Cash flow from operations improved by
Continued to realize the benefits of Integration Initiatives, with adjusted gross margin(1) expanding to 24.9% of net revenue in Q3 2022 compared to 17.2% of net revenue in Q2 2022 and SG&A declining 28.6% in Q3 2022 from Q2 2022
Provincial sales rebounded strongly in Q3 2022 with net sales increasing 22.8% to a record
Top 10 licensed producer in
Entered into an arrangement agreement to be acquired by SNDL, creating a leading vertically integrated entity with the highest pro forma cannabis revenue in
"Our third quarter results clearly show that we are executing on the most important initiative in this environment which is cash flow. We are continuing to realize the benefits of our previously announced Integration Initiatives, with a significant decrease in our cash burn, which not only exceeded our previously stated guidance range but was down approximately 62% quarter-over-quarter, despite lower net revenues," said
"Valens delivered strong growth in provincial sales, our largest revenue segment. We believe that we could have achieved even higher growth, but our momentum was muted by the cybersecurity attacks on the
"Most importantly, we saw adjusted gross profit margin improve quarter-over-quarter to 24.9% compared to 17.2% in Q2 2022, as we continued to see the benefits of our previously announced Integration Initiatives flow through the income statement," Robson continued. "During the quarter Valens entered into an arrangement agreement to be acquired by SNDL to create a leading vertically integrated cannabis platform in
- Cash flow from operations for Q3 2022 was
$(7.6) million , a significant$12.2 million or 61.7% improvement quarter-over-quarter, strongly beating previous guidance of$(9) million to$(12.5) million . - Adjusted EBITDA(2) improved by
$6.1 million quarter-over-quarter to$(9.8) million in Q3 2022 compared to$(15.9) million in Q2 2022. - Net revenue decreased 15.4% to
$20.3 million in Q3 2022 from$24.0 million in Q2 2022, as double-digit growth in provincial sales was more than offset by declines in Green Roads and B2B bulk sales. Despite the decline in net revenue quarter-over-quarter, adjusted gross profit(1) increased by$0.9 million in Q3 2022 to$5.1 million from$4.1 million in Q2 2022. - Provincial sales increased 22.8% to
$11.3 million in Q3 2022 from$9.2 million in Q2 2022. The increase was primarily driven by higher demand of our newly launched branded products across our brand portfolio. - Green Roads revenue decreased 22.8% to
$4.4 million in Q3 2022 from$5.7 million in Q2 2022. The decrease was primarily driven by delays and stock-outs in major product categories, technical challenges resulting from updates initiated by one of our online service providers as well as senior management and other organizational changes associated with our previously announced Integration Initiatives. Furthermore, the Company has actioned process changes to minimize these disruptions going forward and the Company will continue to work with our suppliers to ensure Valens realizes the maximum demand opportunity for Green Roads products. Direct-to-consumer e-commerce sales contributed 54.5% in Q3 2022, a decline of 1.5% from Q2 2022. - B2B decreased 44.3% in Q3 2022 to
$3.9 million from$7.0 million in Q2 2022. The decrease was primarily driven by lower demand in bulk sales. - International revenue and other revenue (including
Valens Labs and Pommies Cider) declined in the quarter to$0.7 million as orders are lumpier.
The following table of financial highlights is presented in Canadian dollars, except for percentages.
Three months ended | Three months ended (in $MM) | Percentage Change
| |
Net Revenue | -15.4 % | ||
Provincial Sales | 22.8 % | ||
Green Roads | -22.8 % | ||
B2B | -44.3 % | ||
International/Other | -66.7 % |
Category | Rank as of August | Basis Point Change | ||
Overall | #9 | 2.8 % | 3.4 % | +60bps |
Flower | #9 | 3.0 % | 3.2 % | +20bps |
Pre-Rolls | #15 | 1.6 % | 1.9 % | +30bps |
Edibles | #11 | 2.8 % | 2.0 % | -80bps |
Vapes | #6 | 3.5 % | 6.5 % | +300bps |
Beverages | #4 | 10.4 % | 8.8 % | -160bps |
- Gross revenue of
$28.7 million in Q3 2022, representing a decrease of 1.9% over Q2 2022 - Net revenue of
$20.3 million in Q3 2022, representing a decrease of 15.4% over Q2 2022 - Adjusted gross profit(1) was
$5.1 million , or 24.9% of net revenue in Q3 2022 compared to$4.1 million , or 17.2% of net revenue in Q2 2022. - The increase in adjusted gross profit was attributable to process-related efficiencies resulting from our previously announced Integration Initiatives as well as optimizing biomass and input sourcing and the commissioning of new automation equipment.
- SG&A decreased 28.6% to
$14.9 million , or 73% of net revenue in Q3 2022, compared to$20.9 million , or 87% of net revenue in Q2 2022. - The reduction in SG&A was due to a combination of savings driven by headcount realignment associated with the previously announced Integration Initiatives and general operating efficiencies across the organization.
- Adjusted EBITDA(2) was
$(9.8) million , in Q3 2022 compared to$(15.9) million in Q1 2022. - The improvement in adjusted EBITDA(2) was attributable to higher adjusted gross profit and lower SG&A.
- Cash, restricted cash, and marketable securities of
$32.2 million at the end of Q3 2022.
The following table of financial highlights is presented in thousands of Canadian dollars, except for percentages, per share figures and Canadian recreational market share.
Three months ended | Three months ended | |
Q3 2022 | Q2 2022 | |
Gross Revenue | ||
Net Revenue | ||
Gross Profit | ||
Gross Profit Margin | 8.8 % | N/A |
Adjusted Gross Profit (1) | ||
Adjusted Gross Profit Margin % (1) | 24.9 % | 17.2 % |
Adjusted EBITDA (2) | ||
Adjusted EBITDA % (2) | N/A | N/A |
Net Income (Loss) | ||
Basic/Diluted Income (Loss) Per Share | ||
Cash, Restricted Cash, & | ||
Quarterly Canadian Recreational Market Share (3) | 3.1 % | 3.2 % |
- Management utilizes this measure to provide a representation of performance in the period by excluding the inventory impairment measurement adjustments, depreciation expense impacting gross margin, and impacts of biological asset changes as required by IFRS. Adjusted gross profit is a non-GAAP ratio, which management believes provides useful information as it represents gross profit for management purposes based on costs to manufacture, package and ship inventory sold, exclusive of any impairments due to changes in internal or external influences impacting the net realizable value of inventory and non-cash items. See reconciliation of "Adjusted Gross Profit (non-GAAP measure)" in the Company's Management's Discussion and Analysis for the quarter ended
August 31, 2022 . Note that in previous quarterly releases depreciation expense was not excluded in calculating adjusted gross profit. - The Company has identified adjusted EBITDA as a relevant industry performance indicator. Adjusted EBITDA is a non-GAAP financial measure used by management that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. Management defines adjusted EBITDA as loss for the period, as reported, adjusted for financing costs (net), recovery of income taxes, depreciation and amortization, share-based payments, fair value and realized biological assets changes, foreign exchange gains, inventory valuation allowance, remeasurement of contingent consideration, restructuring charges, gains and losses on disposal of capital assets, gains and losses on marketable securities and derivatives, and non-recurring and transaction costs. Management believes this measure provides useful information as it is a commonly used measure in the capital markets to approximate operating earnings. See reconciliation of "Adjusted EBITDA (non-GAAP measure)" in the Company's Management's Discussion and Analysis for the three months ended
August 31, 2022 . - Based on Hifyre data for
Alberta ,Ontario ,British Columbia , andSaskatchewan .
- Valens enhanced its adult recreational market portfolio with the launch of Bon Jak, an exclusive cannabis brand in
Quebec , designed to deliver unique, innovative, regionally focused products to consumers inQuebec . - Valens secured an exclusive cannabis partnership with ColdHaus Distribution ("ColdHaus"), providing integrated logistics solutions for Valens-branded cannabis products across
Ontario ,Alberta , andBritish Columbia . Pursuant to the two-year partnership, ColdHaus in conjunction with Valens will be responsible for store level representation, brand advocacy, distribution route coverage and retail staff education to drive brand visibility and commercial retail presence. - Subsequent to the quarter, Coldhaus launched in
Ontario andBritish Columbia inSeptember 2022 and inAlberta inOctober 2022 . - Valens is seeing increased reach and frequency to retail store fronts with more data to better service stores and consumers around the country.
- Valens entered into an arrangement agreement to be acquired by SNDL, to create a leading vertically integrated cannabis platform.
- Creates a leading vertically integrated entity in
Canada : Through the combination of a diverse portfolio of brands, an extensive retail footprint, low-cost biomass sourcing, premium indoor cultivation, and low-cost manufacturing facilities, SNDL will become one of the largest adult-use cannabis manufacturers and retailers. With its retail insight and financial strength, SNDL will be able to adapt quickly to emerging consumer trends. - Enhances branded product offering with low-cost in-house manufacturing capabilities: By integrating Valens' product suite into its portfolio, SNDL will increase its overall cannabis market share to 4.5% and its 2.0 product formats market share to 5.2%, becoming a top 10 player in both categories. As a result of Valens' low-cost platform, SNDL will enhance its own product line while offering pricing flexibility to retail partners.
- Increases optionality on biomass by pairing premium cultivation with low-cost procurement: Combining SNDL's high-quality cannabis cultivation operations with Valens' low-cost biomass procurement capabilities will enhance SNDL's ability to offer a wide range of customized innovative products to meet its customers and consumers desires.
- Synergies through cost rationalization and operational efficiencies: The combination of SNDL and Valens is expected to deliver more than
$10 million of annual cost synergies. Together with incremental revenues from greater distribution of Valens products, it is estimated that the Transaction will deliver upwards of$15 million of additional EBITDA on an annual run-rate basis through synergies and other strategic initiatives. - Valens shareholders to participate in and help create the future of SNDL: Valens shareholders are to receive SNDL common shares in an all-stock transaction. Beyond improved liquidity and better access to a large retail footprint, SNDL's balance sheet strength provides a unique opportunity for Valens shareholders to participate in the creation of a leading vertically integrated Canadian cannabis company.
In light of the proposed acquisition of the Company by SNDL, Valens is withdrawing all previously given financial guidance as such financial guidance is no longer appropriate under the circumstances.
This press release is intended to be read in conjunction with the Management's Discussion and Analysis ("MD&A") for the period and the accompanying Financial Statements and notes, available under the Company's profile on SEDAR at www.sedar.com and the Company's Form 6-K, which will be furnished on EDGAR (www.sec.gov/edgar.shtml).
At Valens, it's Personal.
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All information included in this press release, including any information as to the future financial or operating performance and other statements of The
The risks and uncertainties that may affect forward-looking statements include, among others, if and when the proposed plan of arrangement agreement transaction involving The
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