The Valens Company (TSX: VLNS) this evening put out preliminary figures for its fourth quarter of 2020 and guidance for the current fiscal quarter. Revenue is expected to be between $15 and $16.5 million on a net basis, signifying a quarter over quarter decline, while the company also announced a number of charges related to inventory that it will be taking within the financing results.
Gross revenue has been stated as being between $17.0 million and $18.5 million for the quarter before the impact of excise taxes are included, which takes net revenues to the $15 million to $16.5 million range. The company reported net revenues of $18.1 million in the third quarter, giving the firm a decline of anywhere between a 8.8% to 17.1% decline in quarterly revenues.
The decline has been blamed on reintroduced restrictions as a result of COVID-19, which led to a delay in sales and anticipated purchase orders, which shifted to the first quarter as a result.
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Margins will also be heavily impacted for the quarter, with the company indicating a one-time financial statement impact between $9.0 million and $10.0 million. The impact is to include $2.9 million to $3.2 million in losses from the sale of bulk cannabis oil, an inventory write-down between $4.7 million to $4.9 million, and a provision on previously entered biomass commitments of $1.4 million to $1.9 million.
The charges are the result of “the strategic decision to liquidate the majority of its cannabis oil inventories at market clearing prices.”
In terms of guidance for the first quarter, the company anticipates revenue to be between $19 million and $23 million, although this is believed to be on a gross basis.
Finally, the company also announced the repayment of $9.5 million under its term loan, thereby reducing the secured revolving loan to $9.5 million as of today. The facility was also amended to effectively reduce the firms borrowing capacity, including the removal of an accordion feature that enabled the company to expand the loan by $10.0 million, the amendment of certain covenants related to leverage, the addition of a minimum liquidity covenant of $5.0 million until June 30, 2021, and modification of the loan tiers. Finally, the company obtained a waiver for its fourth quarter financial results from the lender.
The Valens Company last traded at $2.75 on the TSX.
Information for this briefing was found via Sedar and The Valens Company. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
