Extraction-focused Canadian pot firm The Valens Company Inc. (TSX: VLNS) (OTCQX: VLNCF) is continuing its aggressive domestic expansion strategies, ramping up revenue but also spending heavily in the process.
On Thursday, the Kelowna, B.C.-based company published its earnings for the three months ended Aug. 31. Gross revenue rose 20 per cent in the period to $24.6 million, compared to $20.5 million in the previous quarter.
Gross profit margin also increased to 26.8 per cent from 22.0 per cent.
But Valens’s earnings before interest, taxes, depreciation and amortization fell 24 per cent to a loss of $6.2 million, from a loss of $5 million
Net loss also increased 47 per cent to a loss of $12.8 million, from a loss of $8.7 million.
The firm ended the quarter with a cash position of around $31 million.
In September, Valens said it was buying Verse, another extraction-focused producer, for an undisclosed amount. The two firms currently are engaged in a manufacturing partnership.
That deal follows an acquisition of Citizen Stash Cannabis Corp. (TSXV: CSC) (OTCQB: EXPFF) (FRANKFURT: MB31) in an all-stock transaction valued at around $54.3 million.
Read more: Valens set to acquire Citizen Stash for $54.3M
The latter sale is expected to close in the fourth quarter, and would give Valens a strong presence in the flower market with 40 provincial listings.
Valens is set to have a strong presence in Canada’s premium cannabis flower market after buying craft producer Citizen Stash. Photo by Nick Laba
With 180 current listings, the two acquisitions would give the firm “over 248 current and pending listings across nine provinces and territories.”
The company says it’s also expanded its white-label portfolio, adding or expanding six manufacturing agreements since the end of the second quarter. According to Valens, the agreements cover the production of pre-rolls, “innovative” edibles, vapes and hydrocarbon concentrates, as well as expert extraction services.
Consumer demand for the company’s products is very strong, CEO Tyler Robson notes in a statement, leading to consumption-level retail sales growth of over 76 per cent quarter over quarter.
“The combination of net revenue from provincial sales and the partial quarter of revenue contribution from (U.S. subsidiary) Green Roads represented 50 per cent of total net revenue in Q3 2021, further illustrating the early progress on our strategic initiatives,” he continues.
“We expect these [business-to-customer] revenue lines to continue growing in future quarters as previously announced new listings are launched in market and gain commercial traction and the successful closing of the Citizen Stash acquisition adds dried flower revenue to our portfolio. Valens is now present in seven provinces and will span nine provinces and territories across Canada assuming the successful closing of the Citizen Stash acquisition.”
In April, the company said it was buying Florida-based CBD maker Green Roads for US$40 million in cash and stock, plus US$20 million if earnings-based targets are met. And in January it said it was acquiring Canadian rival LYF Food Technologies for $24.9 million in cash and stock.
Read more: Valens enters US CBD market with purchase of Florida firm
Read more: Valens bets big on edibles with $25M LYF acquisition
nick@mugglehead.com
