On November 22, 2022, Indiva Limited (Indiva) (TSXV: NDVA) (OTCQX: NDVAF), a leading Canadian producer of cannabis-infused foods and other cannabis products, announced its financial and operational performance for the third quarter ending September 30, 2022.
We are pleased to report year-over-year growth and record net revenue since the beginning of the year, which is due to the successful launch of several new products and brands in the Canadian market in the third quarter of 2022, including Indiva Life sandwich cookies, Indiva Grön gummies' Life Lozenges, Dime vapes, and Pearls, all of which have quickly become top edible brands in the market. Indiva is transitioning from relying on licensed brands and will continue to make every effort to support these brands, focusing on its innovative core to drive future growth," said Indiva President and CEO Niel Marotta. "In the third quarter, Indiva launched a record number of SKUs, primarily in Ontario and British Columbia. These new products are now being rolled out on our distribution platform nationwide, spanning all 13 provinces and territories in Canada. Feedback from key customers and bidders has been very positive, which has translated into strong reorders for our new products. We look forward to continuing to delight Canadian adult cannabis enthusiasts with the quality and innovation that Indiva products are known for.
Quarterly Performance
In the third quarter of 2022, the total revenue amounted to $8.8 million, showing a decrease of 1.1% compared to the second quarter of 2022, but an increase of 5.9% compared to the same period in 2021. From the beginning of the year until now, the total revenue has increased by 9.3% compared to the same period last year, reaching a record high of $27.4 million.
Due to the launch of new products and the promotion of core product strengths, net revenue for Q3 2022 was $8.1 million US dollars, a decrease of 0.4% from Q2 2022, and an increase of 5.5% year-on-year compared to Q3 2021. The closure of the BC province had a negative impact on net revenue for Q3 2022. The Liquor Distribution Branch's distribution center experienced strike action, and the Ontario Cannabis Retail Corporation's (OCS) distribution center, which operates as a cannabis store in Ontario, was partially closed due to a network security event, causing delivery delays and up to two weeks of delays in new product releases. From the beginning of the year to the present, net revenue has increased by 9.9% year-on-year to a record $25.1 million US dollars.
During this quarter, net revenue from food products reached $7.3 million, slightly higher than the $7.2 million from Q2 2022 and $6.9 million from the same period last year. Food product sales accounted for 90.7% of the net revenue in Q3 2022. Year-to-date, net revenue from food products has increased by 10.7% to a record-breaking $23.1 million, representing 92% of the net revenue.
In the period before fair value adjustments, impairments, and one-time items, the gross profit of the company decreased year-over-year and quarter-over-quarter to $2.3 million, representing 28.9% of net revenue. This is lower than the 33.1% in Q2 2022 and 34.5% in Q3 2021. The decrease in gross profit margin is attributed to delayed receipt of automated equipment related to the production and processing of certain new products, which was offset by lower inventory write-downs. From the beginning of the year until now, the gross profit before fair value adjustments, impairments, and one-time items increased to a record $7.7 million, representing 30.5% of net revenue, compared to $6.8 million, or 29.8% of net revenue in the same period last year.
In the third quarter of 2022, Indiva sold products containing 56.5 million milligrams of cannabinoids (the active ingredient in edible cannabis products), showing a growth of 32.4% compared to the 42.7 million milligrams sold in the second quarter of 2022 and 33.7% compared to the 42.3 million milligrams sold in the third quarter of 2021. This growth was mainly due to a shift in product mix towards foods with higher total cannabinoid content and the addition of small amounts of other cannabinoids (i.e., CBN and CBG) to multiple SKUs.
This quarter, the company's total write-down expenses amounted to $400,000. This includes the write-off of outdated finished products and bulk marijuana flowers, as well as the partial write-off of packaging for some outdated products, which was offset by the recovery of oil-based products. The company will continue its efforts to monetize any write-down inventory that is still sellable. The company expects future inventory write-downs to decrease, as most of the bulk flower inventory from terminated manufacturing contracts has been sold or written down to its net realizable value.
In the current quarter, operating expenses have decreased by 3.0% compared to the previous quarter, accounting for 41.8% of net revenue, whereas in the second quarter of 2022 it was 42.9% and in the third quarter of 2021, it was 39.2%. The decrease in operating expenses is due to lower general and administrative costs, which decreased by 22.5% and 6.1% year-over-year, respectively, but were offset by higher marketing costs and sales commissions. From the beginning of the year until now, increased marketing costs and sales commissions, as well as new product innovation activities, have led to an increase in research and development costs and operating expenses. Operating expenses have increased by 24.5% to $10.4 million, partially offset by lower general and administrative expenses.
In the third quarter of 2022, adjusted EBITDA continued to decline, resulting in a loss of $500,000, compared to a loss of $150,000 in the second quarter and a profit of $130,000 in the third quarter of 2021. The decline is due to the increase in cost of goods sold related to the launch of new products, marketing costs and research and development expenses that have increased since the start of the year, partially offset by lower general and administrative costs. Adjusted EBITDA has been at a loss of $1 million since the start of the year, compared to a profit of $100,000 in the same period last year. Please refer to the "Non-IFRS measures" below.
The comprehensive net loss of $2.6 million includes one-time expenses and a non-cash expense of $400,000 for inventory write-downs. Excluding these expenses, the comprehensive loss increases to $2.2 million, while the adjusted losses for Q2 2022 and Q3 2021 respectively are $2 million and $1 million. The cash balance at the end of the quarter increased to $3.6 million.
For further information regarding the third quarter financial report, you may visit the official website at www.indiva.com.
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