- Year-end net profit of $23.5
million or $0.91 per share
which includes net income from the sale of the AquaGuard
operations
- Revenue from continuing operations increased 45% to
$19.6 million for the year, compared
to $13.5 million in the prior year
due to an increase in product sales
- Fourth quarter was profitable with net income of $1.0 million or $0.04 per share and Adjusted EBITDA of
$1.8 million from continuing
operations
- Covalon ended the year with $25.5
million of cash or $0.99 per
share on the balance sheet with all debt repaid
MISSISSAUGA, ON, Dec. 13, 2021 /CNW/ - Covalon Technologies
Ltd. (the "Company" or "Covalon") (TSXV: COV) (OTCQX: CVALF), an
advanced medical technologies company, today announced its fiscal
2021 fourth quarter and year end results for the period ended
September 30, 2021.
Brian Pedlar, Covalon's President
and CEO, said, "I am very pleased to report that our Company ended
the year with a net profit of $23.5
million or $0.91 per share
after including net income from the sale of our AquaGuard
operations. We ended the year profitable, with 45% revenue growth
year over year from continuing operations. Our fourth quarter was
profitable with net income of $1.0
million or $0.04 per share
from continuing operations. Most significantly, we finished the
year with $25.5 million of
unrestricted and escrow cash on our balance sheet and no debt.
"Covalon is a different company today than we were just a few
short months ago. We are a much stronger company today, both
financially and operationally.
"Our cost management initiatives and strong growth in product
revenue has led to a $8.2 million
year-over-year improvement in net income from continuing operations
and a $4.8 million year-over-year
improvement in Adjusted EBITDA(1) from continuing
operations this fiscal year.
"I am also delighted to report a strong fourth quarter with
revenue of $6.6 million from
continuing operations. Operating expenses were $1.9 million for the quarter ended September 30, 2021.
"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," continued Mr. Pedlar.
Continuing operations includes revenue from our core business of
collagen, medical coatings, and antimicrobial silicone adhesive
dressings, which continues to experience growth in the United States and
internationally. Discontinued operations are comprised of
AquaGuard operations for the year and the resulting gain on the
sale of the AquaGuard product line as of July 28, 2021.
Fiscal 2021 Q4 and Year-End Financial Results
Covalon is continuing to see signs of improvement in product
usage by our customers 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 56% to $17.7
million, compared to $11.3
million for the same period in the prior year. Product
revenue increased in the United
States by 61% or $4.1 million
and in the Middle East by 91% or
$2.1 million. Development and
consulting services revenue for the year ended September 30, 2021 decreased by 15% to
$1.7 million, compared to
$2.0 million for the same period of
the prior year. Revenue from development and consulting services
varies based on opportunities and the length of the sales cycle for
given projects.
Gross margin for the year ended September
30, 2021 increased to 50% compared to 34% in the prior year.
Gross margin is significantly influenced by source of revenue and
the relative mix of products sold in any given financial period.
Both periods include inventory allowance provisions and rework
costs associated with selling product.
Adjusted gross margin(1), which excludes inventory
provisions and depreciation, increased to 53% for fiscal 2021,
compared to 52% for the prior year.
Operational expenses from continuing operations decreased 26% to
$8.9 million compared to $12 million for the prior year, mainly due to
reduced personnel expenses and a $1.4
million accounts receivable write off in 2020 which did not
occur in 2021. Excluding government subsidies and accounts
receivable write off expense, operating expenses decreased
approximately 16% or $2
million. The Company recorded $0.8 million (2020 - $1.1
million) of government subsidies netted out against the
related expenses.
Net income was $23.5 million or
$0.91 per share, compared to a net
loss of $7.0 million or $0.27 per share in fiscal 2020. Adjusted
EBITDA(1) for fiscal 2021 was $1.3 million compared to an EBITDA loss of
$3.5 million in the prior year.
Revenue for the three months ended September 30, 2021 increased 125% to $6.6 million, compared to $2.9 million the prior year. Gross margin for the
period increased to 46% compared to 6% for the same period the
prior year. Net income from continuing operations was $1.0 million or $0.04 per share, compared to a net loss of
$2.3 million or $0.09 per share in fiscal 2020.
Conference Call and Webcast Scheduled
A conference call and webcast to discuss Covalon's Fiscal 2021
Year-End Financial Results will be held Monday, December 13, 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: 11333139
To view the webcast accompanying the conference call, please
copy and paste the below url into a web browser:
https://produceredition.webcasts.com/starthere.jsp?ei=1511898&tp_key=97dc9893c4
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 333139# until to December 27,
2021 at 11:59pm EST.
Statement of Operations
The following unaudited table presents Covalon's consolidated
statements of operations for the quarters and years ended
September 30, 2021 and 2020.
|
|
Three months
ended
September
30,
|
|
Year
ended
September
30,
|
|
|
2021
|
2020
|
|
2021
|
2020
|
Revenue
|
|
|
|
|
|
|
Product
|
$6,027,755
|
2,475,005
|
|
$17,650,865
|
11,329,716
|
|
Development and
consulting services
|
522,383
|
424,318
|
|
1,691,380
|
1,979,282
|
|
Licensing and royalty
fees
|
60,442
|
41,162
|
|
219,056
|
199,436
|
Total
revenue
|
6,610,580
|
2,940,485
|
|
19,561,301
|
13,508,434
|
|
|
|
|
|
|
|
Cost of
sales
|
3,545,483
|
2,754,604
|
|
9,864,970
|
8,861,011
|
|
|
|
|
|
|
|
Gross profit
before operating expenses
|
3,065,097
|
185,881
|
|
9,696,331
|
4,647,423
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
Operations
|
340,887
|
140,471
|
|
995,158
|
1,040,499
|
|
Research and
development activities
|
299,625
|
140,457
|
|
1,140,517
|
794,241
|
|
Sales, marketing and
agency fees
|
305,293
|
649,458
|
|
1,927,181
|
2,916,571
|
|
General and
administrative
|
976,144
|
1,458,571
|
|
4,795,132
|
7,283,315
|
|
|
1,921,949
|
2,388,957
|
|
8,857,988
|
12,034,626
|
|
|
|
|
|
|
|
Finance
expenses
|
117,904
|
109,226
|
|
419,379
|
435,587
|
Net income (loss)
from continuing
operations
|
1,025,244
|
(2,312,302)
|
|
418,964
|
(7,822,790)
|
Net income from
discontinued operations
|
21,344,351
|
129,265
|
|
23,057,942
|
870,566
|
Net income
(loss)
|
$22,369,595
|
$(2,183,037)
|
|
$23,476,906
|
$(6,952,224)
|
|
|
|
|
|
|
|
|
Income (loss) per
common share of continuing operations
|
|
|
|
|
|
Basic earnings (loss)
per share (Note 21)
|
$0.04
|
$(0.09)
|
|
$0.02
|
$(0.30)
|
|
|
Diluted earnings
(loss) per share (Note 21)
|
$0.04
|
$(0.09)
|
|
$0.02
|
$(0.30)
|
|
|
Income per common
share of discontinued operations
|
|
|
|
|
|
Basic earnings per
share (Note 21)
|
$0.83
|
$0.01
|
|
$0.89
|
$0.03
|
|
|
Diluted earnings per
share (Note 21)
|
$0.83
|
$0.00
|
|
$0.89
|
$0.03
|
|
|
Income (loss) per
common share
|
|
|
|
|
|
Basic earnings (loss)
per share (Note 21)
|
$0.87
|
$(0.08)
|
|
$0.91
|
$(0.27)
|
|
|
Diluted earnings
(loss) per share (Note 21)
|
$0.86
|
$(0.08)
|
|
$0.91
|
$(0.27)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 year
ended September 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.
|
Three months
ended
September 30,
|
|
Year ended September
30
|
|
2021
|
2020
|
|
2021
|
2020
|
Gross profit before
operating
expenses
|
3,065,097
|
185,881
|
|
9,696,331
|
4,647,423
|
Add: Depreciation
and
amortization
|
49,470
|
82,081
|
|
282,843
|
258,979
|
Add: Inventory
provisions
|
231,618
|
1,353,653
|
|
361,556
|
2,083,932
|
Adjusted Gross
Margin
|
3,346,185
|
1,621,615
|
|
10,340,730
|
6,990,334
|
Adjusted Gross Margin
(%)
|
51%
|
55%
|
|
53%
|
52%
|
The table below provides a reconciliation of net loss under IFRS
in the consolidated financial statements to Adjusted EBITDA for the
three months, and year ended September 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.
|
Three months
ended
September 30,
|
|
Year ended September
30,
|
|
2021
|
2020
|
|
2021
|
2020
|
Net income (loss)
from
continuing operations
|
1,025,244
|
(2,312,302)
|
|
418,964
|
(7,822,790)
|
Add: Interest
expense
|
117,904
|
109,226
|
|
419,379
|
435,587
|
Add: Depreciation
and
amortization
|
399,527
|
190,351
|
|
700,466
|
756,620
|
Add: Share based
compensation
|
9,698
|
91,463
|
|
163,769
|
715,428
|
Less: Government
subsidies
|
(8,668)
|
(418,872)
|
|
(801,821)
|
(1,132,479)
|
Add: Inventory
provisions
|
231,618
|
1,353,653
|
|
361,556
|
2,083,932
|
Add: Accounts
receivable
write-off
|
-
|
-
|
|
-
|
1,420,002
|
Adjusted EBITDA
from
continuing operations
|
1,775,323
|
(986,481)
|
|
1,262,313
|
(3,543,700)
|
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.
(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.
|
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SOURCE Covalon Technologies Ltd.