Photo by Yiorgos Ntrahas on Unsplash

The Valens Company Inc. (VLNS) reported its fourth quarter financial results for the period ended November 30, 2021, on Monday.

Q4 Financial Highlights (All figures are in U.S. Dollars and compared to the previous quarter)

• Net Revenue: -12.3% to $18.4M
• Adj. Gross Profit ($): +9.1% to $6.3M
• Adj. Gross Margin (%): increased to 34.1% from 27.4%
• Adj. EBITDA: -115.9% to $(13.3)M
• Net Income (Loss): -67.4% to $(21.4)M
• Net Income (Loss) per Share: -41.7% to $(0.34)
• Cash on Hand: -38.2% to $19.1M

Key Objectives for 2022:

1. Vapes, Edibles, Beverages – Become a Top 5 Player in Canada
2. Flower Products – Become a Top 10 Player in Canada
3. Gross Margin Improvement, Positive EBITDA by Q4
4. Further entry into the US market as permissible with federal regulations

Revenue & EBITDA Guidance 2023:

1. Revenue of minimum CAD$225 million
2. Adjusted EBITDA margins of greater than 10%

Management Commentary

Jeff Fallows, President, said:

• "We have completed the successful 'Launch' phase of our business plan, having achieved attractive growth in provincial listings to create a leading cannabis consumer products company with an exciting portfolio of brands.
• ...We now look to enter the 'Growth and Optimize' phases which will focus on maximizing sell-through, driving higher utilization across our facilities, removing underperforming listings, and pursuing optimization initiatives. This will ensure we remain operationally agile, competitively positioned in the market, and best able to deal with the ongoing logistical and inflationary challenges in the current economic environment.
• ...We are starting to see strong momentum across all our key segments with strong growth in provincial sales and increased utilization through our realigned B2B partnerships which are expected to provide both sustained quarter-over-quarter revenue growth in 2022 and enhanced margins. This, combined with our integration initiatives announced in early February that are expected to generate $20 million in annual savings, has set us on a clear pathway to become EBITDA positive by fiscal Q4 2022.
• ...We believe that our focus on business fundamentals with the expectation to drive revenue growth, achieve positive EBITDA, and attain deeper U.S. market penetration will reflect positively as we look to generate shareholder value in 2022.
• ...We have a leading cannabis innovation platform best positioned to drive B2C revenue growth both north and south of the border as well as B2B revenue growth as the benefits of our 'Fewer, Bigger, Better' strategy begin to materialize.
• We expect 2022 to be a challenging environment where only the companies with distinct competitive advantages, low-cost infrastructure, and innovative product capabilities will thrive [and] we believe we have positioned ourselves with the right team and strategy to...[do just that]."

Stock Price Performance

Valens' stock price is DOWN -61.3% from its high in 2021 and has gone DOWN -13.8% YTD and is now only UP 9.9% from its low last year.