Valens products up, gross profits down
Published on October 15, 2020 by David Wylie
The Valens Company is selling a record number of products; still, they’ve seen gross profits fall from a year ago.
The two developments go hand in hand, as Valens shifts focus away from extraction and into the production of white label products, which has led to a drop in its overall profitability.
In its third-quarter financial results, the Kelowna-based company says gross profit was $7.3 million (39.5% of revenue) for the three months ended Aug. 31. That’s a drop compared to $12.8 million (77.8% of revenue) in the same period of 2019. In other words, Valens is making less cash after subtracting the cost of making and selling products.
“In the third quarter we saw our pipeline of manufacturing agreements begin to come to fruition, having manufactured a record-breaking 56 SKUS that span four product categories, with formats ranging from disposable vape pens, vape cartridges, oils and oral sprays, to beverages and concentrates,” says CEO Tyler Robson.
Products manufactured by Valens include vapes by Verse and BRNT’s ‘Made By’, which have made their way onto B.C. shelves, among other provinces.
Valens says its product sales this summer made up 83% of net revenue at $15.1 million—up about $5 million from the previous quarter. Net revenue was also up 10% to $18.1 million over a year ago.
“This was driven by both new brand partnerships, and white label and custom manufacturing agreements and existing contracts,” said Robson. “We expect to see further product revenue growth in Q4 as we continue to ramp up these manufacturing agreements to bring a wide variety of 2.0 products to domestic and international markets.”
The company has hinted at Cannabis 3.0.
- Grew product sales by 52% in Q3 2020, clearly demonstrating both the Company’s core capabilities and strength of its platform as a leading cannabis products company.
- Manufactured a record number of 56 SKUs in the third quarter of 2020, representing a 56% increase from 36 SKUs in the second quarter of 2020.
- Made its first international shipment of oils to Australia as part of the Company’s distribution agreement with Cannvalate Pty Ltd., Australia’s largest medicinal cannabis distributor and clinical research organization. Valens also expects to make an additional shipment in the fourth quarter, subject to shipping permit approvals.