MISSISSAUGA, ON, March 1, 2022 /CNW/ - Covalon Technologies
Ltd. (the "Company" or "Covalon") (TSXV: COV) (OTCQX: CVALF), an
advanced medical technologies company, today announced its first
quarter fiscal 2022 results.
Brian Pedlar, Covalon's President
and CEO, said, "I am very pleased to report that revenue from
continuing operations for our first quarter of fiscal 2022
increased 90% to $4.9 million. We
finished the quarter with $25 million
of cash on our balance sheet and positive operating cash flows of
$0.5 million. We are a much
stronger and improved company today, financially and operationally,
than we were at this time last year.
"During the quarter we successfully completed the transition of
our discontinued AquaGuard business. Operating costs from
continuing operations were $3.4
million for the quarter ended December 31, 2021, and as anticipated included
additional costs associated with the transition. We incurred a net
loss of $1.5 million or $0.06 per share and net loss of $1.1 million from continuing operations.
Our Adjusted EBITDA(1) improved $0.6 million to $0.2
million loss compared to last year's first quarter.
"I'm very proud of our team's contributions to our successful
turnaround and with our strong balance sheet and improvements made
to our operations since last year. Covalon is well positioned
to take advantage of growth opportunities in 2022," continued Mr.
Pedlar.
Continuing operations includes revenue from our core business of
collagen and antimicrobial silicone adhesive dressings, which
continues to experience growth in the
United States and internationally. Discontinued
operations comprised the net operations of AquaGuard for the
periods ended December
31st. The AquaGuard product line was
divested as of July 28, 2021.
Q1 Fiscal 2022 Financial Results
Revenue for the three months ended December 31st, 2021 increased
$2.3 million to $4.9 million, compared to $2.6 million in the prior year, as a result of
increased product revenue sales in the
United States. Gross profit was $2.3 million, compared to $1.3 million in Q1 fiscal 2021. Net loss for
continuing operations was $1.1
million or $0.04 per share,
compared to net loss from continuing operations of $1.0 million or $0.04 per share in Q1 fiscal 2021. Net loss from
discontinued operations was $0.4
million or $0.02 per share,
compared to net income from discontinued operations of $0.7 million or $0.03 per share in Q1 fiscal 2021.
Product revenue for the three months ended December 31st 2021 increased 125% to
$4.5 million, compared to
$2.0 million in the previous year.
Product revenue in the United
States was up $2.6 million due
in part to increased orders from our wound care distributors during
the quarter and due to a recovery from the prior year in our supply
chain which was negatively affected by delays in shipments of our
collagen products. The delay in shipments in the prior year
of collagen products resulted from COVID-19 related issues at a
contract manufacturer, that temporarily delayed production and
shipment of collagen products.
Revenue in the Middle East was
$0.7 million in Q1 fiscal 2022
compared to $0.8 million in Q1 fiscal
2021 and revenue in other international markets was $0.6 million compared to $0.7 million the previous year.
Development and consulting services revenue for the three-month
period ended December 31, 2021
decreased by 28% to $388,367,
compared to $541,750 for the same
period of the prior year. During the quarter, we engaged in 9
customer development projects of various sizes with approximately 4
medical product companies that included the various projects
underway associated with the previously announced major contract
with one of the world's largest medical device companies that
licensed Covalon's proprietary medical coating technologies.
Licensing revenue was $50,280 for the
quarter ended December 31, 2021,
compared to $60,590 for the prior
year.
Gross margin was 46% for Q1 fiscal 2022, compared to 51% for the
prior year. Included in cost of sales in the current quarter are
inventory write-downs, totaling $0.7
million. The gross margin is significantly influenced
by source of revenue and by the relative mix of products sold in
any given financial period.
Adjusted gross margin(1), which excludes inventory
provisions and depreciation, was 62% for Q1 fiscal 2022, compared
to 55% for the prior year. The increase is attributed to product
mix and increased sales in the United
States.
Operating expenses increased to $3.4
million, compared to $2.3
million for the prior year's comparative period. Excluding
the impact of government subsidies ($302,454) on the prior period, operating
expenses for continuing operations increased $0.8 million. Approximately $0.5 million relates to sales, marketing,
operations and administrative staff previously dedicated to the
discontinued AquaGuard business that were re-deployed to continuing
operations. The remaining increase of $0.3 million is due to increased facility and
other expenses.
Adjusted EBITDA(1) for Q1 fiscal 2022 was a loss of
$0.2 million, compared to a loss of
$0.8 million in the prior year's
comparative period.
Conference Call Scheduled
A conference call and webcast to discuss Covalon's Q1 fiscal
2022 financial results will be held Tuesday,
March 1st, 2022 at 9:00am EST. To view, listen to, and
participate in the live webcast, please follow the link below:
https://produceredition.webcasts.com/starthere.jsp?ei=1529622&tp_key=2a5681ae2b
To listen and participate via the conference call, please
dial:
North American Toll-Free: 1-888-664-6392
Local (Toronto): 416-764-8659
Confirmation Number: 47526078
Participants will be able to ask questions of Company management
during the Q&A portion of the conference call either by asking
them on the call or by submitting them using the chat function on
the webcast.
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 526078# until March
15th, 2022. A recording of the call will also be
available on www.covalon.com under News & Events on the
Investors tab.
Statement of Operations
The following unaudited table presents Covalon's consolidated
statements of operations for the three-month periods ended
December 31st, 2021 and
2020.
|
(unaudited)
|
|
|
Three months
ended
December 31,
|
|
|
|
|
|
2021
|
2020
|
Revenue
|
|
|
|
|
|
|
Product
|
|
|
|
$4,497,698
|
$1,997,359
|
|
Development and
consulting
services
|
|
|
|
388,367
|
541,750
|
|
Licensing and royalty
fees
|
|
|
|
50,280
|
60,590
|
|
|
|
|
|
|
|
Total
revenue
|
|
|
|
4,936,345
|
2,599,699
|
|
|
|
|
|
|
|
Cost of product
sales
|
|
|
|
2,643,968
|
1,264,472
|
|
|
|
|
|
|
|
Gross profit
before operating expenses
|
|
|
|
2,292,377
|
1,335,227
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
Operations
|
|
|
|
478,260
|
258,483
|
|
Research and
development
|
|
|
|
259,667
|
142,770
|
|
Sales and
marketing
|
|
|
|
1,170,177
|
560,932
|
|
General and
administrative
|
|
|
|
1,479,552
|
1,309,031
|
|
|
|
|
|
3,387,656
|
2,271,216
|
|
|
|
|
|
|
|
Financing
expenses
|
|
|
|
12,223
|
97,925
|
|
|
|
|
|
|
|
Net income (loss)
from continuing
operations
|
|
|
|
$(1,107,502)
|
$(1,033,914)
|
Net income (loss)
from discontinued
operations
|
|
|
|
(409,295)
|
661,571
|
Net income
(loss)
|
|
|
|
$(1,516,797)
|
$(372,343)
|
|
|
|
|
|
|
|
Other
comprehensive loss
|
|
|
|
|
|
|
Foreign currency
translation adjustment
continued operations
|
|
|
|
(486,584)
|
(576,865)
|
|
Foreign currency
translation adjustment
discontinued operations
|
|
|
|
-
|
(273,272)
|
|
|
|
|
|
|
|
Other
comprehensive loss
|
|
|
|
$(2,003,381)
|
$(1,222,480)
|
|
|
|
|
|
|
|
Income (loss) per
common share of continuing operations
|
|
|
|
Basic earnings (loss)
per share
|
|
|
|
$(0.04)
|
$(0.04)
|
Diluted earnings
(loss) per share
|
|
|
|
$(0.04)
|
$(0.04)
|
|
|
|
|
|
|
Income (loss) per
common share of discontinued operations
|
|
|
|
Basic earnings per
share
|
|
|
|
$(0.02)
|
$0.03
|
Diluted earnings per
share
|
|
|
|
$(0.02)
|
$0.03
|
|
|
|
|
|
|
Income (loss) per
common share
|
|
|
|
|
|
Basic earnings (loss)
per share
|
|
|
|
$(0.06)
|
$(0.01)
|
Diluted earnings
(loss) per share
|
|
|
|
$(0.06)
|
$(0.01)
|
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 ended
December 31, 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
December 31,
|
|
2021
|
2020
|
Gross profit before
operating expenses
|
2,292,377
|
1,335,227
|
Add: Depreciation and
amortization
|
54,295
|
80,509
|
Add: Inventory
provisions
|
719,691
|
6,909
|
Adjusted Gross
Margin
|
3,066,363
|
1,422,645
|
Adjusted Gross Margin
(%)
|
62%
|
55%
|
The table below provides a reconciliation of net loss under IFRS
in the consolidated financial statements to Adjusted EBITDA for the
three months ended December 31, 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
December 31,
|
|
2021
|
2020
|
Net loss
|
(1,107,502)
|
(1,033,914)
|
Add: Interest
expense
|
12,223
|
97,926
|
Add: Depreciation and
amortization
|
109,964
|
248,911
|
Add: Stock based
compensation
|
21,034
|
99,236
|
Less: Government
subsidies
|
----
|
(302,454)
|
Add: Inventory
provisions
|
719,691
|
6,909
|
Adjusted
EBITDA
|
(244,590)
|
(883,387)
|
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.