Indiva Limited (OTCPK:NDVAF) First Quarter 2024 Earnings Conference Call May 23, 2024 at 10:30 a.m. ET
Participating companies
Neil Marotta – CEO
Jennifer Welsh – CFO
operator
Good morning and welcome to the Indiva Limited Q1 2024 Earnings Conference Call. (Operator Instructions) This conference call was recorded on Tuesday, May 23, 2024.
I would now like to turn the conference over to Neil Marotta, CEO of Indiva. Please move on.
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 on this conference call contain forward-looking statements. Each forward-looking statement is subject to risks and uncertainties that may cause actual results to differ materially from those anticipated in such statement. Certain important factors and assumptions have been considered and applied in preparing these forward-looking statements.
Additional information regarding these forward-looking statements, factors and assumptions is available in the financial results press release issued today, as well as in the risk factors section of the annual MD&A and other public documents available on Indiva’s SEDAR+ profile.
“We are pleased to report our first quarter financial results, including positive Adjusted EBITDA in a seasonally weakest quarter. Indiba remains a leader in edibles, with more than 30% of our net revenue derived from our in-house brands, including No Future Gummies and Vapes, Indiba Blips Tablets, Dopio Sandwich Cookies and 1432 Chocolate. First quarter performance was driven by continued growth of Pearls Gummies and the introduction of new products, including Base’s No Future Gummies.
On a year-over-year basis, the Company overcame a 50% decrease in net revenue due to the elimination of all revenue losses and a significant decrease in water revenue due to the transition to contract manufacturing, specifically, the decrease in net revenue contribution due to the relocation. Combined with Wana’s manufacturing contract and Lawson’s lower revenue due to Health Canada’s loss regulations, net revenue for the first quarter was $4.9 million, a 52% loss compared to the same period last year.
This decrease is Net revenue incremental contribution of $5.2 million from Pearls and No Future. I am extremely proud of the resilience and Indiva team and our ability to overcome adversity, especially caused by events beyond our control. Comparing our core brands year-over-year and excluding the impact of lozenges and traps, our net revenue increased 124% compared to the first quarter of 2023. Additionally, compared to the same period last year, the net revenue of Pearls Gummies, our largest contributor, increased. As a percentage of net revenue, it increased by 166%. Pearl’s strong performance continued in the second quarter as permanent wholesaler depletion continued to increase by more than 100% year over year.
Additionally, No Future Gummies continue to perform well, with depletion volumes continuing to trend upward. Gross profit for the quarter improved 18% year over year. Lower impairment and write-downs also boosted gross margin, improving to 30% of net revenues from 25% of net revenues in the same period last year. This result was driven by process improvements at our production facility in London, Ontario. Turning to market share.
Data from permanent wholesalers for the first quarter of 2024 shows the continued leadership of Indiva in the animal category. Indiva holds the No. 1 market share ranking by sales value and unit sales in the animal category, with a 31.5% market share in British Columbia overall and a 27.6% market share in Alberta and Ontario. doing. We now turn to a review of our key business highlights for the first quarter ended March 31, 2024. There is no future in the introduction of new products. There’s no better future than shipping a new gummy called stupid sour gummy with no functionality to Alberta. British Columbia and Ontario are scheduled to launch in August and September. Stupidly Sour Gummies comes in his three flavors: Arctic Meltdown Blues, Key Lime Cherry Revolt, and Citrus Chaos. These additions bring the total lifespan of dummy SKUs on the market to 10.
The company also introduced new Indiva-branded blips. Indiva has expanded its Deep Tablets offerings with two new 20-count SKUs, one with a 1:2 THC to CBG ratio that will move into British Columbia and Alberta in May, and one with a 1:1 TCB ratio that will also move into Alberta in May.
For Pearls Gummies, the company shipped a new 5-pack Pro SKU, Red Basel berry, with a cannabinol ratio of 1:1:1 THC, CBD and CBG, piggybacking on the success of Pearl’s Blue Razelbury, Canada’s top selling cannabis product. Since the end of the quarter, Indiva announced a further loan amendment with (Sundal) under which Indiva will repay $2 million of the outstanding principal amount pursuant to the promissory note and will work to reduce other current liabilities in the near future. The consideration for the repayment of the $2 million termination agreement removed the company’s covenant under the promissory note to guarantee an unrestricted cash balance of more than $2 million at all times. The maturity date of the promissory note remains February 24, 2026.
The Company also employs SSC Advisors as a financial advisor to assist in evaluating potential strategic alternatives aimed at maximizing shareholder value. This includes financing alternatives, mergers, amalgamations, plans of arrangement, consolidations, reorganizations, or other similar transactions. Please note that no further updates regarding this process will be provided at this time. We will provide other updates as needed.
Looking ahead to Q2 2024, we are off to a great start and Indiva’s business has never been stronger. We achieved a record high of $4.3 million in net revenue in April 2024, with a positive net profit for the month. On a year-over-year basis, our net revenue so far in April and May has already surpassed the $7.5 million we achieved for the entire quarter of Q2 2023, with great months remaining. We are therefore confident that our Q2 net revenue will increase both year-over-year and quarter-over-quarter. We expect margins to improve in Q2 as well, and we are on track to maintain our record net revenue and margins for the full year of 2024.
Finally, I would like to thank all of Indiva’s employees, including our dedicated staff at our London, Ontario facility. We would also like to thank our sales and marketing staff and our talented innovation team for working tirelessly to support the launch of new products and the Viva brand across Canada. thank you. We would also like to thank all cannabis enthusiasts across Canada.
We now turn to Jennifer Welsh, Indiva’s chief financial officer, to review our financial results in detail.
Jennifer Welsh
Thanks, Neil. Let me review Indiba’s financial performance for the fiscal first quarter ended March 31, 2024. Total revenue for the quarter was $10.6 million, up 2.6% year over year. Net revenue for the quarter was $9.3 million, down 0.9% year over year. This was primarily driven by strength in Pro and Tape, which will not be coming, offset by lower revenue and losses and revenue losses from Wana. Edibles overall represented 90% of net revenue for the quarter.
In the first quarter of 2024, Indiva’s products contained 186 million milligrams of cannabinoids, representing an increase of 66% compared to the 112 million milligrams of products sold in the first quarter of 2023. Gross profit increased 18% to $2.8 million, or 30% of net revenues, compared to $2.3 million, or 25% of net revenues in the first quarter of 2023, due to lower inventory impairments and a favorable mix impact. Impairment charges for the quarter totaled $17,000, the lowest on record, due to process improvements and the recovery of impairments related to raw materials.
Operating expenses for the quarter were flat year over year at $3.2 million, or 34.4% of net revenue, but increased slightly compared to $3.1 million, or 28.9% of net revenue, in the fourth quarter of 2023. Adjusted EBITDA decreased to a profit of $120,000 in the first quarter of 2024. Comprehensive net loss for the first quarter of 2024 was $1.8 million, which includes one-time charges and non-cash charges (including inventory impairment of $200,000). This was an improvement from the $2.3 million loss in the first quarter of 2023. Excluding these charges, comprehensive net loss decreased to $1.6 million in the first quarter of 2024 compared to a loss of $1.3 million in the first quarter of 2023. The cash balance at the end of the quarter was $3. a million.
Neil Marotta
Thank you, John. Operator, I would like to take your questions.
Q&A session
operator
Neil Marotta
All right. Thank you all for joining us. We’re going to get back to work and I look forward to speaking with you all again in August when we share our second quarter 2024 financial results. Thank you, everyone.
operator
Ladies and gentlemen, this concludes today’s conference call. Thank you for joining us. You may now hang up. Thank you very much.
