The Valens Company Inc (CVE:VLNS) (OTCQX:VLNCF) (FRA:7LV) posted fiscal third-quarter results on Thursday that saw its revenue jump 10% year-over-year driven by new brand partnerships, white-label, custom manufacturing agreements and existing contracts.
For the period ended August 31, 2020, the Kelowna, British Columbia-based manufacturer of cannabinoid-based products, reported revenue of $18.1 million, compared to $16.5 million in the third quarter of 2019.
The company’s gross profit was $7.3 million, or 39.5% of revenue, for the fiscal third quarter, compared to $12.8 million, or 77.8% of revenue, in the same period in fiscal 2019.
Valens chalked up the reduction in gross profit to the “pullback in toll extraction volumes,” as the company shifts its focus toward driving “greater white label and custom manufacturing product volumes and sales.”
As a result, the company’s adjusted EBITDA, earnings before interest, taxes, depreciation, and amortization was $1.4 million, or 7.8% of revenue, for the fiscal third quarter, compared to $9.8 million in the fiscal third quarter of 2019.
Valens has a strong balance sheet with $30.3 million in cash and a net working capital position of $83.5 million as of August 31, 2020.
"In the third quarter, we saw our pipeline of manufacturing agreements begin to come to fruition, having manufactured a record-breaking 56 SKUS that span four product categories, with formats ranging from disposable vape pens, vape cartridges, oils and oral sprays, to beverages and concentrates," said Valens CEO Tyler Robson.
"This was driven by both new brand partnerships, and white label and custom manufacturing agreements and existing contracts.”
The Valens Company boss said he expected to see strong product revenue in the fourth quarter as the company ramped-up manufacturing agreements.
“As we approach year-end, we will focus on gaining market share within existing and upcoming product verticals to prepare for the Cannabis 3.0 market and the opportunities for growth it will provide proven third-party operators like Valens with the differentiated IP and scale to execute," added Robson.
Valens said that during the quarter, it made its first international shipment of oils to Australia as part of the firm’s distribution agreement with Cannvalate Pty Ltd, Australia's largest medicinal cannabis distributor and clinical research organization. Valens said it expects to make an additional shipment in the fourth quarter, subject to shipping permit approvals.
The company received its Health Canada Research Licence through its subsidiary, Valens Agritech Ltd, to conduct human administration trials for sensory and taste evaluation of products.
Valens is the largest third-party extraction company in Canada with an annual capacity of 425,000 kilograms of dried cannabis and hemp biomass at its facility in Kelowna, British Columbia. It is equipped to service Canadian demand as well as the global markets with efficiency at scale.
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