7% decrease year-over-year from Q2 2021, due to
difficult comparisons versus the introduction of Wana Quick in Q2 2021, and delays in provincial
deliveries of new and existing products, causing revenue to slip
into the third quarter. Revenue continues to be driven primarily by
higher sales of category leading edibles including Wana Sour
Gummies and Bhang Chocolate. Year-to-date, net revenue increased
12.1% year over year to a record $17.0
million.
- Net revenue from edible products in the quarter was
$7.2 million, down 14.8% from
$8.5 million in Q1 2022 and down
13.9% from $8.4 million in the prior
year period. Edible product sales represent 89.1% of net revenue in
Q2 2022. Year-to-date net revenue from edible products increased
13.0% year-over-year to a record $15.7
million or 92.6% of net revenue.
- Gross profit before fair value adjustments, impairments and
one-time items declined year-over-year, but increased sequentially,
to $2.7 million, or 33.1% of net
revenue, versus 29.6% in Q1 2022 and 30.1% in Q2 2021. The
improvement in gross margin was due to lower material costs on
certain inputs, improved production efficiencies and lower returns
and impairments to inventory, offset by lower revenues and lower
overhead absorption on goods sold in the quarter. Year-to-date,
gross profit before fair value adjustments, impairments and
one-time items increased to a record $5.3
million, or 31.3% of net revenue, versus $4.2 million or 27.6% of net revenue in the
corresponding period last year.
- In Q2 2022, Indiva sold products containing 44.2 million
milligrams of distillate, the active ingredient in edible products,
which represents a 19% decrease when compared to the 54.5 million
milligrams in products sold in Q1 2022, and a 16% decrease compared
to 52.5 million milligrams sold in Q2 2021.
- Impairment charges in the quarter totaled $0.52 million. This impairment includes a write
off of aged finished goods and bulk cannabis flower, and to a
lesser extent, certain packaging for obsolete products, offset by a
recovery on oil-based products. The Company will continue to work
to monetize any impaired inventory which remains saleable. The
Company expects lower inventory impairments going forward as most
of the bulk flower inventory originating from terminated contract
manufacturing has either been sold or written down.
- Operating expenses in the quarter decreased 0.4% sequentially,
representing 42.9% of net revenue, versus 39.4% in Q1 2022 and
34.4% in Q2 2021. Operating expenses declined due to lower general
and administrative costs, which were down 18.8% year-over-year and
down 6.1% sequentially, offset by higher marketing costs and sales
commissions. Year-to-date, operating expenses increased by 31.2% to
$7.0 million due entirely to higher
marketing costs and sales commissions.
- Adjusted EBITDA improved sequentially in Q2 2022 to a loss of
$0.15 million, versus a loss of
$0.38 million in Q1 2022, and
declined versus a profit of $0.49
million in Q2 2021, due to lower revenue and higher
marketing expenses, offset by lower cost of goods. Year-to-date,
adjusted EBITDA was a loss of $0.53
million versus a loss of $0.01
million in the corresponding period last year. See
"Non-IFRS Measures" below.
- Comprehensive net loss of $2.5
million included one-time expenses and non-cash charges for
impairment of inventory and property, plant and equipment totaling
$0.5 million. Excluding these
charges, comprehensive loss declined to $2.0
million versus an adjusted loss of $2.02 million in Q1 2022 and $0.72 million in Q2 2021.
Operational Highlights for the
Second Quarter 2022
- Dime Industries ("Dime"): Indiva signed an exclusive
licensing and manufacturing agreement with Dime. The agreement has
a five year term which automatically renews for three additional
five year terms. Indiva intends to launch Dime's proprietary and
innovative vape products, including disposable vapes, 510-thread
carts and custom batteries beginning in Q3 2022, marking Indiva's
first entrance into the vape category.
- Awards: Artisan Batch was awarded Best in Grow from Cannabis NB
for best Indica flower, namely Sour Glue, produced by Purplefarm
Genetics.
- Indiva launched additional SKUs including Artisan Batch Mimosa
Live Rosin. Wana Passion Fruit, Wana Lemon Iced Tea, and
Wana Quick Rise and Shine
Clementine, with CBG.
- Indiva introduced its new consumer brand Indiva Life at the
2022 Lift&Co conference. The initial cannabis products to be
launched under the Indiva Life brand will include edibles and
extracts. All of the Indiva Life SKUs are now actively being
ordered by provincial wholesalers.
Events Subsequent to Quarter
End
- Indiva was awarded 25 additional SKU listings by the Ontario
Cannabis Store (OCS), including five SKUs which will participate in
the "Flow-Through" program. These additional listings bring
Indiva's OCS listings to a total of 60 SKUs, up from the current
level of 35 SKUs. The newly accepted SKUs are across six brands:
Indiva Life (including lozenges, cookies and chocolates), Artisan
Batch, Pearls by Grön, including three SKUs in addition to the
initial four Pearls SKUs delivered in July, Pips by Grön, Dime
Vapes and Bhang Chocolate. All SKUs are expected to launch in
Ontario in October 2022, with deliveries to additional
provinces beginning in September
2022.
- Indiva completed an agreement with Kronic Relief, of
Toronto, Ontario, to bring its
premium craft flower to market under the Artisan Batch brand. The
OCS has accepted this cultivar, and 3.5 gram jars of Kronic Relief
flower are expected to hit shelves in Ontario in Q4 2022.
- Indiva shipped its initial deliveries of Pearls by Grön to the
OCS. The company expects the product to be available for sell-in to
Ontario licensed retailers as of
August 23rd.
Market Share
- Data from Hifyre Inc. for the second quarter of 2022 shows
strong sell-through of Indiva edible products. With 31.6% share of
sales, Indiva continues to lead in the #1 market share position in
the edibles category:
- Ontario: #1 with 30.2% market
share.
- Alberta: #1 with 30.0% market
share.
- British Columbia: #1 with
38.1% market share.
- Saskatchewan: #1 with 21.5%
market share.
- Manitoba: #1 with 34.6% market
share.
- Wana™ Sour Gummies led the edibles category, with 26.0%
category share, and 34.1% sub-category share, and
Bhang® continued to lead the chocolate category with 37.6%
sub-category share.
- Product ranking in Q2 2022 showed 6 of the top 10 edible SKUs
are from Indiva.
- Based on data from British
Columbia, Alberta,
Ontario, Manitoba and Saskatchewan, the edibles category increased
by 9% in Q2 2022 to $56.3 million in
retail sales from $51.8 million in Q1
2022.
Correction of Prior Period
Financial Statements
The Company identified an error in the calculation of excise
taxes related to additional duty charged by certain provinces and
determined an adjustment is required to excise taxes payable on
sales for the period of January 1,
2020 to March 31, 2022. As a
result, prior years amounts on the consolidated statements of loss
and comprehensive loss with respect to excise taxes, cost of sales,
and marketing and sales were corrected to reflect the corrected
excise tax payable on sales in those periods, as well as royalty
and sales commissions which are recoverable as a result of
decreased net revenues for those prior period sales. Management
assessed the materiality of the correction described above on prior
period financial statements and concluded that these corrections
were not material to any prior annual or interim periods.
Accordingly, amounts related to the three and six ended
June 30, 2021, and as at June 30, 2021, and December 31, 2021, have been re-presented after
correction of such immaterial adjustments solely for
comparability purposes.
Outlook
- The Company expects Q3 2022 and 2H 2022 net revenue to be
higher sequentially and year-over-year driven primarily by new
product introduction including Pearls gummies, Dime Industries vape
products, as well as new Indiva Life branded products, resulting
from in-house innovation, namely Double-Stuffed Vanilla Cookies and
Double Stuffed Fudge Cookies, as well as Wild Cherry THC Lozenges
and Lemon THC Lozenges.
- Margins are expected to benefit in the second half of 2022 due
to the implementation of automation in the production and packaging
of edible products. The Company expects to deliver on its
commitments for existing or new listings of products, despite some
delays in receiving equipment due to global COVID-19-related
lockdowns.
Operating and Financial Results
for the Three and Six Months ended June 30,
2022 and 2021
|
Three months
ended
June
30
|
Six months
ended
June
30
|
(in thousands of $,
except gross
margin % and per share figures)
|
2022
|
2021
|
2022
|
2021
|
Gross
revenue
|
8,891.3
|
9,870.3
|
18,590.1
|
16,740.6
|
Net revenue
|
8,126.5
|
8,878.6
|
17,005.1
|
15,215.9
|
Gross margin before
fair value
adjustments and impairments
|
2,690.8
|
3,016.4
|
5,319.2
|
4,156.6
|
Gross margin before
fair value
adjustments and impairments (%)
|
33.1 %
|
30.1 %
|
31.3 %
|
27.4 %
|
Loss and comprehensive
loss
|
2,501.8
|
1,480.0
|
5,575.9
|
4,549.2
|
Adjusted
EBITDA1
|
(149.6)
|
499.0
|
(528.0)
|
(55.0)
|
Net and comprehensive
earnings per
share – basic and diluted
|
(0.02)
|
(0.01)
|
(0.04)
|
(0.03)
|
1
|
See "Non-IFRS
Measures" below.
|
Operating Expenses
|
Three months
ended
June
30
|
Six months
ended
June
30
|
(in thousands of
$)
|
2022
|
2021
|
2022
|
2021
|
General and
administrative
|
1,359.7
|
1,675.0
|
2,807.8
|
2,800.5
|
Marketing and
sales
|
1,625.4
|
1,091.0
|
3,356.1
|
1,961.0
|
Research and
development
|
225.1
|
41.0
|
335.8
|
41.0
|
Share-based
compensation
|
176.7
|
162.1
|
288.0
|
273.3
|
Expected credit loss
(recovery)
|
(2.3)
|
5.9
|
(0.5)
|
18.3
|
Depreciation of
property, plant, and equipment
|
51.8
|
71.4
|
98.9
|
127.6
|
Amortization of
intangible assets
|
51.9
|
52.0
|
103.7
|
104.0
|
Total operating
expenses
|
3,448.2
|
3,098.5
|
6,898.9
|
5,325.7
|
COVID-19
Government and private entities are still assessing the present
and future effects of the COVID-19 pandemic. Indiva has continued
to operate with enhanced health and safety protocols in place to
protect its employees. The Company continues to assess the
customer, supply chain, and staffing implications of COVID-19 and
is committed to making continuous adjustments to minimize
disruption and impact. Indiva will remain proactive in its response
to the pandemic and compliant with any and all provincial and/or
federal policy enacted to protect Canadians.
CONFERENCE CALL - Tuesday, August 16, 2022 at 8:30 a.m. (EST):
The Company will host a conference call to discuss its results
on Tuesday, August 16, 2022 at
8:30 a.m. (EST). Interested
participants can join by dialing 416-764-8658 or 1-888-886-7786.
The conference ID number is 34309929.
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 309929#. The
recording will remain available until Friday, September 16, 2022.
ABOUT INDIVA
Indiva sets the standard for quality and innovation in cannabis.
As a Canadian licensed producer, Indiva produces and distributes
award-winning cannabis products nationally, including
Bhang® Chocolate, Wana™ Sour Gummies, Jewels
Chewable Tablets, Grön edibles, Dime IndustriesTM vape
products, as well as capsules, edibles, extracts, pre-rolls and
premium flower under the INDIVA, Indiva Life and Artisan Batch
brands. Click here to connect with Indiva on LinkedIn, Instagram,
Twitter and Facebook, 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, (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, and (iv) the
Company's ability to deliver on its commitments for existing or new
listings of products. 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, (viii) risks related to the
enforceability of contracts, (ix) reliance on the expertise and
judgment of senior management of the Company, and ability to retain
such senior management, * risks related to proprietary intellectual
property and potential infringement by third-parties, (xi) risks
relating to the management of growth and/or increasing competition
in the industry, (xii) risks associated to cannabis products
manufactured for human consumption, including potential product
recalls, (xiii) risks related to the economy generally, and (xiv)
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.
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SOURCE Indiva Limited