MISSISSAUGA, ON, Jan. 25,
2023 /CNW/ - Covalon Technologies Ltd. (the "Company"
or "Covalon") (TSXV: COV) (OTCQX: CVALF), an advanced medical
technologies company, today announced its fiscal 2022 fourth
quarter and year end results for the period ended September 30, 2022.
"Fiscal 2022 was a year of strengthening and transforming our
Company," states Brian Pedlar,
Covalon President and CEO. "We were excited to start the year
following the divestiture of our AquaGuard product line, with a
clean balance sheet, no debt, and significant cash reserves. Our
team executed on deliberate and well-planned strategic decisions to
re-position Covalon to be able to unlock value from our lifesaving,
patented products and technology, by investing in our people, our
sales and marketing capabilities, and our infrastructure. With our
strong product and technology portfolio, Covalon is focused on
becoming the leading provider of compassionate care solutions that
help patients heal faster and live better. We are on track to grow
Covalon into the company we know it can be, and we have already
made strong progress in 2023 towards reaching our goals."
As part of Covalon's transformation strategy in fiscal 2022, the
Company hired highly experienced leaders to transform its marketing
and sales teams to focus on the largest medical products market in
the world – the United States.
Throughout 2022, Covalon established its key products in more than
70 major United States hospitals,
including a dominant position in six of the top 10 children's
hospitals in the United States.
The Company's portfolio of patented infection prevention products
is becoming the standard of care in intensive care units and
surgical departments of those hospitals by helping to protect
patients of all ages from infection and helping them to heal with
innovative, gentler, and more compassionate solutions that support
better outcomes.
"We also expanded our digital marketing efforts which have
helped us grow our brand presence both in the United States and internationally with
physicians and clinicians that are focusing on reducing infections
and improving patient outcomes in hospitals and community care
settings," continues Pedlar. "We invested heavily in strengthening
our sales teams with staff and capabilities to engage our customers
whether digitally, virtually, or in person."
As part of the Company's customer focus initiatives, Covalon
improved supply chain operations, and invested in upgrading both
business systems and infrastructure to allow the Company to better
serve customers and drive growth in key markets going forward.
Additional investments included expanding Covalon's in-house
manufacturing, and medical coating services capabilities. This,
along with already implemented cost-saving initiatives, is expected
to improve our margins and profitability starting in 2023.
Management anticipates strong revenue growth going forward as
the Company works to improve its margins and further align its
operating expenses to growth prospects. Strategic priorities for
this fiscal year included a focus on strengthening core business
areas with respect to people and processes. The Company's
United States distributor
partners, focusing on the home-healthcare and long-term care
markets, are anticipating growth in 2023 through sales of Covalon's
collagen products. Covalon intends to increase its United States hospital customer base through
its direct sales team and increase product usage in many
significant hospitals where the Company's infection prevention
products have become standard of care. Internationally, Covalon
eliminated its sales efforts in the United Kingdom and several other markets which
do not offer the opportunity to create a meaningful market
presence. Going forward, the Company will focus on key markets
where its products will capture significant and meaningful market
share.
"We are in a much stronger position in our key markets compared
to last year and look forward to seeing the results of these
investments positively impacting us in 2023 and beyond. In 2022,
our investments in leadership, sales, marketing and operations,
along with our focused approach to our key revenue markets have
strengthened Covalon. Every department in the Company embraced
significant change in 2022 to processes, resources and people, and
I am proud of our team's resilience. To be sure, some uncertainty
will continue to affect global supply chains and the economy, but
the momentum we have, and the certainty of purpose we have in our
products and mission, will allow our Company to succeed. We are
excited about our progress in transforming Covalon into a
patient-driven medical device company, built on the relentless
pursuit to help the most vulnerable patients have a better chance
at healing," says Pedlar.
(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.
Fiscal 2022 Q4 and Year-End Financial Results
Revenue for the year ended September 30,
2022 was 7% lower at $18.1M
compared to $19.6M for the same
period of the prior year. International product revenue was
$6.0M, reflecting a $0.8M decrease compared to the prior year, due
primarily to decreased sales in the United Kingdom. Product revenue from
the United States decreased
approximately $0.6M or 5% primarily
due to the timing of collagen orders related to two major collagen
distributors.
Development and consulting services revenue for the year ended
September 30, 2022 decreased by 12%
to $1.5M, compared to $1.7M for the same period of the prior year.
During the period the Company engaged in 31 customer development
projects of various sizes with approximately 8 medical product
companies. This included various projects currently underway as
part of the previously announced major contract with one of the
world's largest medical device companies that licensed Covalon's
proprietary medical coating technologies.
Gross margin for the year ended September
30, 2022 was 41% compared to 50% in the same period for the
prior year. Cost of sales included an inventory provision for the
year ended September 30, 2022 of
$2.3M ($0.4M for the year ended September 30, 2021). Adjusted Gross Margin for
the year ended September 30, 2022,
increased to 55% compared to 53% for the same period of the prior
year, excluding inventory provisions and depreciation. Gross margin
is significantly influenced by source of revenue, the relative mix
of products sold, and any inventory provisions recorded in any
given financial period.
Operating expenses for the year ended September 30, 2022 increased $7.8M to $16.6M,
compared to $8.9M for the prior
year's comparative period. Excluding the impact of government
subsidies of $0.8M which were netted
against operating expenses in the prior period, operating expenses
increased $7.0M. The increase is due
mostly to sales and marketing costs increasing to $6.5M in the year ended September 30, 2022 from $1.9M in the comparable period. The increase was
driven by investments made in new leadership and additional staff
in sales and marketing, including retaining certain staff from the
AquaGuard product line, which in the prior period was classified as
a discontinued operation. The increase is also due to investments
to enhance and expand the production capability of our collagen
products, which will allow the Company to improve its margins going
forward.
General and administrative expenses for the three months ended
September 30, 2022 increased to
$2.3M from $1.1M in the comparable period, primarily due to
one-time costs, which are not anticipated to re-occur, and
additional finance and administrative headcount.
Net loss for continuing operations for the year ended
September 30, 2022 was $9.3M or $0.36 per
share, compared to a net income of $0.4M or $0.02 per
share for the year ended September 30,
2021. Net loss for discontinued operations for the year
ended September 30, 2022 was
$0.4M or $0.02 per share, compared to net income of
$23.1M or $0.89 per share for the year ended September 30, 2021. Net loss for the year ended
September 30, 2022 was $9.7M or $0.38 per
share, compared to net income of $23.5M or $0.91 per
share for the year ended September 30,
2021.
Adjusted EBITDA for the year ended September 30, 2022, was a loss of $5.6M compared to an Adjusted EBITDA income of
$1.3M for the year ended September 30, 2021.
Conference Call and Webcast Scheduled
A conference call and webcast to discuss Covalon's Fiscal 2022
Year-End Financial Results will be held Thursday, January 26, 2023 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: 24078707
To view the webcast accompanying the conference call, please
copy and paste the below url into a web browser:
https://app.webinar.net/L5Gbg9PmNYo
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 078707# until February 9,
2023 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, 2022 and 2021.
|
|
Three months
ended
September
30,
|
|
Year
ended
September
30,
|
|
|
2022
|
2021
|
|
2022
|
2021
|
Revenue
|
|
|
|
|
|
|
Product
|
$4,829,911
|
6,027,755
|
|
$16,429,051
|
17,650,865
|
|
Development and
consulting services
|
498,017
|
522,383
|
|
1,484,441
|
1,691,380
|
|
Licensing and royalty
fees
|
62,277
|
60,442
|
|
232,898
|
219,056
|
Total
revenue
|
5,390,205
|
6,610,580
|
|
18,146,390
|
19,561,301
|
|
|
|
|
|
|
|
Cost of
sales
|
4,078,867
|
3,545,483
|
|
10,652,885
|
9,864,970
|
|
|
|
|
|
|
|
Gross profit before
operating expenses
|
1,311,338
|
3,065,097
|
|
7,493,505
|
9,696,331
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
Operations
|
592,558
|
190,515
|
|
2,064,808
|
995,158
|
|
Research and
development activities
|
248,565
|
299,625
|
|
1,095,095
|
1,140,517
|
|
Sales, marketing and
agency fees
|
2,200,727
|
305,293
|
|
6,517,242
|
1,927,181
|
|
General and
administrative
|
2,315,316
|
1,126,516
|
|
6,958,688
|
4,795,132
|
|
|
5,357,166
|
1,921,949
|
|
16,635,833
|
8,857,988
|
|
|
|
|
|
|
|
Finance
expenses
|
29,973
|
117,904
|
|
111,590
|
419,379
|
Net income (loss)
from continuing
operations
|
(4,075,801)
|
1,025,244
|
|
(9,253,918)
|
418,964
|
Net income (loss)
from discontinued
operations
|
-
|
21,344,351
|
|
(409,295)
|
23,057,942
|
Net income
(loss)
|
$(4,075,801)
|
$22,369,595
|
|
$(9,663,213)
|
$23,476,906
|
|
|
|
|
|
|
|
|
|
Income (loss) per
common share of continuing operations
|
|
|
|
|
Basic earnings (loss)
per share
|
$(0.16)
|
$0.04
|
|
$(0.36)
|
$0.02
|
|
Diluted earnings (loss)
per share
|
$(0.16)
|
$0.04
|
|
$(0.36)
|
$0.02
|
|
Income per common
share of discontinued operations
|
|
|
|
|
Basic earnings (loss)
per share
|
$0.00
|
$0.83
|
|
$(0.02)
|
$0.89
|
|
Diluted earnings (loss)
per share
|
$0.00
|
$0.83
|
|
$(0.02)
|
$0.89
|
|
Income (loss) per
common share
|
|
|
|
|
Basic earnings (loss)
per share
|
$(0.16)
|
$0.87
|
|
$(0.38)
|
$0.91
|
|
Diluted earnings (loss)
per share
|
$(0.16)
|
$0.86
|
|
$(0.38)
|
$0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2022 and 2021.
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,
|
|
2022
|
2021
|
2022
|
2021
|
Gross profit before
operating expenses
|
1,311,338
|
3,065,097
|
7,493,505
|
9,696,331
|
Add: Depreciation and
amortization
|
99,882
|
49,470
|
251,656
|
282,843
|
Add: Inventory
provisions
|
1,255,081
|
231,618
|
2,264,853
|
361,556
|
Adjusted Gross
Margin
|
2,666,301
|
3,346,185
|
10,010,014
|
10,340,730
|
Adjusted Gross Margin
(%)
|
49 %
|
51 %
|
55 %
|
53 %
|
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,
2022 and 2021. 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,
|
|
2022
|
2021
|
2022
|
2021
|
Net income
(loss)
|
(4,075,801)
|
1,025,244
|
(9,253,918)
|
418,964
|
Add: Interest
expense
|
29,973
|
117,904
|
111,590
|
419,379
|
Add: Depreciation and
amortization
|
544,744
|
399,527
|
1,032,807
|
700,466
|
Add: Share
based compensation
|
84,450
|
9,698
|
211,438
|
163,769
|
Less: Government
subsidies
|
-
|
(8,668)
|
-
|
(801,821)
|
Add: Inventory
provisions
|
1,255,081
|
231,618
|
2,264,853
|
361,556
|
Adjusted
EBITDA
|
(2,161,553)
|
1,775,323
|
(5,633,230)
|
1,262,313
|
Website:
https://covalon.com/
Twitter:
@covalon
About Covalon
Covalon Technologies Ltd. is a patient-driven medical device
company, built on the relentless pursuit to help the most
vulnerable patients have a better chance at healing. Through a
strong portfolio of patented technologies and solutions for
advanced wound care, infection prevention and medical device
coatings, we offer innovative, gentler and more compassionate
options for patients to heal with less infections, less pain and
better outcomes. Our solutions are designed for patients and made
for care providers. 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 the 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 may contain 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" or variations of such words and
phrases or state that certain actions, events or results "may",
"could", "would", "might", "will" or "will be taken", "occur" or
"be achieved". In addition, any statements that refer to
expectations, projections or other characterizations of future
events or circumstances contain forward-looking information.
Statements containing forward-looking information are not
historical facts, but instead represent management's expectations,
estimates and projections regarding future events. Forward-looking
statements involve risks and uncertainties, including, but not
limited to, the factors described in greater detail in the "Risks
and Uncertainties" section of our management's discussion and
analysis of financial condition and results of operations for the
year ended September 30, 2022, which
is available on the Company's profile at
www.sedar.com, any of which could cause results,
performance, or achievements to differ materially from the results
discussed or implied in the forward-looking statements. Investors
should not place undue reliance on any forward-looking statements.
The forward-looking statements contained in this news release are
made as of the date of this news release, and the Company assumes
no obligation to update or alter any forward-looking statements,
whether as a result of new information, further events or
otherwise, except as required by law.
View original content to download
multimedia:https://www.prnewswire.com/news-releases/covalon-announces-fourth-quarter-and-year-end-results-for-fiscal-2022-and-highlights-company-transformation-changes-301731121.html
SOURCE Covalon Technologies Ltd.