Provincial sales net revenue increased 31.7%
to $7.9 million in Q4 2021 compared
to $6.0 million in Q3 2021
Canada-wide
provincial listings increased 21.0% to 219 in Q4 2021, compared to
181 in Q3 2021, with further growth to 255 as of January 30, 2022
Adjusted gross profit margin increased
significantly to 34.1% in Q4 2021 compared to 27.4% in Q3
2021
B2C revenue lines of provincial sales and
Green Roads accounted for 73.9% of net revenue in Q4 2021
Valens expects to achieve positive adjusted
EBITDA by Q4 2022
KELOWNA, BC, Feb. 28, 2022 /PRNewswire/ - The Valens
Company Inc. (TSX: VLNS) (Nasdaq: VLNS) (the "Company", "The Valens
Company" or "Valens"), a leading manufacturer of cannabis
products, is pleased to report its fourth quarter and fiscal
year financial results for the period ended November 30, 2021.
Tyler Robson, Chief Executive
Officer, Co-Founder and Chair of The Valens Company, said: "This
quarter showcases the progress we have made in our business plan in
key areas despite a competitive and challenging operating
environment in Canada and
globally. Net revenue slightly declined quarter-over-quarter as we
completed the transition of our B2B business to align with the
'fewer, bigger, better' strategy and was negatively impacted by the
floods in British Columbia which
resulted in supply chain disruptions. However, in our two key
revenue segments, we are very pleased with the industry leading
growth in provincial sales revenue and the full quarter revenue
generated by our Green Roads US CBD business. With the B2B
transition largely behind us, we expect to have more sustained
growth in 2022."
Robson continued, "A bright spot in the quarter was our adjusted
gross profit margin which increased from 27.4% in Q3 2021 to 34.1%
in Q4 2021. I am very proud of our operations and logistics teams
which have had to deal with a significant business transition over
2021 as well as automation delays, inflationary cost pressures,
supply chain disruptions, and the flooding in British Columbia. With further automation and
our recently announced integration initiative, we are now heading
down the path towards profitability. This supports our confidence
and commitment to achieving both positive adjusted EBITDA by Q4
2022 and our revenue guidance for 2023 of at least $225 million."
Fourth Quarter & Full Year Fiscal 2021
Highlights:
- Net revenue of $18.4 million in
Q4 2021 and $78.2 million in fiscal
year 2021, representing a decrease of 12.3% compared to Q3 2021.
However, despite a decrease in net revenue quarter-over-quarter,
adjusted gross profit increased by 9.1% to $6.3 million from $5.7
million in Q3 2021.
-
- Provincial sales increased by 31.7% to $7.9 million from $6.0
million in Q3 2021. Valens branded products represent the
majority of these sales, which are expected to increase in the
coming quarters as the listings we achieved in 2021 begin to
meaningfully contribute to market share and revenue gains.
- Provincial listings increased by 21.0% to 219 in Q4 2021
compared to 181 at the end of Q3 2021 and 75 at the end of Q1 2021,
and further expanded to 255 by January 30,
2022.*
- Green Roads generated $5.7
million of revenue in its first full quarter of
consolidation, growing 21.3% quarter-over-quarter from $4.7 million for a partial quarter in Q3
2021.
- B2B declined 53.9% in Q4 2021 to $4.1
million from $8.9 million in
Q3 2021 as Valens aggressively moved to align with the 'fewer,
bigger, better' strategy in anticipation of continued headwinds
for smaller, undercapitalized cannabis companies in 2022.
- Other revenue sources include Valens
Labs, Pommies, & International Revenue.
-
- Decrease attributable to delayed international shipments which
are expected to arrive in Q1 2022
|
Q4
2021
|
Q3
2021
|
Percentage
Change
|
Net Revenue
|
$18.4
|
$21.0
|
-12.3%
|
Provincial
Sales
|
$7.9
|
$6.0
|
+31.7%
|
Green
Roads
|
$5.7
|
$4.7
|
+21.3%
|
B2B
|
$4.1
|
$8.9
|
-53.9%
|
Other
|
$0.7
|
$1.4
|
-50.0%
|
- Adjusted gross profit margin increased to 34.1% in Q4 2021
compared to 27.4% in Q3 2021.
- Product achievements:
-
- Valens and Citizen Stash combined were ranked 11th
by overall estimated market share across all categories for the
three months ended January 2022 in
Alberta, British Columbia, Ontario and Saskatchewan based on Hifyre data
- Verse BC God Bud 28g was the #2 best-selling SKU across all
categories in Alberta,
British Columbia, Ontario and Saskatchewan during the three months ended
January 2022 based on Hifyre data. In
January 2022, Valens achieved the
8th highest market share of all licensed producers in
Ontario with Verse BC God Bud 28g
as the #1 best-selling SKU across all categories based on OCS
depletion data encompassing online sales to consumers and wholesale
sales to private retailers
- Estimated share of the cannabis-infused beverage category
increased to 10.0% in Q4 2021 from 9.0% in Q3 2021, and 5.5% in Q1
2021 in Alberta, British Columbia and Ontario based on Hifyre data
- Valens had a cash and marketable securities position of
$19.1 million at the end of Q4 2021
and subsequent to quarter end raised $40
million in debt financing. Proceeds from the debt financing
were used to repay previous existing debt and will be used for
general working capital purposes.
- Valens book value per share as of Q4 2021 was CAD$3.82.**
*The term "provincial listings" refers to the total number of
provincial and territorial listings in Canada of products manufactured and/or
distributed by The Valens Company
**Book value per share
is calculated by dividing total shareholders' equity from the Q4
2021 consolidated statements of financial position by the common
shares found in the Q4 MD&A as of November 30, 2021.
Fourth Quarter & Full Fiscal 2021 Corporate and
Operational Highlights:
- Successfully closed the acquisition of Citizen Stash &
Verse Cannabis, propelling Valens into the flower and pre-roll
segments, the two largest categories in the Canadian cannabis
market, currently accounting for over 70% of retail sales. The
strategic expansion into flower provides Valens access to a
catalogue of genetics, contract grow relationships, and an expanded
brand portfolio with provincial listings across eight provinces and
territories.
- Entered into the Quebec
marketplace, the third-largest cannabis market in Canada, through the execution of a letter
of intent with Société québécoise du cannabis for the distribution
of Valens' cannabis products into the region online, enabling the
Company to expand its national distribution platform and make its
products accessible to over 80% of the Canadian population.
- Closed four strategic acquisitions and expanded domestic and
international footprint, including access to eight provinces
and territories, 50 states, and third-party distribution
relationships in 10 countries. Through these acquisitions Valens
has tripled its total addressable market with leading brands in all
respective cannabis categories.
-
- Expanded edible product capabilities through LYF Food
Technologies Inc.
- Entered the US CBD market through Green Roads
- Expanded into premium flower-based categories through Citizen
Stash
- Entered the value segment through Verse Cannabis, subsequently
rebranded to Versus in Q1 2022
- Commissioned the K2 & Pommies GTA beverage
facilities, enabling Valens to leverage its low-cost
manufacturing platform to drive product sales, accelerate entry
into new innovative product verticals, and increase economies of
scale.
-
- Launched flower, pre-rolls, topicals, and edibles as new
product verticals in 2021
- Doubled vape manufacturing capacity in 2021
- Installed pre-roll manufacturing equipment, producing 3.2
million pre-rolls in 2021 with a capacity to produce 8.6 million
pre-rolls annually
- Installed Nitrotin packing line, with a capacity to produce
720,000 units of 3.5g premium flower
- Pommies provides an additional 30,000 square feet of licensed
manufacturing space, with a capacity to produce more than eight
million units per year on a single shift in various formats
- Subsequent to quarter-end, Valens commenced trading on the
Nasdaq Capital Market, positioning Valens and its shareholders
for greater access to liquidity, increased corporate visibility,
and a broader shareholder base in 2022.
- Strengthened custom manufacturing partnership network with
the addition and expansion of manufacturing agreements. The
agreements cover the production of a variety of cannabis products
including pre-rolls, edibles, vapes, hydrocarbon concentrates, as
well as expert extraction services.
Financial Summary
- Net revenue of $18.4 million in
Q4 2021 and $78.2 million in fiscal
year 2021, representing a decrease of 12.3% over Q3 2021, driven by
a decline in B2B as Valens aggressively moved to align with the
'fewer, bigger, better' strategy for customers. Both
provincial sales and Green Roads showed strong growth in
contributed revenue in Q4 2021 as discussed above.
- Adjusted gross profit(1) was $6.3 million, or 34.1% of net revenue in Q4 2021,
compared to $5.7 million, or 27.4% of
net revenue, in Q3 2021.
-
- Adjusted gross profit was positively impacted by new branded
business lines, optimizing utilization of manufacturing equipment,
and increasing efficiencies through SKU optimization and portfolio
rationalization.
- Adjusted EBITDA(2) was ($13.3) million, in Q4 2021 compared to
($6.2) million in Q3 2021.
-
- The reduction in EBITDA was driven by the reduction in Canadian
Emergency Wage Subsidy, inflationary cost pressures, increased
costs from supply chain disruptions, Nasdaq listing process,
integration of new acquisitions including SG&A, launch of new
innovative products, automation delays, and flooding in
British Columbia.
The following table of financial highlights is presented in
thousands of Canadian dollars, except for number of provincial
listings.
|
Three months
ended November
30, 2021;
|
Three months
ended August 31,
2021;
|
Fiscal year
ended November
30, 2021;
|
Fiscal year
ended November
30, 2020;
|
Q4
2021
|
Q3
2021
|
Fiscal
2021
|
Fiscal
2020
|
Gross Revenue
$
|
23,342
|
24,569
|
90,154
|
86,059
|
Net Revenue
$
|
18,407
|
20,990
|
78,175
|
83,778
|
Gross Profit
$
|
2,705
|
5,629
|
17,239
|
25,724
|
Gross Profit
Margin
|
14.7%
|
26.8%
|
22.1%
|
30.7%
|
Adjusted Gross
Profit
$ (1)
|
6,272
|
5,748
|
21,470
|
39,992
|
Adjusted Gross
Profit
Margin % (1)
|
34.1%
|
27.4%
|
27.5%
|
47.7%
|
Adjusted EBITDA
$
(2)
|
(13,347)
|
(6,183)
|
(26,731)
|
14,139
|
Adjusted EBITDA
%
(2)
|
N/A
|
N/A
|
N/A
|
16.4%
|
Net income (loss)
$
|
(21,423)
|
(12,799)
|
(49,034)
|
(20,682)
|
Basic/diluted
income
(loss) per share $ (3)
|
(0.34)
|
(0.24)
|
(0.88)
|
(0.49)
|
Cash and
marketable
securities $ (4)
|
19,125
|
30,958
|
19,125
|
21,376
|
Provincial
Listings
|
219
|
181
|
219
|
N/A
|
- Gross Profit Margin, Adjusted Gross Profit and Adjusted Gross
Profit Margin are non-GAAP financial measures that do not have any
standardized meanings prescribed by IFRS and may not be comparable
to similar measures presented by other companies. Gross Profit
Margin is calculated as the difference between net revenue and cost
of goods sold divided by net revenue (expressed as a
percentage). Adjusted Gross Profit is calculated by
increasing Gross Profit by the amount of inventory valuation
allowance and fair value of biological assets. Adjusted Gross
Profit Margin is calculated by dividing total Adjusted Gross Profit
by Net Revenue (expressed as a percentage). Management
believes the adjusted measures provide a meaningful comparison
between companies, as Valens will contribute to net revenue from
branded sales and the sale of flower products. Furthermore, these
measures provide useful information as they are commonly used in
the capital markets to approximate operating performance, for
companies that engage in the sale of flower products, on an
adjusted basis as described above. See reconciliation of "Adjusted
Gross Profit (non-GAAP measure)" in the Company's Management's
Discussion and Analysis for the year ended November 30, 2021, for additional information (in
addition to the period ended August 31,
2021).
- 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) from
operations, as reported, adjusted for financing costs, interest
income, income taxes, depreciation and amortization, share-based
payments, accretion, foreign exchange gains and losses, inventory
valuation allowance, joint venture termination costs, gains and
losses on disposals of capital assets, realized gains and losses
from marketable securities and derivatives, remeasurement of
contingent consideration, and non-recurring and transaction costs.
Management believes this measure provides useful information as it
is a commonly used measure in the capital markets to approximate
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 year ended
November 30, 2021 (in addition to the
period ended August 31, 2021).
- Per share dollar amounts have been adjusted for the 3-for-1
consolidation announced on November 15,
2021
- Valens had a cash and marketable securities position of
$19.1 million at the end of Q4 2021
and after the quarter raised $40
million in debt financing. Proceeds from the debt financing
were used to repay previous existing debt and for general working
capital purposes.
Key Performance Indicators and Revenue Guidance:
Key Objectives for 2022:
- Vapes, Edibles, Beverages – Become a Top 5 Player in
Canada
- Flower Products – Become a Top 10 Player in Canada
- Gross Margin Improvement, Positive EBITDA by Q4
- Further entry into the US market as permissible with federal
regulations
Revenue & EBITDA Guidance 2023:
- Revenue of minimum CAD$225
million
- Adjusted EBITDA margins of greater than 10%
Jeff Fallows, President of The
Valens Company, said: "We have now completed the successful
'Launch' phase of our business plan, having achieved
attractive growth in provincial listings to create a leading
cannabis consumer products company with an exciting portfolio of
brands. Although we have only just begun to experience the targeted
revenue growth from our 'Launch, Grow, Optimize' strategy,
we now look to enter the 'Growth and Optimize' phases of our
business plan, which will focus on maximizing sell-through, driving
higher utilization across our facilities, removing underperforming
listings, and pursuing optimization initiatives. This will ensure
we remain operationally agile, competitively positioned in the
market, and best able to deal with the ongoing logistical and
inflationary challenges in the current economic environment. In Q1
2022, we are already starting to see strong momentum across all our
key segments with strong growth in provincial sales and increased
utilization through our realigned B2B partnerships which are
expected to provide both sustained quarter-over-quarter revenue
growth in 2022 and enhanced margins. This, combined with our
integration initiatives announced in early February that are
expected to generate $20 million in
annual savings, has set us on a clear pathway to become EBITDA
positive by fiscal Q4 2022."
Fallows continued, "Over the course of the year, we believe that
our focus on business fundamentals with the expectation to drive
revenue growth, achieve positive EBITDA, and attain deeper US
market penetration will reflect positively as we look to generate
shareholder value. With our track record of driving one of the
highest revenues per dollar invested compared to our Canadian
cannabis peers, our recent Nasdaq listing already showing
increasing liquidity and expanding our reach to investors in
the United States, we believe we
are well positioned to drive value for our shareholders in 2022.
Looking back over the last year we are incredibly proud of what we
have achieved in a tough global environment. In 2022 we have a
leading cannabis innovation platform best positioned to drive B2C
revenue growth both north and south of the border as well as B2B
revenue growth as the benefits of our 'Fewer, Bigger,
Better' strategy begin to materialize. We expect 2022 to be a
challenging environment where only the companies with distinct
competitive advantages, low-cost infrastructure, and innovative
product capabilities will thrive. We believe we have positioned
ourselves with the right team and strategy to generate long-term
value for shareholders."
This press release is intended to be read in conjunction with
Company's Management's Discussion and Analysis ("MD&A") for the
period and the accompanying Financial Statements and notes,
available under the Company's profile on SEDAR at www.sedar.com and
the Company's Form 10-Q, which will be filed on
(www.sec.gov/edgar.shtml).
Q4 2021 Conference Call Details
The Company will host a conference call tomorrow, Tuesday, March 1, 2022, 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 13727202.
The call will be available via 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, Sunil Gandhi, Chief
Financial Officer, Jeffrey 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.
At Valens, it's Personal.
About The Valens Company
The Valens Company is a
leading cannabis consumer products company, with significant
expertise in manufacturing cannabinoid based products and a mission
to bring the benefits of cannabis to the world. Valens provides
proprietary cannabis processing services and best-in-class product
development, manufacturing, and commercialization of cannabis
consumer packaged goods. Valens' high-quality products are
formulated for the recreational, health and wellness, and medical
consumer segments and are offered across all cannabis product
categories, with a focus on quality and product innovation. Valens
also manufactures, distributes, and sells a wide range of CBD
products in the United States
through its subsidiary Green Roads, and distributes medicinal
cannabis products to international markets through its subsidiary
Valens Australia. In partnership with brand houses, consumer
packaged goods companies and licensed cannabis producers around the
globe, Valens continues to grow its diverse product portfolio in
alignment with evolving cannabis consumer preferences. Through
Valens Labs, Valens is setting the
standard in cannabis testing and research and development with
Canada's only ISO17025 accredited
analytical services lab, named The Centre of Excellence in
Plant-Based Science by partner and scientific world leader Thermo
Fisher Scientific. Discover more on The Valens Company at
http://www.thevalenscompany.com.
Notice regarding Forward Looking Statements
All
information included in this press release, including any
information as to the future financial or operating performance and
other statements of The Valens Company that express management's
expectations or estimates of future performance, other than
statements of historical fact, constitute forward-looking
information or forward-looking statements within the meaning of
applicable securities laws and are based on expectations, estimates
and projections as of the date hereof. Forward-looking statements
are included for the purpose of providing information about
management's current expectations and plans relating to the future.
Wherever possible, words such as "plans", "expects", "scheduled",
"trends", "forecasts", "future", "indications", "potential",
"estimates", "predicts", "anticipate", "to establish", "believe",
"intend", "ability to", or statements that certain actions, events
or results "may", "should", "could", "would", "might", "will", or
are "likely" to be taken, occur or be achieved, or the negative of
these words or other variations thereof, have been used to identify
such forward-looking information. Specific forward-looking
statements include, without limitation, all disclosure regarding
future results of operations, future outcomes of transactions,
economic conditions, and anticipated courses of action. Investors
and other parties are advised that there is not necessarily any
correlation between the number of SKUs manufactured and shipped and
revenue and profit, and undue reliance should not be placed on such
information.
The risks and uncertainties that may affect forward-looking
statements include, among others, cannabis regulatory risk, risks
relating to the regulation of hemp in the
United States, U.S. entry restrictions, the uncertainties,
effects of and responses to the COVID-19 pandemic, reliance on
Canadian licenses, reliance on Australian licenses, the illegality
of cannabis under federal law in the
United States; catastrophic events; competition; the recent
development of the cannabis industry and market in Canada; price compression in the cannabis
industry; maturation of the cannabis market; dependence on supply
of cannabis and reliance on other key inputs, material weakness in
the Company's internal controls over financial reporting,
dependence on senior management and key personnel, general business
risk and liability, regulation of the cannabis industry, change in
laws, regulations and guidelines, compliance with laws, foreign
operations, reliance on a limited number of facilities, limited
operating history, TSX and Nasdaq continued listing requirements,
vulnerability to rising energy costs, environmental regulations and
risks, conflicts of interest, unfavourable publicity or consumer
perception, product liability, risks related to intellectual
property, product recalls, difficulties with forecasts, management
of growth and litigation, many of which are beyond the control of
The Valens Company. For a more comprehensive discussion of the
risks faced by The Valens Company, and which may cause the actual
financial results, performance or achievements of The Valens
Company to be materially different from estimated future results,
performance or achievements expressed or implied by forward-looking
information or forward-looking statements, please refer to The
Valens Company's latest Annual Information Form filed with Canadian
securities regulatory authorities at www.sedar.com or on The Valens
Company's website at www.thevalenscompany.com. The risks described
in such Annual Information Form are hereby incorporated by
reference herein. Although the forward-looking statements contained
herein reflect management's current beliefs and reasonable
assumptions based upon information available to management as of
the date hereof, The Valens Company cannot be certain that actual
results will be consistent with such forward-looking information.
The Valens Company cautions you not to place undue reliance upon
any such forward-looking statements. The Valens Company 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 required by applicable law. Nothing herein
should be construed as either an offer to sell or a solicitation to
buy or sell securities of The Valens Company.
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SOURCE The Valens Company Inc.