Exclusive Interview with INDIVA Co-Founder, CEO, and President Niel Marotta
Over the last 12 months, INDIVA (TSXV: NDVA) (OTC: NDVAF) has made significant progress on its growth plans. Co-Founder, CEO, and President Niel Marotta, who last spoke with New Cannabis Ventures in September 2018, checked in with an update on the company’s grow footprint and extraction plans. The audio of the entire conversation is available at the end of this written summary.
The Growing INDIVA Team
As the company has been gearing up for Cannabis 2.0, the moniker for the next wave of cannabis products soon to be available in Canada, it has added more talent to its team. INDIVA has brought on mid-level and senior management with years of experience in the CPG space, including people like Vice President of Operations Rob Carse and Director of Operations Melissa Kurek. The company has also focused on adding senior finance executives to its team.
INDIVA has approximately 50 employees, but aggressive expansion will likely double that number over the course of the next few months, according to Marotta.
Canadian Cultivation and Distribution Footprint
The company’s London, Ontario facility has four phases of growth. A year ago, the 40,000-square-foot building had less than 2,000 square feet of grow space. Today, it has approximately 8,000 square feet of grow space. Once the third growth phase is licensed, there will be double that amount of space. The rooms are built and ready as the company waits for licensing approval, as well as its oils sales license. The facility is slated to be 100 percent complete by the end of October, according to Marotta.
INDIVA has a supply agreement with Ontario and sells its pre-rolls in the state. Additionally, it has an LOI for a supply agreement with Quebec. Marotta sees the company continuing to build its presence in Canada and distributing high-quality products through the provincial system.
Marotta sees a significant opportunity to build the company’s brand in London. When allowed, it has plans to add a “farm gate” retail store to its facility there.
The company is largely focused on establishing growth in Canada. When asked about the opportunity in California, Marotta points to full shelves. In Canada, the shelves have yet to fill with derivative products. That will soon change, but everyone will be taking off from the starting line, rather than trying to carve out space in an already crowded market.
Though INDIVA is mainly working to grow its Canadian market presence, international opportunities are on the radar. The company has an LOI to acquire a license in Denmark.
The Extraction Opportunity
While INDIVA is scaling up its grow operations, flower products are going to be a small fraction of the company’s revenue over the next 12 to 18 months. Non-flower products will account for approximately 80 to 90 percent of revenue, according to Marotta. The company is already making some of these products, like tinctures, sprays, and gel capsules, but the onset of edibles is one of the most exciting areas for growth.
The company’s extraction facility is operational, and INDIVA has a joint venture to produce Bhang chocolates and a licensing agreement to produce Ruby sugar, salt, and fruit Gems. INDIVA is also partnering with other LPs, like TerrAscend, to offer contract manufacturing services.
An increasing number of cannabis consumers are looking for alternatives to smokable products, and INDIVA aims to fill that niche with a thoughtfully curated line of flexible edibles.
When it comes to funding, INDIVA has focused on debt financing. The company has $30 million in assets on its balance sheet and access to capital. The company has invested a smaller amount of capital compared to many other companies, and its cash needs are in the single-digit millions, according to Marotta. The company is in discussions with lenders and commercial banks, and he recommends staying tuned for future announcements around financing that will not include the sale of equity.
Tracking INDIVA’s Growth
The company’s Q2 financial results showed a slight decline in revenue, attributed to regulatory delays. But, the company had a positive gross margin for the quarter compared to a loss in Q1, according to Marotta. As new products, like edibles, come online he anticipates a major revenue ramp up for INDIVA late in the year and into 2020.
As investors track the company, Marotta recommends keeping an eye on revenue growth, licensing, signed partnership agreements, and cash flow.
Preparing for Cannabis 2.0
The company’s goal is to deliver “products that delight the customer,” which means looking at the quality of the biomass that goes into its extractor and creating recipes that ultimately deliver a good taste and consistent effects. As Cannabis 2.0 rolls out, INDIVA will be challenged to increase its volumes within a relatively short time frame–a challenge that is also the company’s biggest opportunity.
New Cannabis Ventures provides an Investor Dashboard for INDIVA, who is a client of New Cannabis Ventures. Listen to the entire interview: