Provincial sales net revenue increased 20.0%
quarter over quarter supported by a 76.5% quarter over quarter
increase in consumption-level retail sales according to
Hifyre1
Canada-wide
provincial listings increased 37.1% to 181 at the end of Q3 2021,
compared to 132 at the end of Q2 2021 with an additional 27
accepted subsequent to quarter end
Beverage market share increased to 9.0% in Q3
2021 vs 8.0% in Q2 20211
Gross margin increased to 26.8% in Q3 2021
from 22.0% in Q2 2021
B2C revenue lines of provincial sales and
Green Roads accounted for ~50.0% of net revenue in Q3 2021, which
is expected to increase following the close of the Citizen Stash
acquisition
KELOWNA, BC, Oct. 13, 2021 /PRNewswire/ - The Valens
Company Inc. (TSX: VLNS) (OTCQX: VLNCF) (the "Company", "The Valens
Company" or "Valens"), a leading manufacturer of cannabis
products, is pleased to report its third quarter financial
results for the period ended August 31, 2021.
Tyler Robson, Chief Executive
Officer, Co-Founder and Chair of The Valens Company, said: "We are
very pleased with the progress we have made on our strategic
initiatives to transform Valens into a leading cannabis consumer
packaged goods company. Our innovative product launches have driven
growth in provincial listings and we are only just beginning to see
the resulting financial impact with provincial sales net revenue
growing 20% quarter over quarter. More importantly, consumer demand
for our products is very strong, leading to even greater growth in
consumption-level retail sales for Valens products which were up
76.5% quarter over quarter. The combination of net revenue from
provincial sales and the partial quarter of revenue contribution
from Green Roads represented 50% of total net revenue in Q3 2021,
further illustrating the early progress on our strategic
initiatives. We expect these B2C revenue lines to continue growing
in future quarters as previously announced new listings are
launched in market and gain commercial traction and the successful
closing of the Citizen Stash acquisition adds dried flower revenue
to our portfolio. Valens is now present in seven provinces and will
span nine provinces and territories across Canada assuming the successful closing of the
Citizen Stash acquisition."
Robson continued, "With our operational platform largely built
and a critical mass of provincial listings now in place, our focus
has shifted to operational efficiencies, implementation of
automation initiatives and volume growth to drive margin
improvement and positive EBITDA in future quarters. During the
third quarter, we strategically transitioned away from smaller,
underperforming B2B partners resulting in a 29% decrease in B2B LP
sales revenue quarter over quarter. We have instead taken a fewer,
bigger, better approach and focused on building deeper
relationships with larger licensed producer partners to drive
efficiencies and profitable growth. This is illustrated by the
addition and expansion of six custom manufacturing agreements,
three of which are with the top seven licensed producers by market
share. We expect these agreements to begin generating revenue over
the next two quarters with further growth expected to follow. We
remain customer focused and are looking for consistent and higher
volume partnerships that drive profitability for all parties."
Key Highlights
- Gross revenue increased 32.7% in Q3 2021 to $24.6 million, compared to $18.5 million in Q3 2020
- Net revenue increased 15.8% in Q3 2021 to $21.0 million, compared to $18.1 million in Q3 2020
- Green Roads contributed $4.7
million in its revenue in first partial quarter of
consolidation
- Provincial listings increased by 37.1% to 181 at the end
of August compared to 132 at the end of Q2 2021, making
Valens one of the fastest growing licensed producers in
Canada over the quarter and
trailing year
-
- Additionally, Valens has obtained approval for an additional 27
provincial listings, which, when combined with Citizen Stash's 40
listings, will bring the pro forma company's total count of
listings to over 248
- In Q3 2021, Valens and Citizen Stash combined were ranked
11th by overall estimated market share across all
categories in Alberta,
British Columbia and Ontario based on Hifyre data
- Verse BC God Bud was a top 5 best-selling flower SKU in
Alberta, Ontario and British
Columbia during September 2021
based on Hifyre data
- Estimated share of the cannabis-infused beverage category from
Summit and Basecamp beverages increased to 9.0% in Q3 2021
from 8.0% in Q2 2021 in Alberta, British
Columbia, and Ontario,
based on Hifyre data with only one customer in this category to
date
-
- Valens expects additional market share gains in this category
beginning in Q4 2021 based upon the acquisition of Verse Cannabis
and the launch of the GTA Facility
- Provincial sales increased 20.0% compared to Q2 2021
-
- Strong growth in provincial sales is expected to continue
following a 76.5% increase in aggregate consumption-level retail
sales in Q3 2021 compared to Q2 2021, based on Hifyre data for
Alberta, British Columbia and Ontario
- Strategic acquisition of Citizen Stash expected to propel
Valens' asset-light entry into the flower and pre-roll segments,
the two largest categories in the Canadian cannabis market
currently accounting for over 70% of retail sales
- Ended the quarter with a strong cash position of
~$31 million
*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
Corporate and Operational Highlights:
In the third quarter, The Valens Company continued to
execute on its corporate strategy and advanced its global
manufacturing platform, as illustrated by the following milestones
and initiatives:
- Accelerated entry into the $2.7
billion flower-based market through the agreement to acquire
Citizen Stash Cannabis Corp., valued at approximately
$54.3 million on an enterprise value
basis, boasting an attractive multiple of approximately 4.3x first
half fiscal 2021 annualized revenue. Valens expects the acquisition
to be accretive, specifically due to Citizen Stash's asset-light
model which leverages a robust network of craft contract growing
partners. Their award-winning brand portfolio offers more than 40
provincial listings and is complementary to Valens' growing house
of brands which now spans across seven provinces and
territories. The Citizen Stash acquisition is expected to
close in the fourth quarter of 2021.
- Created top tier Licensed Producer in Canada through the acquisition of Verse
Cannabis, announced in early September and expected to be further
bolstered by the acquisition of Citizen Stash when it
closes. Verse's current and expanding portfolio of
products will amplify provincial listings and drive category market
share. Similar to Citizen Stash, the acquisition of Verse is
expected to be accretive to the Company before synergies. The
two acquisitions will provide Valens with over 248 current and
pending listings across nine provinces and territories.
- Achieved significant steps toward entry into Québec, the
third largest cannabis market in Canada. During the third quarter, Valens
became authorized to contract or subcontract with a public body
from the Autorité des marchés publics (AMP).
- Expanded international product manufacturing and
distribution through new and evolving partnerships. Through an
agreement with Epsilon, a diversified global healthcare and
pharmaceuticals company, Valens expects to be able to offer its
innovative suite of cannabis products to Australia and New
Zealand through the use of Epsilon's Southport GMP
manufacturing facility. This will also allow Valens the potential
to deliver GMP-grade manufactured products in Latin America, Europe, the UK and Asia-Pacific.
- Strengthened custom manufacturing partnership network with
the addition and expansion of six manufacturing agreements since
the end of Q2 2021. The agreements cover the production of
a variety of cannabis products including pre-rolls, innovative
edibles, vapes, hydrocarbon concentrates, as well as expert
extraction services. Three of the agreements are with the top seven
Canadian licensed producers by market share, showcasing a strategic
transition to a smaller set of larger licensed producer clients.
The agreements are expected to commence over the next two quarters,
with anticipated revenue generation during the same period.
- Launched a range of innovative products in the
edibles, concentrates, and cartridges categories.
Edibles: In
partnership with Verse Cannabis, Valens introduced a 1-unit x 10mg
double chocolate brownie, the third edible product under the Verse
Originals line and one of the first confectionery products of its
kind available in the Ontario
recreational market. Additionally, Valens manufacturing and
formulation technology supported the creation of Rapid Tropical
Rush, the first cannabis-infused beverage introduced by the Verse
brand, and currently available in Alberta, British
Columbia, and Ontario.
Valens has also partnered with A1 Cannabis to create the Summit 10
Raspberry Lemonade and Summit 10 Peach Lemonade, two additional
Summit 10 beverage flavours already available in British Columbia and Alberta.
Cartridges &
Concentrates: Formulated using Valens' proprietary,
ultra-refined extraction processes, the Mango Nectar vape cartridge
is comprised of ultra-pure distillate and represents the newest
addition to the top-selling line of vape cartridges from the Verse
brand. In addition to the Mango Nectar vape cartridge, Valens, via
the Verse brand, has also launched a new addition to the Live Terp
series under the Verse Concentrates line, the Live Terp Guava x BC
Blueberry 510 Vape Cartridge (1g), now available in Alberta and expected to be available soon in
British Columbia and Ontario.
Financial Summary
- Net revenue increased 15.8% to $21.0 million in Q3 2021 compared to
$18.1 million in Q3 2020,
and increased by 11.9% compared to $18.8
million in Q2 2021
Net
Revenue Breakdown
|
Three months
ended
August 31, 2021
|
Three months
ended August 31, 2020
|
(in thousands
of
Canadian dollars)
$
|
(in thousands
of
Canadian dollars)
$
|
Product
Sales
|
19,525
|
15,059
|
Toll Processing and
Co-Packing
|
624
|
2,644
|
Analytical
Testing
|
346
|
425
|
Other
Revenue
|
495
|
-
|
Total Net
Revenue
|
20,990
|
18,128
|
- Product sales revenue, including both provincial sales and
B2B/B2C sales of finished goods, distillate, isolate, and
oils:
-
- Increased 29.7% to $19.5 million in Q3 2021 from the prior
year period, comprising 93.0% of total net revenue
- Valens achieved record provincial sales net revenue in Q3 2021
attributable to the early revenue contribution from the record
level of provincial listings compared to the prior year period
- Strategically transitioned away from underperforming B2B
partners during the quarter, focusing on fewer, bigger, better
partnerships announced subsequent to quarter. This is illustrated
by a 29% decrease in B2B revenue quarter over quarter end.
- Gross profit was $5.6 million, or 26.8% of net revenue in
Q3 2021 compared to $7.3 million, or 40.3% of net revenue, in
Q3 2020
-
- Gross profit was impacted in the third quarter by new product
launches, inefficiencies due to rapid volume growth and human
resources scale-up and the Company's continued shift away from its
historical focus on toll processing and towards the current
strategic focus of product development, manufacturing, and branded
B2C products.
- Adjusted EBITDA(1) was $(6.2) million, or
(29.5)% of net revenue in Q3 2021, compared to $1.4 million, or 7.9% of net revenue in
Q3 2020
-
- The reduction in adjusted EBITDA can be attributed to the
Company's strategic transition (as discussed above) and insurance
costs related to Valens application to list on the Nasdaq.
Jeff Fallows, President of The Valens Company, said: "We are now
at the tail end of what's proven to be a highly successful launch
phase in our business transition strategy having achieved industry
leading growth in provincial listings, surpassing 248 current and
pending listings including Citizen Stash, and operationalizing the
broadest product manufacturing platform in the industry. We now
look to enter the growth phase of our business plan which will
focus on maximizing sell-through and driving higher utilization at
our facilities. With continued growth of provincials sales and
increased utilization through our repositioned B2B partnerships we
are setup to achieve scale that is expected to enhance our margin
profile in the coming quarters."
Fallows continued, "With our recently announced agreement to
acquire Citizen Stash and acquisition of Verse, we have gained
exposure to a much larger share of the market, operating in the two
best segments for profitable growth: Cannabis 2.0 products and
premium dried flower. We have consistently messaged since the
beginning of the year that Valens would exit 2021 as a very
different company than when we entered. Implicit in that assertion
was our belief that at the end of year we would be best positioned
to service both our customers and consumers, grow market share,
drive towards profitability and be a leader in the industry.
Looking back over the last three quarters I am incredibly proud of
what we have achieved in a tough global environment and believe we
are well on our way to achieving our goal. The future prospects for
Valens have never been better and we are excited about the
opportunities that lie ahead both for the Company and our
shareholders."
The following table of financial highlights is presented in
thousands of Canadian dollars, except per share, biomass extracted
amounts, and number of provincial listings.
|
Three months
ended August 31, 2021;
|
Three months
ended May 31, 2021;
|
Three months
ended February 28, 2021;
|
Three months
ended November 30, 2020;
|
Three months
ended August 31, 2020;
|
Q3
2021
|
Q2
2021
|
Q1
2021
|
Q4
2020
|
Q3
2020
|
Gross Revenue
$
|
24,569
|
20,469
|
21,774
|
17,932
|
18,517
|
Net Revenue
$
|
20,990
|
18,764
|
20,014
|
16,044
|
18,128
|
Gross Profit
(loss) $
|
5,629
|
4,136
|
4,768
|
(5,993)
|
7,313
|
Gross Profit
%
|
26.8%
|
22.0%
|
23.8%
|
N/A
|
40.3%
|
Adjusted EBITDA
$(1)
|
(6,183)
|
(4,960)
|
(2,241)
|
(4,280)
|
1,440
|
Adjusted
EBITDA
%(1)
|
N/A
|
N/A
|
N/A
|
N/A
|
7.9%
|
Net income (loss)
$
|
(12,799)
|
(8,659)
|
(6,153)
|
(16,634)
|
(3,064)
|
Net income
%
|
N/A
|
N/A
|
NA
|
N/A
|
N/A
|
Basic /
diluted
income (loss) per
share $
|
(0.08)
|
(0.05)
|
(0.05)
|
(0.13)
|
(0.02)
|
Cash and
marketable
securities $
|
30,958
|
23,926
|
49,300
|
21,376
|
30,257
|
Biomass
extracted
(Kilograms) (2)
|
21,816
|
24,569
|
17,813
|
10,311
|
8,054
|
Provincial
Listings
|
181
|
132
|
75
|
49
|
20
|
- 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, realized gains and
losses from short term investments and liabilities, and other
non-cash items including impairment losses. 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 period ended August 31, 2021,
for additional information.
- Biomass extracted includes input from Licensed Producer
partners for toll processing, in addition to the Company's biomass
inventory for 2.0 products.
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.
Q3 2021 Conference Call Details
The Company will host a conference call on Thursday, October 14, 2021, 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 13723378.
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, 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.
At Valens, it's Personal.
Sources:
1Based on Hifyre data for
Alberta, Ontario and British
Columbia
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, Canadian regulatory risk,
Australian regulatory risk, U.S. regulatory risk, U.S. border
crossing and travel bans, whether or not the acquisition of Citizen
Stash will be completed, the uncertainties, effects of and
responses to the COVID-19 pandemic, reliance on licenses, expansion
of facilities, competition, dependence on supply of cannabis and
reliance on other key inputs, 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, limited operating history, vulnerability to
rising energy costs, 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.