MISSISSAUGA, ON, Aug. 30, 2021 /CNW/ - Covalon Technologies
Ltd. (the "Company" or "Covalon") (TSXV: COV) (OTCQX: CVALF), an
advanced medical technologies company, today announced its fiscal
2021 third quarter results for the period ended June 30, 2021.
Brian Pedlar, Covalon's President
and CEO, said, "I am delighted to report a strong quarter with 32%
year-over-year revenue growth and over $1
million in net income and Adjusted EBITDA. With the
recently completed sale of our AquaGuard product line, we are debt
free with over $24 million of cash
(approximately $0.93 per share) on
our balance sheet. We are positioned extremely well to
further accelerate the growth of our biological collagen and
antimicrobial products that have been contributing to revenue
growth this fiscal year.
"Covalon is a different company than we were a few short months
ago – we have a significantly improved balance sheet, we have
posted strong earnings year-to-date, and we have many more levers
at our disposal to fuel further growth. I'm very proud of our
team's efforts over the past 18 months to steer us clear of
COVID-19 challenges and their contributions to our successful
turnaround.
"Our core business of collagen and antimicrobial silicone
adhesive dressings continues to experience growth in the United States and internationally.
We are seeing increases in orders placed by our distribution
partners and have more visibility into forecasted orders over the
next twelve months.
"We were profitable this past quarter with net income of
$1,057,931 or $0.04 per share for the three months ended
June 30, 2021. Operating costs
were $3.9 million for the quarter
ended June 30, 2021. Our cost
management initiatives will continue, and we will look to improve
on the progress we have made following the transition of AquaGuard
to TIDI Products LLC. Our efforts have led to a $5.9 million year-over-year improvement in our
net income and a $3.3 million
year-over-year improvement in Adjusted EBITDA(1) so far
this fiscal year. COVID-19 continues to impact our supply
chain and our distribution channels with longer lead times for
certain raw materials, lower consumption of our products by
hospitals due to delays in elective procedures, and restricted
access to hospital facilities by our own and our distributors'
sales teams."
Fiscal 2021 Q3 and Year-to-Date Financial Results
Revenue for the three months ended June
30, 2021 increased 32% to $8.8
million, compared to $6.7
million in the prior year, due to increased collagen sales
and increased shipments to the Middle
East. Revenue in the United
States increased by 47% or $2,201,607 to $6.9
million predominantly as a result of increased collagen
sales. We are continuing to see signs of improvement in product
usage by our clinicians in the United
States and internationally even though the impacts of
COVID-19 continue to adversely affect our customers and
restrictions have not completely eased in many of the geographies
in which we operate.
Product revenue increased 33% to $8.5
million, compared to $6.4
million for the same period in the prior year. Product
revenue increased in the United
States by 49% or $2.1 million
due to increased collagen sales, and in the Middle East by 4% to $1,020,825. Development and consulting services
revenue for the three-month period ended June 30, 2021 increased by 41% to $312,102, compared to $221,943 for the same period of the prior year,
due to COVID-19 related delays last year on several projects with
our larger customers and the timing of projects undertaken during
the quarters.
(1) See
"Non-IFRS Measures" below, including for a reconciliation of the
non-IFRS measures used in this release to the most comparable IFRS
measures. ©2021 Covalon Technologies Ltd.
|
Gross margin for the three months ended June 30, 2021 increased to 58% compared to 46% in
the prior year, due to additional costs incurred in the prior year
to repurpose existing inventory to satisfy customer orders. Gross
margin is significantly influenced by source of revenue and the
relative mix of products sold in any given financial period.
Adjusted gross margin(1), which excludes inventory
provisions and depreciation, increased to 60% for Q3 fiscal 2021,
compared to 50% for the prior year.
Operational expenses increased 55% to $3.9 million compared to $2.5 million for the prior year's comparative
period, due to the impact of higher government subsidies in the
comparative period. Excluding government subsidies and one-time
transaction expenses related to the AquaGuard divestiture,
operating expenses decreased approximately 6% or $0.3 million. The Company recorded
$630,818 (2020 - $1,825,202) of government subsidies netted out
against the related expenses.
Net income was $1.1 million or
$0.04 per share, compared to a net
income of $314,167 or $0.01 per share in Q3 fiscal 2020. Adjusted
EBITDA(1) for Q3 fiscal 2021 was a profit of
$1.4 million compared to a loss of
$517,380 in the prior year's
comparative period.
Revenue for the nine months ended June
30, 2021 increased 8% to $21.5
million, compared to $19.9
million the prior year. Gross margin for the period
increased to 57% compared to 54% for the same period the prior
year. Net income was $1.1 million or
$0.04 per share, compared to a net
loss of $4.8 million or $0.18 per share in fiscal 2020.
Conference Call Scheduled
A conference call to discuss Covalon's Fiscal 2021 Q3 Financial
Results will be held Monday, August
30th, 2021 at 9:00am
EST. To participate in the call, please dial:
North American Toll-Free: 1.888.664.6392
Local (Toronto): 416.764.8659
Confirmation Number: 01860859
A recording of the call will be available by calling
1.888.390.0541 or 416.764.8677 and entering the encore replay enter
code 860859# until to September 13,
2021 at 11:59pm EST.
Statement of Operations
The following unaudited table presents Covalon's consolidated
statements of operations for the three-month periods ended
March 31, 2021 and 2020, and for the
six months ended March 31, 2021 and
2020.
|
(unaudited)
|
Three months
ended,
June
30,
|
|
Nine months
ended
June
30,
|
|
|
2021
|
2020
|
|
2021
|
2020
|
Revenue
|
|
|
|
|
|
|
Product
|
$8,455,147
|
$6,365,839
|
|
$20,217,578
|
$18,167,287
|
|
Development and
consulting services
|
312,102
|
221,943
|
|
1,168,997
|
1,554,964
|
|
Licensing and royalty
fees
|
48,268
|
85,612
|
|
158,614
|
158,274
|
|
|
|
|
|
|
|
Total
revenue
|
8,815,517
|
6,673,394
|
|
21,545,189
|
19,880,525
|
|
|
|
|
|
|
|
Cost of product
sales
|
3,719,038
|
3,628,656
|
|
9,220,792
|
9,207,884
|
|
|
|
|
|
|
|
Gross profit
before operating expenses
|
5,096,479
|
3,044,738
|
|
12,324,397
|
10,672,641
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
Operations
|
223,647
|
137,156
|
|
741,641
|
1,128,236
|
|
Research and
development activities
|
295,716
|
205,133
|
|
840,892
|
653,784
|
|
Sales, marketing and
agency fees
|
1,336,165
|
919,620
|
|
3,999,970
|
6,155,581
|
|
General and
administrative
|
2,059,665
|
1,263,082
|
|
5,274,881
|
6,847,203
|
|
|
3,915,193
|
2,524,991
|
|
10,857,384
|
14,784,804
|
|
|
|
|
|
|
|
Financing
expenses
|
123,355
|
205,580
|
|
359,701
|
657,025
|
|
|
|
|
|
|
|
Net income
(loss)
|
$1,057,931
|
$314,167
|
|
$1,107,312
|
$(4,769,188)
|
|
|
|
|
|
|
|
Other
comprehensive income (loss)
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
(242,427)
|
(838,205)
|
|
(1,307,665)
|
520,905
|
|
|
|
|
|
|
|
Other
comprehensive income (loss)
|
$815,504
|
$(524,038)
|
|
$(200,353)
|
$(4,284,283)
|
|
|
|
|
|
|
|
Basic earnings (loss)
per share
|
$0.04
|
$0.01
|
|
$0.04
|
$(0.18)
|
Diluted earnings
(loss) per share
|
$0.04
|
$0.01
|
|
$0.04
|
$(0.18)
|
Non-IFRS Financial Measures
This press release makes reference to certain non-IFRS
measures. These measures are not recognized or defined
measures under IFRS, do not have standardized meaning
prescribed by IFRS and are therefore unlikely to be comparable
to similar measures presented by other companies. Rather,
these measures are provided as additional financial
information to complement those IFRS measures by providing further
understanding of our results of operations from management's
perspective. Accordingly, these measures should not be considered
in isolation or as a substitute for analysis of our financial
information reported under IFRS. The non-IFRS financial measures,
adjustments, and reasons for adjustments should be carefully
evaluated as these measures have limitations as analytical tools
and should not be used in substitution for an analysis of the
Company's results under IFRS. We use non-IFRS measures including
"Adjusted Gross Margin" and "Adjusted EBITDA" to provide investors
with supplemental measures of our operating performance and thus
highlight trends in our core business that may not otherwise be
apparent when relying solely on IFRS measures. We believe that
securities analysts, investors and other interested parties
frequently use non-IFRS measures in the evaluation of issuers. Our
management also uses non-IFRS measures in order to facilitate
operating performance comparisons from period to period,
to prepare annual operating budgets and forecasts and to determine
components of management compensation. The following non-IFRS
financial measures are presented in this news release, and a
description of the calculation for each measure is included
below:
- Adjusted Gross Margin is defined as gross profit before
operating expenses, plus depreciation and amortization included in
cost of sales, plus inventory provision amounts.
- Adjusted EBITDA is defined as net loss, plus interest expense,
plus depreciation and amortization, plus stock-based compensation,
less government subsidies, plus inventory provisions, plus accounts
receivable write-off expenses.
You should also be aware that the Company may recognize income
or incur expenses in the future that are the same as, or similar to
some of the adjustments in these non-IFRS financial measures.
Because these non-IFRS financial measures may be defined
differently by other companies in our industry, our definitions of
these non-IFRS financial measures may not be comparable to
similarly titled measures of other companies, thereby diminishing
their utility.
The table below provides a reconciliation of gross profit before
operating expenses under IFRS in the consolidated financial
statements to Adjusted Gross Margin for the three months, and nine
months ended June 30, 2021 and 2020.
Management believes that Adjusted Gross Margin is useful in
assessing the performance of the Company's ongoing operations and
its ability to generate cash flows from period to period. The
adjusting items below are considered to be outside of the Company's
core operating results, and these items can distort the trends
associated with the Company's ongoing performance, even though some
of those expenses may recur.
(unaudited)
|
Three months ended
June 30,
|
|
Nine months ended
June 30,
|
|
2021
|
2020
|
|
2021
|
2020
|
Gross profit before
operating expenses
|
5,096,479
|
3,044,738
|
|
12,324,397
|
10,672,641
|
Add: Depreciation and
amortization
|
73,043
|
91,905
|
|
233,373
|
259,890
|
Add: Inventory
provisions
|
123,598
|
214,809
|
|
129,938
|
715,343
|
Adjusted Gross
Margin
|
5,293,120
|
3,351,452
|
|
12,687,708
|
11,647,874
|
Adjusted Gross Margin
(%)
|
60%
|
50%
|
|
59%
|
59%
|
The table below provides a reconciliation of net loss under IFRS
in the consolidated financial statements to Adjusted EBITDA for the
three months, and nine months ended June 30,
2021 and 2020. Management believes that these non-IFRS
measures are useful in assessing the performance of the Company's
ongoing operations and its ability to generate cash flows to funds
its cash requirements from period to period. The adjusting items
below are considered to be outside of the Company's core operating
results, and these items can distort the trends associated with the
Company's ongoing performance, even though some of those expenses
may recur.
(unaudited)
|
Three months ended
June 30,
|
|
Nine months ended
June 30,
|
|
2021
|
2020
|
|
2021
|
2020
|
Net income
(loss)
|
1,057,931
|
314,167
|
|
1,107,312
|
(4,769,188)
|
Add: Interest
expense
|
123,355
|
205,580
|
|
359,701
|
657,025
|
Add: Depreciation and
amortization
|
267,857
|
346,174
|
|
841,360
|
921,828
|
Add: Stock based
compensation
|
(3,111)
|
227,092
|
|
201,451
|
845,968
|
Less: Government
subsidies
|
(630,818)
|
(1,825,202)
|
|
(1,976,819)
|
(1,825,202)
|
Add: Inventory
provisions
|
123,598
|
214,809
|
|
129,938
|
715,343
|
Add: AquaGuard
transaction costs
|
451,939
|
-
|
|
632,012
|
-
|
Add: Accounts
receivable write-off
|
-
|
-
|
|
-
|
1,420,002
|
Adjusted
EBITDA
|
1,390,751
|
(517,380)
|
|
1,294,955
|
(2,034,224)
|
About Covalon
Covalon Technologies Ltd. is a
researcher, developer, manufacturer, and marketer of
patent-protected medical products that improve patient outcomes and
save lives in the areas of advanced wound care, infection
management and surgical procedures. Covalon leverages its patented
medical technology platforms and expertise in two ways: (i) by
developing products that are sold under Covalon's name; and (ii) by
developing and commercializing medical products for other medical
companies under development and license contracts. The Company is
listed on the TSX Venture Exchange, having the symbol COV and
trades on the OTQX Market under the symbol CVALF. To learn
more about Covalon, visit our website at www.covalon.com
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
This news release contains forward-looking statements which
reflect the Company's current expectations regarding future events.
The forward-looking statements are often, but not always,
identified by the use of words such as "seek", "anticipate", "plan,
"estimate", "expect", "intend" and statements that an event or
result "may", "will", "should", "could" or "might" occur or be
achieved and other similar expressions. These forward-looking
statements involve risk and uncertainties, including the difficulty
in predicting product approvals, acceptance of and demands for new
products, the impact of the products and pricing strategies of
competitors, delays in developing and launching new products, the
regulatory environment, fluctuations in operating results, the
impact and timing of COVID-19 on operating activities and market
conditions, and other risks, any of which could cause
results, performance, or achievements to differ materially from the
results discussed or implied in the forward-looking statements.
Many risks are inherent in the industry; others are more specific
to the Company. Investors should consult the Company's ongoing
quarterly filings for additional information on risks and
uncertainties relating to these forward-looking statements.
Investors should not place undue reliance on any forward-looking
statements. The Company assumes no obligation to update or alter
any forward-looking statements whether as a result of new
information, further events or otherwise.
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SOURCE Covalon Technologies Ltd.