The Valens Company Inc. (TSX: VLNS) (Nasdaq: VLNS) reported its second quarter fiscal year 2022 financial results for the period ending May 31, 2022. Valens reported that its net revenue increased 3.5% sequentially to $24.0 million in the second quarter versus $23.2 million in the first. The company said the increase was driven by double-digit growth in both Green Roads and B2B, which was partially offset by a decline in provincial sales.
The company also delivered an eye-popping net loss of $160 million for the second quarter versus a net loss of $25 million in the first quarter. Valens said that it recognized an impairment loss on goodwill and intangible assets of $52.9 million and $67.9 million, respectively, for the quarter. In the same period, unrelated to the goodwill and intangible impairment charges, the company also said it recognized impairment losses of $4.1 million on prepaid deposits, $2.8 million on assets held for sale, and an inventory write-down of $13.9 million. Valens said it does not expect the impairment charges to have any impact on future operations, nor affect its liquidity, cash flow from operating activities, or compliance with the financial covenants set forth in the loan agreement.
“The second quarter of 2022 clearly shows that we are executing on our 2022 objectives showing both modest revenue growth in the quarter and a meaningful decline in both cash burn and SG&A expenses. This is expected to accelerate in future quarters as the majority of cost savings from our Integration Initiatives have not been fully realized as these initiatives were executed part way through Q2 and into Q3 2022” said Tyler Robson, Chief Executive Officer of The Valens Company.
“The largest takeaway in the quarter is that we were able to achieve these strides forward despite a revenue decline in our largest segment, provincial sales, where we experienced absent depletion weeks as we transitioned our brand from Verse to Versus,” Robson continued. “Despite the temporary setback in provincial sales, we continue to see strong sell-through for our brands at retail as we were able to expand market share across all product categories. More importantly, momentum has reaccelerated in June with record monthly provincial sales as well as seeing strong visibility into our pipeline of purchase orders into July. During Q2, we experienced strong growth in all other categories of our business with double-digit growth quarter over quarter in our US Green Roads CBD and B2B segments, as well as a large increase in international sales,” he said.
Valens also provided revenue & EBITDA estimates for 2023 for a minimum revenue of C$225 million and Adjusted EBITDA margins greater than 10%.
“Encouragingly, we’ve continued to make progress against our Integration Initiatives, having actioned $15 million and now expecting to exceed the $20 million in targeted cost savings. Looking ahead, we intend to realize these cost savings in the coming quarters, which when achieved would lead to a material step down in our overall cost structure. We are well positioned to continue our strategic initiatives and pave the way towards a more profitable future.” Robson added.