KELOWNA, BC, April 14, 2020 /CNW/ - Valens GroWorks
Corp. (TSXV: VLNS) (OTCQX: VLNCF) (the "Company",
"Valens" or "The Valens Company"), a global leader in
the end-to-end development and manufacturing of innovative,
cannabinoid-based products, is pleased to report its financial
results for its first quarter, for the period ended February 29, 2020.
Key Financial Highlights of the First Quarter of 2020
- Revenue for the first quarter of 2020 increased to $32.0 million, a significant increase from
$2.2 million in the first quarter of
2019.
- Revenue of $1.44 per gram of
input in the first quarter of 2020, compared to $1.25 per gram of input in the fourth quarter of
2019.
- Gross profit increased to $18.1
million, or 56.6% of revenue, compared to $0.9 million, or 38.3% of revenue, in the first
quarter of 2019.
- Adjusted EBITDA(1) was $14.3
million or 44.7% of revenue, for the first quarter of 2020,
compared to negative adjusted EBITDA(1) of ($2.0 million) in the first quarter of 2019.
- Strong balance sheet with $44.3
million in cash and short-term investments and a net working
capital position of $80.4 million as
of February 29, 2020.
Corporate Highlights
- The Company announced its corporate rebranding to 'The Valens
Company', to further solidify its position as a global leader in
the end-to-end development and manufacturing of cannabinoid-based
products and better reflect the strategic vision of the
business.
- To align with the rebranding, the Company's ticker symbol on
the TSX Venture Exchange ("TSXV") changed to 'VLNS' and its ticker
symbol on the OTCQX changed to 'VLNCF'.
- The Valens Company also obtained eligibility from the
Depository Trust Company ("DTC") for its shares traded on the
OTCQX, under the symbol 'VLNCF'.
- The Company received approval from the TSXV for its notice of
intention to make a normal course issuer bid which allows the
Company, over the 12 months from approval, to acquire up to
6,275,204 of its common shares in open market purchases. There are
127,709,952 common shares outstanding as of February 29, 2020.
- Subsequent to the quarter end, the Company received conditional
approval from the Toronto Stock Exchange ("TSX") to up list from
the TSXV to the TSX. The Valens Company has since received final
approval to list its common shares on the TSX and will officially
commence trading at the opening of the markets on April 16, 2020, under the trading symbol
"VLNS."
"The first quarter of fiscal 2020 was pivotal for The Valens
Company as we hit many milestones, including posting continued
quarter-over-quarter revenue growth and having oil-based cannabis
2.0 products hit the shelves in Canada amidst a challenging market backdrop.
Throughout the quarter, we leveraged the flexibility of our
extraction platform to help our customers navigate increasing
market complexity while at the same time accelerating the scale-up
of our white label capabilities. These efforts included launching a
number of new product formats such as hydrocarbon-based offerings
with the intention of bringing these high-demand products to
customers at the beginning of the third quarter," said Tyler Robson, CEO of The Valens Company. "In
total, we saw a moderation in extraction volumes in the quarter as
our customers continued to shift to smaller processing lots as a
result of the slower roll-out of Cannabis 2.0 products in the
broader market. Looking forward, we are starting to see some
encouraging signs with respect to a return to larger extraction
volumes into the back half of fiscal 2020. The first quarter also
saw an increase in our revenue per gram of input which is directly
related to our white label strategy and we expect this number to
continue to increase throughout 2020 as this segment makes up a
larger part of our revenue and overall business. This was the
motivation for our rebrand to The Valens Company which represents
much more than just a corporate name change, it signifies the
evolution of our business into a leading cannabinoid-based product
development and manufacturing company positioned to capitalize on
the evolving industry on a global scale."
"At this unprecedented time under the COVID-19 pandemic, we have
taken a number of steps to ensure that the health and safety of our
employees remains our top priority. Collectively, as a society, we
are doing our best to navigate the uncertainty, and now more than
ever, we are committed to remaining a trusted partner to our
customers, consumers and communities as we work to support them as
much as possible despite the challenging conditions," concluded Mr.
Robson.
Key Operating Highlights of the First Quarter 2020
- 19,962 kilograms of dried cannabis and hemp biomass was
processed in the first quarter of 2020. During the quarter, Valens
worked with a number of its clients to process white label products
in preparation for the launch of edibles and concentrates for
Cannabis 2.0. As a result, revenue-per-gram of input increased to
$1.44/gram in the first quarter of
2020, compared to $1.25/gram in the
fourth quarter of 2019 and $0.61/gram
in the third quarter of 2019. Revenue-per-gram is expected to
continue to increase throughout 2020 as product development and
white label contracts continue to grow in number, and revenue from
extraction contracts contributes to a lesser proportion of total
revenue.
- The Company has 25 SKUs across 5 different product lines in its
development pipeline and expects this to continue to grow
throughout 2020 to meet demand from its customers for Cannabis 2.0
products, including vape pens, edibles, concentrates,
cannabis-infused beverages, topicals, tinctures, and capsules.
- The Company announced a four-year extraction and white label
agreement with Emerald Health Therapeutics Inc. with annual minimum
quantities of 10,000 kilograms.
- The Company entered an amended manufacturing and sales licence
agreement with SōRSE Technology Corporation ("SōRSE") which grants
Valens an exclusive licence to use the proprietary SōRSE emulsion
technology to produce, market, package, sell and distribute
cannabis infused products in Canada, the United
Kingdom, Europe,
Australia and Mexico.
- The Company entered into multi-year distillate and SōRSE
emulsion supply agreement with large-scale confectionary company,
Dynaleo Inc.
- The Company also announced receipt of its first international
purchase orders of white label products to customers in
Australia. Based on the purchase
orders received, the initial shipments will consist of three SKUs
of tinctures, totaling over 3,000 units, and are expected to be
shipped in the coming months, pending receipt of necessary import
and export permits.
- Valens entered into a multi-year manufacturing agreement with a
Health Canada licensed party that provides the Company with
additional licensed capacity to demand for white-label product
development services. Under the terms of the agreement, an initial
cGMP certified 5,000 square feet has been allocated to Valens
operations with a total of up to 50,000 square feet being made
available subject to the counter-party receiving the required
Health Canada licence amendment.
- Subsequent to the quarter end, the Company launched a line of
cannabis-infused beverages, produced under a white label agreement
with A1 Cannabis Company (a subsidiary of Iconic Brewing). The new
line of beverages includes BASECAMP, a CBD-forward iced tea that
sold out in its first week of release, and SUMMIT, a THC-forward
citrus water. Both beverages are currently available in select
retailers across Ontario.
Jeff Fallows, President of The
Valens Company, said, "We are seeing challenges in the current
market environment with several of our customers experiencing
reduced workforces, temporary decreases in cultivation output, and
a resulting reduction in demand for extraction services. Although
retail demand for cannabis has surged during the COVID-19 pandemic
and we are experiencing strong white label sales going into the
second half of fiscal 2020, we are unable to predict the full
impact these challenges will have on our second quarter financials.
That being said, we continue to benefit from the flexibility
of our platform, the quality of our output and the experience of
our team in accessing opportunities both in the near and longer
term. With a breadth of new products on the horizon, a white label
platform that surpasses even the largest Canadian cannabis
companies and a diversified customer base, we are well-positioned
to adapt to ever-changing environments. Our strong cash position
does not leave us complacent as our team looks to maximize capital
allocation to generate the highest return on invested capital for
our shareholders."
The following table of financial highlights is presented in
thousands of Canadian dollars, except per share and biomass
extracted amounts.
|
Three-months
ended February
29, 2020; Q1
2020
|
Three-months
ended November
30, 2019; Q4 2019
|
Three-months
ended August
31, 2019; Q3
2019
|
Three-months
ended May 31,
2019; Q2 2019
|
Three-months
ended February
28, 2019; Q1
2019
|
Revenue $
|
31,980
|
30,624
|
16,462
|
8,800
|
2,220
|
|
|
|
|
|
|
Gross Profit
$
|
18,086
|
22,594
|
12,807
|
5,099
|
851
|
Gross Profit
%
|
56.6%
|
73.8%
|
77.8%
|
57.9%
|
38.3%
|
|
|
|
|
|
|
Adjusted EBITDA
$ (1)
|
14,282
|
17,669
|
9,772
|
2,023
|
(2,028)
|
Adjusted EBITDA
% (1)
|
44.7%
|
57.7%
|
59.4%
|
23.0%
|
N/A
|
|
|
|
|
|
|
Net income (loss)
$
|
2,543
|
4,466
|
5,893
|
(10,529)
|
(6,366)
|
Net income (loss)
%
|
8.0%
|
14.6%
|
35.8%
|
N/A
|
N/A
|
|
|
|
|
|
|
Basic / diluted
income (loss) per
share $
|
0.02
|
0.04
|
0.05
|
(0.10)
|
(0.07)
|
Cash and cash
equivalents and
short-term
investments $
|
44,286
|
58,701
|
69,233
|
65,522
|
20,552
|
|
|
|
|
|
|
Biomass extracted
(Kilograms)
|
19,962
|
24,426
|
26,625
|
8,547
|
1,796
|
|
|
(1)
|
Adjusted EBITDA is a
non-GAAP measure used by management that does not have any
standardized meaning prescribed by IFRS and may not be comparable
to similar measures presented by other companies. 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, unrealized gains and losses from short term
investments and other one-time and non-cash items including
impairment losses. Management believes adjusted EBITDA is a
useful financial metric to assess its operating performance on an
adjusted basis as described above. See reconciliation of "Adjusted
EBITDA (non-GAAP measure)" in the Company's Management's Discussion
and Analysis for the period ended February 29, 2020 for additional
information.
|
The management's discussion and analysis for the period and the
accompanying financial statements and notes are available under the
Company's profile on SEDAR at www.sedar.com.
Conference Call Details
The Company will host a conference call tomorrow, Wednesday, April 15, 2020, at 11:00 am Eastern Time / 8:00 am Pacific Time to discuss the financial
results and business outlook.
Participant Dial-In Numbers:
Toll-Free: 1-877-407-0792
Toll / International: 1-201-689-8263
*Participants should request The Valens Company Earnings Call or
provide confirmation code 13701091
The call will be webcast on the Valens Investor page of the
Company website at https://thevalenscompany.com/investors/ or
at this link. Please visit the website at least 15 minutes prior to
the call to register, download, and install any necessary audio
software. A replay of the call will be available on the Valens
Investor page approximately two hours after the conference call has
ended.
Tyler Robson, Chief Executive
Officer, Chris Buysen, Chief
Financial Officer, Jeff Fallows,
President, and Everett Knight,
Executive Vice President of Corporate Development and Capital
Markets, will be conducting a question and answer session following
the prepared remarks.
About The Valens Company
The Valens Company is a global leader in the end-to-end
development and manufacturing of innovative, cannabinoid-based
products. The Company is focused on being the partner of choice for
leading Canadian and international cannabis brands by providing
best-in-class, proprietary services including CO2, ethanol,
hydrocarbon, solvent-less and terpene extraction, analytical
testing, formulation and white label product development and
manufacturing. Valens is the largest third-party extraction company
in Canada with an annual capacity
of 425,000 kg of dried cannabis and hemp biomass at our
purpose-built facility in Kelowna,
British Columbia which is in the process of becoming
European Union (EU) Good Manufacturing Practices (GMP) compliant.
The Valens Company currently offers a wide range of product
formats, including tinctures, two-piece caps, soft gels, oral
sprays and vape pens as well as beverages, concentrates, topicals,
edibles, injectables, natural health products and has a strong
pipeline of next generation products in development for future
release. Finally, the Company's wholly-owned subsidiary
Valens Labs is a Health Canada
licensed ISO 17025 accredited cannabis testing lab providing
sector-leading analytical services and has partnered with Thermo
Fisher Scientific to develop a Centre of Excellence in Plant-Based
Science. The Company expects to formally change its name in due
course. For more information, please visit
http://thevalenscompany.com. The Company's investor deck can be
found specifically at http://thevalenscompany.com/investors/.
Notice regarding Forward Looking Statements
This news release contains certain "forward-looking statements"
within the meaning of such statements under applicable securities
law. Forward-looking statements are frequently characterized by
words such as "anticipates", "plan", "continue", "expect",
"project", "intend", "believe", "anticipate", "estimate", "may",
"will", "potential", "proposed", "positioned" and other similar
words, or statements that certain events or conditions "may" or
"will" occur. These statements are only predictions. Various
assumptions were used in drawing the conclusions or making the
projections contained in the forward-looking statements throughout
this news release. Forward-looking statements are based on the
opinions and estimates of management at the date the statements are
made and are subject to a variety of risks and uncertainties and
other factors that could cause actual events or results to differ
materially from those projected in the forward-looking statements.
The Company is under no obligation, and expressly disclaims any
intention or obligation, to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as expressly required by applicable law.
The TSXV or other regulatory authority has not reviewed,
approved or disapproved the contents of this press release. We seek
Safe Harbour.
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SOURCE The Valens Company