Canadian licensed producer Indiva Limited (TSX: NDVA) reported record earnings for the third quarter ending Sept. 30, pointing to higher demand for cannabis edibles as the company continues to write off older, now-banned goods.
The company posted a net revenue of $9.8 million for the quarter, a meaningful 21% rise from the same period last year. The growth is primarily driven by the success of its Pearls by Grön gummies and the introduction of its new No Future gummies and vapes.
Indiva’s focus on edibles has proven fruitful, with these products making up 92.5% of the net revenue for the third quarter of 2023. The Pearls gummies have become the top-selling gummy product in Ontario and British Columbia, while the No Future brand has shown rapid growth with over 1.3 million units ordered since July.
Despite facing regulatory challenges that led to some inventory impairments, Indiva reported a gross profit of $3.6 million, a 55.3% increase over the previous year. The rise in profit margins was aided by a combination of higher sales, a shift towards higher-margin products, and efficiencies from the use of automated equipment in production.
Operating expenses for the company fell to 31% of net revenue, the lowest in the company’s history, largely due to reduced marketing and research costs.
Indiva’s adjusted EBITDA was positive at $1 million, versus a loss of $600,000 from the same quarter last year. The financials do indicate a net loss of $900,000 million for the quarter, though that loss includes non-cash charges for inventory impairment of $600,000 and a $300,000 gain on debt modification.
So while the company reported impressive revenue and gross profit growth, the net loss reflects specific charges and adjustments, including the impact of inventory impairments and other non-operational costs. Management might view these losses as part of the growth and adjustment process.
“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’,” Niel Marotta said in a statement.
“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.”
The company’s market share in the edibles sector remains strong, with Indiva leading in Ontario with a 23.1% market share and holding significant positions in British Columbia and Alberta. Its dominance in specific sub-categories like chocolate and baked goods further solidifies their market position.
Looking forward, Indiva anticipates continued growth. The company expects an increase in net revenue for the fourth quarter of 2023, driven by new product launches and an expanding market presence. Management’s strategy to focus on high-margin products and enhanced production efficiency is expected to drive further profit growth.