Covalon Announces Second Quarter Results for Fiscal 2023
Brian Pedlar, Covalon’s President and CEO, said, “I am pleased to announce another strong financial quarter for Covalon. Revenue for the three months ended March 31, 2023 increased
“Our efforts to grow our customer base in
“Gross margins were significantly improved in the first six months of 2023. As part of the Company’s customer focus initiatives, we improved our supply chain operations and invested in upgrading both business systems and infrastructure. Additional ongoing investments to allow us to better serve customers and drive growth in key markets going forward include expanding Covalon’s in-house manufacturing capabilities and medical coating services. The full positive impact on our margins from our supply chain improvement initiatives are expected to be further realized over time.
“We continue to align our operating costs to growth prospects, as we see the results of our improved sales and marketing initiatives and as we realize the benefits of our efforts to transform our supply chain. Operating costs from continuing operations for the quarter ended March 31, 2023 increased over the same period last year. In 2022, our team executed on deliberate and well-planned strategic decisions to re-position Covalon to be able to unlock value from our lifesaving, patented products and technology by investing in our people, our commercial capabilities, and our infrastructure. We are confident that the changes we have made to Covalon will allow us to consistently achieve our objectives.
“The momentum we have, and the certainty of purpose we have in our products and mission, will allow Covalon to succeed. This quarter demonstrates that we are moving in the right direction with respect to investments made last year in several key business areas, including sales and marketing, operations, and IT infrastructure. We are excited about our progress in transforming Covalon into a patient-driven medical device company, built on the relentless pursuit to help the most vulnerable patients have a better chance at healing,” concluded Mr. Pedlar.
Conference Call Scheduled
A conference call and webcast to discuss Covalon’s Q2 fiscal 2023 financial results will be held Thursday, May 25th, 2023, at 9:00am EDT. To view, listen to, and participate in the live webcast, please follow the link below:
https://events.q4inc.com/attendee/898628652
To listen and participate via the conference call, please dial:
North American Toll-Free: 1-888-396-8049
Local (
Conference ID: 23773049
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 be available on www.covalon.com under News & Events on the Investors tab.
Q2 Fiscal 2023 and Year-to-Date Financial Results
Total revenue for the three months ended March 31, 2023 increased
Product revenue for the three-month period ended March 31, 2023 increased
Development and consulting services revenue for the three-month period ended March 31, 2023 increased by
Licensing and royalty fees for the six months ended March 31, 2023 were
Gross margin for the three-month period ended March 31, 2023 increased to
Gross margin for the six months ended March 31, 2023 increased to
Operating expenses for the three months ended March 31, 2023 increased
Operating expenses for the six months ended March 31, 2023 increased
Net loss for the three months ended March 31, 2023 was
Adjusted Gross Margin for the three-month period ended March 31, 2023 was
Adjusted EBITDA{1} loss for the three months ended March 31, 2023 was
Business outside of direct sales in
Statement of Operations
The following unaudited table presents Covalon’s consolidated statements of operations for the three- and six-month periods ended March 31st, 2023 and 2022.
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(unaudited) |
Three months ended March 31, |
|
Six months ended March 31, |
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|
2023 |
2022 |
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2023 |
2022 |
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Revenue |
|
|
|
|
|
|||
|
Product |
|
|
|
|
7,473,490 |
||
|
Development and consulting services |
1,108,466 |
233,324 |
|
1,926,812 |
621,691 |
||
|
Licensing and royalty fees |
30,434 |
84,718 |
|
152,229 |
134,998 |
||
|
|
|
|
|
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Total revenue |
7,244,594 |
3,293,834 |
|
13,429,999 |
8,230,179 |
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|
|
|
|
|
|
|
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Cost of sales |
3,072,566 |
1,551,773 |
|
5,563,139 |
4,195,741 |
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|
|
|
|
|
|
|
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Gross profit before operating expenses |
4,172,028 |
1,742,061 |
|
7,866,860 |
4,034,438 |
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|
|
|
|
|
|
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Operating expenses |
|
|
|
|
|
|||
|
Operations |
542,755 |
407,919 |
|
750,634 |
886,179 |
||
|
Research and development activities |
279,491 |
357,750 |
|
565,466 |
671,957 |
||
|
Sales, marketing and agency fees |
2,209,894 |
1,566,210 |
|
4,239,830 |
2,736,387 |
||
|
General and administrative |
1,861,677 |
1,834,179 |
|
3,388,572 |
3,259,191 |
||
|
|
4,893,817 |
4,166,058 |
|
8,944,502 |
7,553,714 |
||
|
|
|
|
|
|
|
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Finance expenses (income) |
(23,708) |
38,018 |
|
1,260 |
50,241 |
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|
|
|
|
|
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Net (loss) from continuing operations |
(698,081) |
|
|
(1,078,902) |
|
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Net (loss) from discontinued operations |
- |
- |
|
- |
(409,295) |
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Net (loss) |
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Other comprehensive income (loss) Amount that may be reclassified to profit or loss
|
|
|
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|
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|
Foreign currency translation adjustment continued operations |
(246,523) |
123,032 |
|
(263,308) |
(363,552) |
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Other comprehensive (loss) |
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(Loss) per common share of continuing operations |
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Basic (loss) per share |
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Diluted (loss) per share |
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(Loss) per common share of discontinued operations |
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Basic (loss) per share |
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Diluted (loss) per share |
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(Loss) per common share |
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Basic (loss) per share |
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Diluted (loss) per share |
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(1) See “Non-IFRS Measures” below, including for a reconciliation of the non-IFRS measures used in this release to the most comparable IFRS measures.
Non-IFRS Financial Measures
This press release makes reference to certain non-IFRS measures. These measures are not recognized or defined measures under IFRS, do not have standardized meaning prescribed by IFRS 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 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. The non-IFRS 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. We use non-IFRS 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 measures. We believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Our management also uses non-IFRS 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-IFRS 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-IFRS financial measures. Because these non-IFRS financial measures may be defined differently by other companies in our industry, our definitions of these non-IFRS 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 in the consolidated financial statements to Adjusted Gross Margin for the three and six months ended March 31st 2023 and 2022. 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, |
||
|
2023 |
2022 |
2023 |
2022 |
|
Gross profit before operating expenses |
|
|
|
|
|
Add: Depreciation and amortization |
53,050 |
41,530 |
|
109,083 |
95,825 |
Add: Inventory provisions (reversals) |
(158,724) |
73,278 |
|
(158,724) |
792,969 |
Adjusted Gross Margin |
4,066,355 |
1,856,869 |
|
7,817,219 |
4,923,232 |
Adjusted Gross Margin (%) |
|
|
|
|
|
The table below provides a reconciliation of net loss under IFRS in the consolidated financial statements to Adjusted EBITDA for the three and six months ended March 31st 2023 and 2022. Management believes that these non-IFRS measures are useful in assessing the performance of the Company’s ongoing operations and its ability to generate cash flows to funds 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, |
||
|
2023 |
2022 |
2023 |
2022 |
|
Net income (loss) |
( |
( |
|
( |
( |
Add: Finance expense (gains) |
(23,708) |
38,018 |
|
1,260 |
50,241 |
Add: Depreciation and amortization |
233,324 |
92,360 |
|
483,409 |
202,324 |
Add: Stock based compensation |
173,150 |
18,217 |
|
329,457 |
39,251 |
Add: Inventory provisions (reversals) |
(158,724) |
73,278 |
|
(158,724) |
792,969 |
Adjusted EBITDA |
( |
( |
|
( |
( |
About Covalon
Covalon Technologies Ltd. is a patient-driven medical device company, built on the relentless pursuit to help the most vulnerable patients have a better chance at healing. Through a strong portfolio of patented technologies and solutions for advanced wound care, infection prevention, and medical device coatings, we offer innovative, gentler, and more compassionate options for patients to heal with less infections, less pain, and better outcomes. 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, 2022, which is available on the Company’s profile at www.sedar.com, 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230525005296/en/
To learn more about Covalon:
Brian Pedlar, CEO, Covalon Technologies Ltd.
Email: bpedlar@covalon.com
Phone: 905.568.8400 x 233
Toll-Free: 1.877.711.6055
Website: https://covalon.com/
Twitter: @covalon
Source: Covalon Technologies Ltd.