The Valens Company Posts 67% Higher Loss, Provides Strong 2023 Guidance With Revenue Of CA$225M

The Valens Company Inc. VLNS VLNS reported its fourth quarter and fiscal year financial results for the period ended November 30, 2021.

"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," Tyler Robson, CEO, co-founder and chair of The Valens Company, stated. "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."

Financial Summary

• Net revenue of CA$18.4 million ($14.5 million) in Q4 2021 and CA$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 CA$6.3 million from CA$5.7 million in Q3 2021.
• Adjusted gross profit was CA$6.3 million, or 34.1% of net revenue in Q4 2021, compared to CA$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 was (CA$13.3) million, in Q4 2021 compared to (CA$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.
• Net loss was of CA$21.42 million in Q4 2021, comapred to a loss of CA$12.8 million in the previous quarter.
• Provincial sales increased by 31.7% to CA$7.9 million from CA$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.

Q4 & FY 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.
• 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.
• 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.

  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 CA$225 million
• Adjusted EBITDA margins of greater than 10%