The Valens Company Inc. (VLNCF), formerly known as Valens Groworks Corp., is a global leader in the end-to-end development and manufacturing of innovative, cannabinoid-based products and a constituent in the munKNEE.com Pure-Play Pot Stock Index and it reported its Q4, 2020, financials yesterday, as follows:

Q4 Financial Highlights (All figures are in Canadian dollars and compared to the previous quarter)

• Net Revenue: decreased 11.5% to $16.0M
• Gross Profit ($): declined to $(6.0)M from $7.3M
• Adj. EBITDA*: declined to $(4.3)M from $1.4M
• Net Income (Loss): increased by 81.6% to $(16.6)M
• Income Loss/Share: declined to $(0.13) from $(0.02)
• Cash on Hand: declined by 29.4% to $21.4M 

*Valens' management defines adjusted EBITDA as:

• income (loss) and comprehensive income (loss) from operations, as reported, before interest, tax, depreciation, and amortization,
• and adjusted for removing share-based payments, realized gains and losses from short-term investments and liabilities, and other one-time and non-cash items including impairment losses.
• and believes adjusted EBITDA is a useful financial metric to assess its operating performance on an adjusted basis as described above. 

Q4 Operational Highlights

• Increased market share to ~4.9% of the Cannabis 2.0 market in Alberta, British Columbia, and Ontario 
• Grew cannabis-infused beverage market share in Canada to approximately 5.2%
• Manufactured 62 SKUs in Q4 2020, an increase of 11%
• Cemented position as the largest third-party vape manufacturer in Canada
• Transitioned from shipping bulk distillate in Q1 2020 to shipping hundreds of thousands of finished product units per month in Q4 2020, resulting in revenue which is expected to be recurring in nature

Management Commentary

Jeff Fallows, the President, said:

• "Over the course of 2020, Valens has created a platform that is not only highly adaptable to changing market conditions, but also easily transportable into new markets.
• Moving into the fiscal year 2021, we have already executed step one of our strategic plan for the year with the announcement of our agreement to acquire LYF Food Technologies Inc. (which is expected to close on or around March 1, 2021) and are focused on quickly integrating and realizing on the incredible opportunity we see in adding their edibles platform to our capabilities.
• With our recent bought deal financing, we are also well-positioned to aggressively pursue available and future growth opportunities, including potential acquisitions.
• We are now more excited than ever about the future of Valens and the potential for us to create shareholder value in 2021 and beyond."

Tyler Robson, Chief Executive Officer,  Co-Founder, and Chair, said:

• "In fiscal year 2020, we transformed Valens from a leading extraction company into the industry's most trusted third-party manufacturer of cannabis consumer packaged goods...
• Moving into 2021 with a transformed business model, a growing international presence, and over 77,000 square feet of manufacturing space, Valens is focused on three key initiatives
  • growing unit volumes per SKU,
  • increasing Cannabis 2.0 and 3.0 product market share,
  • and driving revenues in new consumer verticals.
• We expect to do this by expanding our provincial distribution capabilities, entering new international markets including the U.S., and broadening our custom manufacturing and white label partnership network."

Fiscal 2021 Strategic Initiatives

• To enter the U.S. market and other international markets, as broader legal and regulatory frameworks continue to evolve, and, with respect to cannabis products, subject to legalization at the federal level and dependent on the requirements of the TSX. Valens will look to enter strategic partnerships and acquisitions with leaders in their respective markets.
• To utilize data-driven expertise gained as a category leader in vape manufacturing to expand its leadership in new verticals, such as edibles, concentrates, beverages, and 3.0 products. The Company expects to achieve this with its accelerated entry into the edibles market with its recent acquisition of LYF Food Technologies Inc...
• To expand domestic distribution network beyond Alberta, British Columbia, Ontario, and Saskatchewan to all provincial markets, including near-term entry into Manitoba and Quebec, to drive greater market share and distribution capabilities.
• To gain Canadian recreational market share with brand & consumer package good partners with the launch of new products for the Cannabis 2.0 and 3.0 markets, including edible and topical products targeted for the health and wellness market.
• To achieve EU GMP Certification and broaden already fast-growing international shipments, including increased sell-through in existing international markets such as Australia, and globally with an emphasis on Europe.
• To increase custom manufacturing and white label agreements and continue to innovate in partnership with its existing customers.

Subsequent to Q4 2020

• The Valens Company launched THC and CBD water-soluble drops under a custom manufacturing agreement with Verse Cannabis, and nūance's CBD 100 isolate formulation created for Medical Cannabis by Shoppers.
• Additionally, the Company secured an amendment to its existing Health Canada standard processing license permitting the sale of dried cannabis products.

2021 Guidance

Valens reiterates its previously announced guidance for Q1 2021 with revenue projected to be between $19 million to $23 million, driven by the Company's newly launched and operational K2 Facility which is expected to give Valens the ability to increase product capabilities and unit volumes.

Stock Performance

Valens' stock price is down 13.8% so far in 2021.