Covalon Announces Profitable Second Quarter Fiscal 2024 Results
Covalon Technologies announced strong Q2 fiscal 2024 results, with a 16% year-on-year revenue increase to $8.4 million. The company achieved an EBITDA of $1.7 million, adjusted EBITDA of $2.5 million, and an EPS of $0.06. US product segment revenue surged by 54%, contributing to the overall growth. Gross margins improved to 63%, the highest in recent company history. Operating expenses were reduced by 22% compared to the previous year, further boosting profitability. Additionally, the company noted a significant reduction in development and consulting services revenue to $0.06 million for the half-year period, down 97% from the prior year. A conference call to discuss these results is scheduled for May 29, 2024.
- 16% year-on-year revenue increase to $8.4 million.
- EBITDA of $1.7 million and adjusted EBITDA of $2.5 million.
- EPS of $0.06.
- 54% increase in US product segment revenue.
- Gross margins improved to 63%.
- Operating expenses reduced by 22% compared to the prior year.
- Development and consulting services revenue decreased by 97% to $0.06 million for the half-year period.
- Revenue for the six months ended March 31, 2024, decreased by 3% to $13.1 million.
- Recorded inventory provisions of $0.7 million due to changes in obsolescence estimates.
Recent changes and effective execution pave the way for strong Q2 results
-
Q2 EBITDA of
, Adjusted EBITDA of$1.7 million , and EPS of$2.5 million $0.06 -
Q2 year-on-year Revenue growth of
16% , focus area of US Product segment grew54% -
Q2 Gross Margin increased to
63% , the highest in recent company history -
Achieved strong growth while reducing operating expenses by
22% versus prior year
Brent Ashton, Covalon’s Chief Executive Officer stated, “We delivered a very strong second quarter – a testament to the value that our products bring to our customers and their patients as well as the hard work of our One Covalon team. The combination of high revenue growth, expanded operating margins and smarter, reduced operating expenses propelled us to a return to profitability as a company. We are building momentum and are very optimistic about the remainder of fiscal 2024 and beyond.”
Conference Call Scheduled
A conference call and webcast to discuss Covalon’s Q2 fiscal 2024 financial results will be held Wednesday, May 29, 2024 at 8:15am ET. To view, listen to, and participate in the live webcast, please follow the link below:
https://events.q4inc.com/attendee/221238520
To listen and participate via the conference call, please dial:
North American Toll-Free: 1-800-549-8228
Local (
Local (
Conference ID: 29401
Participants will be able to ask questions of Company management during the Q&A portion of the conference call either by asking them on the call or by submitting them using the chat function on the webcast.
A recording of the call will also be available on www.covalon.com under Financials on the Investors tab.
Q2 Financial Overview
Total revenue for the three months ended March 31, 2024 increased 16 % to
Global product revenue for the three month period ended March 31, 2024 increased
Global product revenue for the six months ended March 31, 2024 increased
Development and consulting services revenue for the three-month period ended March 31, 2024 was nil, compared to
Licensing and royalty fees for the three months ended March 31, 2024 were
Revenue fluctuates from quarter to quarter depending on the composition of contractual arrangements entered into in each quarter, the timing of product shipments, and completion of services in any period.
Gross margins for the three-month period ended March 31, 2024 increased to
Gross margins for the six months ended March 31, 2024, increased to
Operating expenses for the three months ended March 31, 2024, decreased by
Operating expenses for the six months ended March 31, 2024 decreased
The Operations department covers expenses related to Quality Control, Quality Assurance, Production, and Regulatory activities. Operations expenses decreased to
Operations expenses increased
Sales and marketing expenses decreased
General and administrative expenses decreased to
Wages, benefits, and consulting fees (for all departments) include a non-cash expense related to stock-based compensation. During the three months ended March 31, 2024, stock-based compensation was
Statement of Operations
The following audited table presents Covalon’s consolidated statements of operations for the three- and six-month periods ended March 31, 2024 and 2023.
(unaudited) |
Three months ended March 31, |
Six months ended March 31, |
||||||
|
2024 |
2023 |
2024 |
2023 |
||||
Revenue |
|
|
|
|
||||
Product |
|
|
|
|
||||
Development and consulting services |
- |
1,108,466 |
56,358 |
1,926,812 |
||||
Licensing and royalty fees |
25,588 |
30,434 |
56,520 |
152,229 |
||||
|
|
|
|
|
||||
Total revenue |
8,413,610 |
7,244,594 |
13,076,667 |
13,429,999 |
||||
|
|
|
|
|
||||
Cost of sales |
3,101,103 |
3,072,566 |
4,917,668 |
5,563,139 |
||||
|
|
|
|
|
||||
Gross profit before operating expenses |
5,312,507 |
4,172,028 |
8,158,999 |
7,866,860 |
||||
|
|
|
|
|
||||
Operating expenses |
|
|
|
|
||||
Operations |
423,239 |
542,755 |
1,053,952 |
750,634 |
||||
Research and development activities |
450,510 |
279,491 |
761,921 |
565,466 |
||||
Sales, marketing and agency fees |
1,262,960 |
2,209,894 |
2,909,263 |
4,239,830 |
||||
General and administrative |
1,690,995 |
1,861,677 |
3,422,620 |
3,388,572 |
||||
|
3,827,704 |
4,893,817 |
8,147,756 |
8,944,502 |
||||
|
|
|
|
|
||||
Finance expenses (income) Gain on finance lease receivable |
22,340 - |
(23,708) - |
12,376 (610,008) |
1,260 - |
||||
|
|
|
|
|
||||
Net income (loss) |
|
|
|
|
||||
Other comprehensive income (loss) Amount that may be reclassified to profit or loss |
|
|
|
|||||
|
|
|
|
|||||
Foreign currency translation adjustment - continued operations |
576,178 |
(246,523) |
188,905 |
(263,308) |
||||
|
|
|
|
|
||||
Total comprehensive income (loss) |
|
|
|
|
||||
|
|
|
|
|
||||
Income (loss) per common share |
||||||||
Basic income (loss) per share |
|
|
|
|
||||
Diluted income (loss) per share |
|
|
|
|
||||
Non-GAAP Financial Measures
This press release makes reference to certain non-GAAP measures. These measures are not recognized or defined measures under IFRS Accounting Standards, do not have standardized meaning prescribed by IFRS Accounting Standards and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional financial information to complement those IFRS Accounting Standards measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation or as a substitute for analysis of our financial information reported under IFRS Accounting Standards. The non-GAAP financial measures, adjustments, and reasons for adjustments should be carefully evaluated as these measures have limitations as analytical tools and should not be used in substitution for an analysis of the Company’s results under IFRS Accounting Standards. We use non-GAAP measures including “Adjusted Gross Margin” and “Adjusted EBITDA” to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS Accounting Standards measures. We believe that securities analysts, investors and other interested parties frequently use non-GAAP measures in the evaluation of issuers. Our management also uses non-GAAP measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. The following non-GAAP financial measures are presented in this news release, and a description of the calculation for each measure is included below:
- Adjusted Gross Margin is defined as gross profit before operating expenses, plus depreciation and amortization included in cost of sales, plus inventory provision amounts.
- Adjusted EBITDA is defined as net loss, plus interest expense, plus depreciation and amortization, plus stock-based compensation, less government subsidies, plus inventory provisions, plus accounts receivable write-off expenses.
You should also be aware that the Company may recognize income or incur expenses in the future that are the same as, or similar to some of the adjustments in these non-GAAP financial measures. Because these non-GAAP financial measures may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
The table below provides a reconciliation of gross profit before operating expenses under IFRS Accounting Standards in the consolidated financial statements to Adjusted Gross Margin for the three months, and six months ended March 31, 2024 and 2023. Management believes that Adjusted Gross Margin is useful in assessing the performance of the Company’s ongoing operations and its ability to generate cash flows from period to period. The adjusting items below are considered to be outside of the Company’s core operating results, and these items can distort the trends associated with the Company’s ongoing performance, even though some of those expenses may recur.
(unaudited) |
Three months ended March 31, |
Six months ended March 31, |
||
|
2024 |
2023 |
2024 |
2023 |
Gross profit before operating expenses |
|
|
|
|
Add: Depreciation and amortization |
58,322 |
53,050 |
110,870 |
109,083 |
Add: Inventory provisions (reversals) |
674,866 |
(158,724) |
482,095 |
(158,724) |
Adjusted Gross Margin |
6,043,650 |
4,066,354 |
8,751,964 |
7,817,219 |
Adjusted Gross Margin (%) |
|
|
|
|
The table below provides a reconciliation of net loss under IFRS Accounting Standards in the consolidated financial statements to Adjusted EBITDA for the three and six months ended March 31, 2024 and 2023. Management believes that these non-GAAP measures are useful in assessing the performance of the Company’s ongoing operations and its ability to generate cash flows to fund its cash requirements from period to period. The adjusting items below are considered to be outside of the Company’s core operating results, and these items can distort the trends associated with the Company’s ongoing performance, even though some of those expenses may recur.
(unaudited) |
Three months ended March 31, |
Six months ended March 31 |
||
|
2024 |
2023 |
2024 |
2023 |
Net income (loss) |
|
( |
|
( |
Add: Finance expense (gains) |
22,340 |
(23,708) |
12,376 |
1,260 |
Add: Depreciation and amortization |
247,756 |
233,324 |
487,950 |
483,409 |
Add: Stock based compensation |
81,464 |
173,150 |
197,393 |
329,457 |
Add: Inventory provisions (reversals) |
674,866 |
(158,724) |
482,095 |
(158,724) |
Add: Gain of finance lease receivable |
- |
- |
(610,008) |
- |
Adjusted EBITDA |
|
( |
|
( |
About Covalon
Covalon is a patient-driven medical device company, that provides innovative and cost-effective healthcare solutions for advanced wound care, infection control, and medical device coatings. Through a strong portfolio of patented technologies and solutions, we offer innovative, gentle and more compassionate options to aid patients on their healing journey. Our solutions are designed for patients and made for care providers. Covalon leverages its patented medical technology platforms and expertise in two ways: (i) by developing products that are sold under Covalon’s name; and (ii) by developing and commercializing medical products for other medical companies under development and license contracts. The Company is listed on the TSX Venture Exchange, having the symbol COV and trades on the OTCQX Market under the symbol CVALF. To learn more about Covalon, visit our website at www.covalon.com.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This news release may contain forward-looking statements which reflect the Company's current expectations regarding future events. The forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan, "estimate", "expect", "intend", or variations of such words and phrases or state that certain actions, events, or results “may”, “could”, “would”, “might”, “will” or “will be taken”, “occur”, or “be achieved”. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts, but instead represent management’s expectations, estimates, and projections regarding future events. Forward-looking statements involve risks and uncertainties, including, but not limited to, the factors described in greater detail in the “Risks and Uncertainties” section of our management’s discussion and analysis of financial condition and results of operations for the year ended September 30, 2023, which is available on the Company’s profile at www.sedarplus.ca, any of which could cause results, performance, or achievements to differ materially from the results discussed or implied in the forward-looking statements. Investors should not place undue reliance on any forward-looking statements. The forward-looking statements contained in this news release are made as of the date of this news release, and the Company assumes no obligation to update or alter any forward-looking statements, whether as a result of new information, further events, or otherwise, except as required by law.
(1) See “Non-GAAP Measures” below, including for a reconciliation of the non-GAAP measures used in this release to the most comparable IFRS Accounting Standards measures.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240529712389/en/
To learn more about Covalon, please contact:
Investor Relations, Covalon Technologies Ltd.
Email: investors@covalon.com
Website: https://covalon.com/
Source: Covalon Technologies Ltd.
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