Valens Cuts Cash Burn, Extends Runway Ahead of Sundial Sale

Shares for The Valens Company Inc. (TSX: VLNS) (Nasdaq: VLNS) ticked up this morning as the company has managed to cut its losses, which had been far outpacing revenue over the past year.

The company, which announced an acquisition deal with SNDL, Inc. (Nasdaq: SNDL) in August, released its third quarter financial report card for the period ending August 31.

Net revenue slumped further to $20.3 million in the third quarter, down 15.4% versus revenues of $24.0 million in the second quarter — as double-digit growth in provincial sales was more than offset by declines in Green Roads and B2B bulk sales, the company said.

Net loss for the third quarter was $27.5 million, a 83% improvement versus the massive $160.8 million loss in the previous quarter, according to company filings. The company reported a loss of 34 cents per share.

“Our third quarter results clearly show that we are executing on the most important initiative in this environment which is cash flow,” said Tyler Robson, Chief Executive Officer of The Valens Company.

Filings show that $(7.6) million cash flow from operations for the third quarter improved by $12.2 million or 61.7% quarter-over-quarter, beating previous guidance of $(9) million to $(12.5) million.

Robson added that the company could have performed even better, “but our momentum was muted by the cybersecurity attacks on the Ontario Cannabis Store and the labour strike impacting the British Columbia market.”

Adjusted gross profit increased by $900,000 in the third quarter to $5.1 million versus $4.1 million in the second quarter.

The company saw $32.2 million worth of cash, restricted cash, and marketable securities at the close of the third quarter.

Valens withdrew all previously given financial guidance due to the proposed acquisition of the company by Sundial.

“During the quarter Valens entered into an arrangement agreement to be acquired by SNDL to create a leading vertically integrated cannabis platform in Canada,” said Robson. “With the current market economic headwinds, we believe the pro forma company will be well positioned to capture market share while also providing our investors with exposure to one of the strongest balance sheets in the industry.

“Moreover, the pro forma entity will be the largest revenue generating cannabis company in Canada with a near term opportunity to become one of the most profitable cannabis companies in Canada.”