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The Valens Company sees record revenues in fiscal Q1 as white label business expands

The company brought in revenue of C$32 million in the three months ended February 29, a year over year increase of more than 14 times

Cannabis leaf and $100 bills
The Valens Company, which recently underwent a rebrand from Valens GroWorks Corp, also recently launched a number of new product formats such as hydrocarbon-based offerings

The Valens Company (CVE:VLNS) (OTCQX:VLNCF) reported fiscal first-quarter results after the bell on Tuesday revealing record revenue and growing profits, thanks in part to its growing white label cannabis operations.

The company brought in revenue of C$32 million in the three months ended February 29, a year over year increase of more than 14 times the $2.2 million reported in the same period last year. Gross profit increased to C$18.1 million, good for 56.6% of revenue, up from C$900,000 a year ago.

"The first quarter of fiscal 2020 was pivotal for The Valens Company as we hit many milestones, including posting continued quarter-over-quarter revenue growth and having oil-based cannabis 2.0 products hit the shelves in Canada amidst a challenging market backdrop,” Valens' CEO Tyler Robson said in a statement 

“Throughout the quarter, we leveraged the flexibility of our extraction platform to help our customers navigate increasing market complexity while at the same time accelerating the scale-up of our white label capabilities,” he added.

READ: The Valens Company begins making hand sanitizer to help combat coronavirus pandemic

Valens said its whiite label extraction efforts helped increase the company’s revenue on a per gram of input basis to C$1.44 per gram from C$1.25, even as customers opted more for smaller extraction batches due to tumultuous market forces. 

During the quarter, Valens said it processed 19,962 grams of dried cannabis and hemp biomass, working with its clients to process white label edible and concentrate products.

"In total, we saw a moderation in extraction volumes in the quarter as our customers continued to shift to smaller processing lots as a result of the slower roll-out of Cannabis 2.0 products in the broader market,” Robson said.

“Looking forward, we are starting to see some encouraging signs with respect to a return to larger extraction volumes into the back half of fiscal 2020.”

To that end, the company announced a four-year extraction and white label deal during the quarter with Emerald Health Therapeutics with annual minimum quantities of 10,000 kilograms. Additionally, the company entered an amended manufacturing and sales licence agreement with SōRSE Technology Corporation, granting it an exclusive license to use the company’s proprietary emulsion technology. 

The Valens Company, which recently underwent a rebrand from Valens GroWorks Corp, also recently launched a number of new product formats such as hydrocarbon-based offerings, which it expects to bring to customers in the third quarter. 

“[The name change] represents much more than just a corporate name change, it signifies the evolution of our business into a leading cannabinoid-based product development and manufacturing company positioned to capitalize on the evolving industry on a global scale,” Robson said.

Looking ahead, the coronavirus (COVID-19) pandemic has caused huge uncertainty in the markets, but the company is seeing a strong demand for cannabis. 

“Although retail demand for cannabis has surged during the COVID-19 pandemic and we are experiencing strong white label sales going into the second half of fiscal 2020, we are unable to predict the full impact these challenges will have on our second-quarter financials,” Valens' president Jeff Fallows said.  “That being said, we continue to benefit from the flexibility of our platform, the quality of our output and the experience of our team in accessing opportunities both in the near and longer-term."

Fallows added: “With a breadth of new products on the horizon, a white label platform that surpasses even the largest Canadian cannabis companies and a diversified customer base, we are well-positioned to adapt to ever-changing environments. Our strong cash position does not leave us complacent as our team looks to maximize capital allocation to generate the highest return on invested capital for our shareholders."

Whatever the future holds, the company may soon be trading in a new market.

Valens has received conditional approval to uplist to the TSX Exchange in Toronto. It currently trades on the TSX Venture Exchange as well as on the OTCQX market in the US. 

Contact Andrew Kessel at [email protected] 

Follow him on Twitter @andrew_kessel

Quick facts: The Valens Company

Price: 2.43 CAD

TSX:VLNS
Market: TSX
Market Cap: $310.34 m
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