MISSISSAUGA, ON, Aug. 24, 2020 /CNW/ - Covalon Technologies
Ltd. (the "Company" or "Covalon") (TSXV: COV); (OTCQX: CVALF), an
advanced medical technologies company, today announces its third
quarter fiscal 2020 results.
Brian Pedlar, Covalon's President
and CEO, said, "During the quarter ended June 30th, the entire Covalon team was focused on
execution and delivering results, despite the challenges faced
during this past quarter. We have been working very hard to
generate new sales opportunities for our infection prevention
portfolio of products, engage with existing customers and reduce
operating costs. We also amended our banking agreement with
HSBC Bank Canada ("HSBC"). The amendment provided relief under
certain financial covenants until March 31,
2021 and an additional $1
million facility through the Business Credit Availability
Program ("BCAP") with the Business Development Bank of Canada ("BDC"). I am confident the steps
we have taken have put Covalon in the best possible position for
the long term and we will see the impact in increased revenue,
better operating results, and expanded opportunities.
"Our efforts in reducing operating expenses and generating new
sales allowed us to achieve a profit for the quarter ended
June 30th, with the help
of government subsidies related to COVID-19 relief. We are
already seeing some signs of recovery in July and early August in
the United States with increased
procedure volumes that consume our products, and we are cautiously
watching to determine if these signs of recovery continue.
"Sales for the quarter were flat compared to last year and the
impact of COVID-19 has masked many of the positive gains we have
made in the United States,
Latin America, and the Middle
East. For the quarter ended June
30th, sales overall in the United States were down by 17% compared to
last year. Even though sales to hospital customers were down
by 40% due to COVID-19, we were able to mitigate this decline with
increased sales of products outside of our hospital channel.
The decline in hospital sales is temporary and a result of the
deferral of elective procedures by hospitals that consume our
products. Our team has displayed determination and creativity
in continuing to engage with current and new hospital customers and
we are seeing positive signs of hospital customers willing to trial
new products we have introduced in the last few months.
"Overall operating costs for the past 9 months are over
$8 million lower than last
year. We are continuing to reduce operating expenses,
headcount, and discretionary spending in an effort to return
Covalon to consistent profitability. We believe we are well
on our way to doing so.
"The diversity of our technology portfolio and the strength of
our ability to adapt and innovate has allowed us to launch new
products that are less affected by a reduction in hospital elective
procedures. Our recently announced CovaGuard product line allows
our sales team to engage with new customers. We also introduced
CovaClear and VALGuard products that are targeted at neonatal and
pediatric patients within our existing customer base. Collectively
these efforts will over time contribute to revenue and help to
reduce the impact of COVID-19 on our existing product sales. Our
customers appreciate the strength and depth of our infection
prevention product portfolio as they upgrade their infection
prevention protocols. As the world emerges from COVID-19, I
have no doubt that Covalon will emerge as a stronger and much more
valuable company because of Covalon's unique and highly respected
infection control technologies that will be in greater demand than
ever."
Q3 Fiscal 2020 Financial Results
Revenue for the three months ended June
30, 2020 was $6.7 million,
compared to $6.9 million the prior
year. Gross margin was 46% in Q3 fiscal 2020, compared to 59% in Q3
fiscal 2019. Net income was $314,167 or $0.01
per share, compared to a net loss of $3.5
million or $0.16 per share in
Q3 fiscal 2019.
Revenue in the United States
for the quarter was down 17% year-over-year in Q2 to $4.7 million. Revenue from sales in the
Middle East was $1.0 million, up by $0.2
million compared to last year. Sales in Latin
American, European, and other international regions was
$1.0 million compared to $0.4 million last year. Product
revenue was $6.4 million while
services revenue was $0.2 million,
compared to $6.4 million and
$0.6 million, respectively.
Gross margins were lower due to $0.3
million of one-time inventory provisions, $0.4 million of additional costs to re-purpose
certain existing inventory to fulfil orders, and the impact of
selling protective masks, face shields, and other personal
protective equipment at very low margins. Going forward,
gross margins are expected to recover to normal levels in line with
last year before accounting for any additional one-time
charges.
Operating expenses were $2.5
million compared to $7.3
million last year and included a one-time $1.8 million of COVID-19 related government
subsidies which were netted out against the related expenses.
Excluding this one-time offset, operating expenses were down 41%
compared to the prior year's third quarter.
The Company obtained a waiver from HSBC related to the covenants
that were not met as of the quarter ended June 30, 2020. The Company and HSBC also
entered into an amended and restated credit agreement providing
for, among other items, certain adjustments to the covenants in
future quarters until March 2021. The
amended and restated credit agreement also provides the Company
with an additional $1 million
facility through the BCAP program with BDC, the availability of
which is subject to certain conditions contained in the amended and
restated credit agreement. The BDC Business Credit
Availability Program is designed to provide access to working
capital through eligible participating banks to eligible
businesses, like Covalon, that have been impacted by
COVID-19.
Conference Call Scheduled
A conference call to discuss Covalon's Fiscal 2020 Q3 Financial
Results will be held Monday August
24th, 2020 at 9:00am
EST. To participate in the call, please dial:
Local (Toronto):
416.764.8659
North American Toll-Free: 1.888.664.6392
Confirmation Number: 80896464
A recording of the call will be available until September 7th, 2020, by calling
416.764.8677 or 1.888.390.0541 and entering the encore replay entry
code 896464#.
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 completion of
integration of the AquaGuard acquisition, 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 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.
SOURCE Covalon Technologies Ltd.