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 Q3 financials today, as follows:
Q3 Financial Highlights (All figures are in Canadian dollars and compared to the previous quarter)
- Revenue: increased 2.8% to $18.1M
- Gross Profit ($): increased 15.7% to $7.3M
- Gross Profit (%): increased to 39.5% from 35.8%
- Adj. EBITDA*: declined 46.6% to $1.4M
- Net Income (Loss): improved by 13.2% to $(3.1M)
- Income Loss/Share: declined to $(0.02) from $(0.03)
- Cash on Hand: declined by 32.9% to $30.3M
*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.
Q3 Operational Highlights
- Manufactured a record 56 SKUs for a 55.5% increase over Q2.
- Made its first international shipment of oils to Australia's largest medicinal cannabis distributor and clinical research organization.
- Entered into a syndicated credit facility which will provide up to C$40 million of secured debt financing to further strengthen Valens' balance sheet and allow for the continued expansion of its operations, and execution of its corporate strategy both domestically and internationally.
- Announced its participation in a Medical Cannabis Real-World Evidence Study in partnership with Shoppers Drug Mart.
- Received its Health Canada Research License through its wholly-owned subsidiary, Valens Agritech Ltd, to conduct human administration trials for sensory and taste evaluation of products.
- Applied for a license amendment for its K2 facility expansion to increase its manufacturing capabilities and optimize production and quality assurance efficiencies.
- Delayed construction of its GTA facility due to the COVID-19 pandemic but is on track to be operational in the first half of 2021.
- Entered into agreements with a number of industry brand houses to develop and manufacture derivative products to meet continued demand in the Canadian 2.0 market.
Management Commentary
Jeff Fallows, President, commented, in part, as follows:
"Through the end of the year, we will continue to focus on:
- our diverse pipeline of product launches in partnership with our customers,
- executing on the white label and custom manufacturing agreements that have been gaining momentum throughout Canada and now reaching the Australian medical market...
- and pursuing other growth opportunities globally with the added ability to mass produce consumer-friendly derivative products."
Tyler Robson, Chief Executive Officer had the following comments:
- "We expect to see further revenue growth in Q4 as we continue to ramp up our manufacturing agreements to bring a wide variety of 2.0 products to domestic and international markets.
- As we approach year-end, we will focus on gaining market share within existing and upcoming product verticals to prepare for the Cannabis 3.0 market and the opportunities for growth it will provide proven third-party operators like Valens with the differentiated IP and scale to execute."
Stock Performance
Valens' stock price has declined 48.9% so far in 2020 with a 6.9% decline on Tuesday and an additional 1.5% decline on Wednesday.
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