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The so-called Cannabis 2.0 rollout in Canada – the introduction of a wide assortment of cannabis derivative products such as cannabis- infused products (edibles and drinkables), vape pens, cannabis concentrates, and more – was met with a lot of fanfare around the beginning of 2020. But the industry has had its fair share of growing pains adjusting to new market conditions and consumer spending habits.
London Ontario-based
Indiva Limited (
TSX-V:NDVA,
OTC:NDVAF,
Forum) is a leading Canadian producer of cannabis edibles and other cannabis products, claiming to set the standard for quality and innovation while bringing its exceptional portfolio of products to Canadians and cannabis enthusiasts around the world.
In this lively and enlightening video podcast, Stockhouse Media’s Dave Jackson was joined by Indiva’s CEO Niel Marotta – one of the cannabis community’s most respected and experienced names – to discuss the Company’s record net revenue for Fiscal Q3 2020, developing strategic corporate partnerships, and how Indiva has managed to stay ahead of a cannabis curve that’s been bending downwards for the past year-plus.
SH: So, let’s start with Indiva’s recent big news – your announcement on October 6th that the Company has set a record net revenue for Fiscal Q3 2020 – over 14-hundred percent year-over-year and nine-percent sequential net revenue growth. Can you walk us through these impressive results and what this means for shareholders and potential investors?
NM: Sure. Thanks for the opportunity to chat today. We continue to have very strong growth driven primarily by 2.0 products. By that really we mean edibles. We have other products in our lineup, but the Wana sour gummies and the Bhang chocolate, really drove results in Q3 and the, the really big sort of, you know, 1400% year over year growth.That's a reflection of last year, we did not have our edibles, topicals, NexTraq sales license yet, and edibles really hit the market in January. We got our license to sell edibles at the end of January of 2020. So it's really this year, Q1, two and three, where we've seen very good growth sequentially, but year-over-year it's really big because of the introduction of the edibles. Inside Q3 we first began shipping Wana sour gummies in the month of September, and so as a result, September was a record month and we expect that strength to continue into Q4. The products have been really well received, the distribution's getting wider to more provinces, and we're introducing new flavors this quarter as well.
SH: Indiva continues to increase its retail reach throughout Canada. You recently announced you’ll be shipping your popular Wana Sour Gummies to BC, Alberta, Saskatchewan, and Yukon Territory – the number one edibles brand in the U-S. Do you expect the same results north of the border?
NM: I think part of the theory of licensing these great brands is it stood to reason if they were popular in the US, in places like Colorado or, Nevada or California, they would be very popular and well received in Canada. The products are award-winning and sell very well and so far so good. We have leading market share at least in Ontario where we have a very good idea about the numbers, driven by both, not just Wana, but also by the Bhang chocolate, which was very well received. We introduced those products back in February and continued to introduce new products. I guess the theory is playing out fairly well so far. So far, so good.
SH: Speaking of award-winning, You’ve cemented strategic partnerships with award-winning U-S brands like Bhang Inc. For our investor audience, what do these relationships really mean and what are the core benefits?
NM: Sure. Well part of it is brand recognition, it's hard to quantify, what the impact of that will be in Canada, you know, to what extent do Canadians recognize the Wana or Bhang brands, so far that our market share again is leading. So I think again, hard to quantify, but, directionally it's worked in that we have very good market share at top of the table. But beyond that, there's, I would say two core things, one learning how to make these products, and make them at scale. We signed the Wana deal in March and six months later we're distributing nationally, and we couldn't have done that without the right partner. And I would say the same thing for Bhang. So that's really important.
And then the second, or maybe last piece, beyond brand and understanding how to make the products and scale quickly, is the ability to piggyback the R &D that our partners do on their own. So for instance Wana has a fast onset gummy that they've just launched in the US, back in March of this year. And so we're very keen to introduce those products hopefully as early as Q1 2021 in Canada. And so, again, that's, I think a great example of all that research and development that was done by Wana to create a fast onset gummy, we can again benefit from that knowledge and introduce those parts in Canada very quickly without having to go through all that work ourselves.
SH: We can’t really sugar coat …pardon the pun..the fact that 2019 and 2020 were pretty rough couple of years in the cannabis space. As I mentioned off the top, Indiva has performed well above and beyond industry averages. How has the Company positioned itself for profitability and growth beyond this year?
NM: Sure. We took a sort of steady growth perspective to this. We didn't do a lot of acquisitions right out of the gate. We didn't take the view that we needed to be vertically integrated and own everything from growth through extraction. We looked at all of those things and we pivoted quickly away from it. Initially when we realized we didn't actually have to do this, there's plenty of flower capacity in Canada, there is a lot of distillate available now from many suppliers. So to a large extent, we look at that as raw materials. And so we don't have, let's say excess capital, built into producing the raw materials for our products. We also run a pretty lean company. I'm quite proud of, how low we keep our overheads.
And we have a team, all of our team members across the country and elsewhere, but primarily in London, Ontario, our facilities built, deeply experienced folks. And so we know how to produce at scale. Everybody onsite in London has decades of experience in the food industry and the CPG industry. And so now we're just applying that to cannabis. And as far as profitability goes, we would expect our margins to expand as our unit costs continue to decline. And that would primarily be driven by things like scaling up, leveraging our overheads, but also lower costs for flower and distillate as inputs into our products,
SH: “Value and opportunity” are small cap market catchphrases that really get the attention of investors. What can you tell them that makes your company so intriguing and attractive, and separates Indiva from the competition?
NM: Sure. Well, I mean, I think we touched on it a little bit, you know, trying specifically not to be everything to everybody and focus on where our core strengths lie, and for us, that's being as downstream as we can meet our manufacturing, finer final products and distributing them across the country, and doing that at a very consistent high quality level, at a relatively fair price. I think that that strategy is bearing fruit now, and we're really excited about 2021 and new products and flavors that we'll introduce.
SH: I’d be remiss if I didn’t ask if you can you update our investor audience and your Indiva shareholders on any other new company developments, especially in the wake of the coronavirus pandemic?
NM: Sure. Well luckily we've had no cases onsite, everyone is healthy at the facility. We implemented measures back in the spring and we continue to pay close attention to social distancing. Everyone wears masks, PPE. We check temperatures of everybody when they arrive. So, so far so good, knock on wood everything has been great. As far as new developments, again, I think we have new products that we'd like to introduce in Q4 and Q1, primarily some of the licensed products that we have from deep sell the Ruby Sugar and Saphire Salt and the Jewel candies, which are very much like a sweet tart, unique products that are not available in the market. And we'll continue to look at introducing other products, whether it's more chocolates and gummies that don't breach our contracts, in let's say different price points, or other licenses and license agreements, and even other categories like concentrates that are, that are very interesting, where we think we can again, use raw materials to produce a final product that's very competitive.
SH: And finally, what can you tell our investor audience regarding the current valuation of your stock and why it’s a solid buy right now?
NM: Sure. Well, I mean, our market cap now is about 25 million. So, you know, definitely a small cap, almost a micro cap. We've gone to great lengths to improve our balance sheet over the last 12 months. And in Q3, our working capital has swung back positive. And so going forward, I think what investors should expect is acceleration in revenue growth in Q4, not just a steady continuation of what they've seen in the last three quarters, and we fully expect, that's positive. So, to me, the opportunity to have a cannabis name that's focused as leading market share, arguably undervalued relative to revenue and EBITDA projections and turning profitable - there's very few companies that are in that position, and we're there right now.
For more information, visit
www.indiva.com.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.