Net revenue

The Valens Company Inc. Sees Net Sales Increase 26.1% in Fiscal Q1 as Its Diversified Cannabis Business Lines Gain Ground

For the period ended Feb. 28, 2022, the Kelowna, BC-based cannabis consumer products company reported revenue of $23.2 million, compared to $18.4 million in 4Q 2021

The Valens Company (TSX:VLNS, OTCQX:VLNCF) Inc released financial results for the first quarter of fiscal 2022 that saw its net revenue jump 26.1% quarter-over-quarter , enhancing the inherent strength of its diverse cannabis-related business lines.

For the period ended February 28, 2022, the Kelowna, BC-based cannabis consumer products company reported revenue of $23.2 million, compared to $18.4 million in 4Q 2021.

The company, which has expertise in manufacturing cannabinoid products and providing proprietary cannabis processing services, noted that revenue was mainly driven by provincial sales, which climbed 36.7% to 10. $.8 million in 1Q 2022, compared to $7.9 million in 4Q 2021.

READ: Valens says Pommies receives microprocessing license from Health Canada for Greater Toronto Area facility

Valens noted that the increase was due to the consolidation of Citizen Stash’s full first quarter results, as well as newly launched branded products from Valens, which accounted for the lion’s share of sales. Meanwhile, Green Roads revenue was down 10.5% to $5.1 million in the quarter from $5.7 million in Q4 2021, primarily due to seasonal trends, with December being historically the slowest month of the year.

Still, business-to-consumer (B2C) revenue lines for provincial sales and green routes accounted for 68.5% of net revenue, the company pointed out. Separately, business-to-business (B2B) revenue increased 53.7% in the quarter to $6.3 million from $4.1 million in 4Q 2021. Other revenue streams included Valens Labs, Pommies and international income.

Significantly, Valens became one of the top 10 licensed producers in Canada with a market share of 3.1% in February 2022, compared to 2.4% in November 2021 in Alberta, British Columbia, Ontario and in Saskatchewan, according to data from Hifyre.

Valens had cash and marketable securities of $20.2 million at the end of the quarter and subsequently raised gross proceeds of $32.3 million.

The company’s adjusted gross profit was $3.4 million, or 14.6% of net revenue in the first quarter, compared to $6.3 million, or 34.1% of revenue net in the fourth quarter of 2021.

The company’s Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization in the quarter, was negative $17.6 million, compared to negative $13.3 million in 4Q 2021. Valens, however, reiterated his objective of achieving positive adjusted EBITDA by 4Q 2022.

In a statement accompanying the numbers, Valens CEO Tyler Robson said, “The first quarter results demonstrate that Valens’ underlying business has passed an inflection point. Valens delivered strong revenue growth despite many headwinds in the market.This performance reinforces the importance of Valens has now diversified its business lines into Provincial Sales, B2B LP Sales and Green Roads Sales.

Diversified businesses now allow Valens to ensure more sustainable growth.

“At this point, we have delivered another quarter of strong provincial sales as we continue to grow our share of the recreational market, with the launch of Versus and Contraband. We are also pleased to report that our B2B segment has returned to growth,” added Robson.

The Valens boss acknowledged that adjusted EBITDA had declined due to an “inefficient cost structure” which had yet to benefit from the company’s integration initiatives announced in late February and a change in the sales mix that saw a lower percentage of sales come from its higher-margin Green Roads business. .

“We took the opportunity to release some higher priced inventory through the B2B channel and reposition our holdings to better support the expected growth over the next few quarters,” Robson said. “These factors also resulted in lower gross margins in the quarter. Importantly, we are already seeing the benefits of our integration initiatives and expect to improve our cost structure in the second half of the year. »

Robson underlined that Valens remains “on track” to achieve its objectives and reiterated “the company’s objective to achieve positive Adjusted EBITDA in 4Q 2022”.

Contact author Uttara Choudhury at [email protected]

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