Velan Inc. (TSX: VLN) (“Velan” or the “Company”), a world-leading
manufacturer of industrial valves, announced today financial
results for its first quarter ended May 31, 2024. All amounts are
expressed in U.S. dollars unless indicated otherwise.
FIRST-QUARTER HIGHLIGHTS AND RECENT EVENTS
- Order backlog of
$528.3 million, up $36.8 million from the beginning of the
year.
- Bookings1 of $109.8
million compared to $91.8 million in the first quarter of fiscal
2024.
- Book-to-bill ratio1
of 1.42 versus 1.36 in the same period last year.
- Sales of $77.5
million, up 14.5% from $67.7 million in the first quarter of fiscal
2024.
- Gross profit of
$23.8 million, or 30.7% of sales, versus $15.1 million, or 22.2% of
sales, in the same period last year.
- Net loss2 of $1.1
million compared to a net loss of $8.3 million in the first quarter
of 2024.
- Net cash and cash
equivalents of $34.0 million.
- On July 8, Velan
announced a CA$50-million alliance agreement with Bruce Power to
provide valve and valve support over the next 10 years.
FINANCIAL
RESULTS(‘000s of U.S. dollars, excluding per share
amounts) |
Three-month periods ended |
May 31, 2024 |
May 31, 2023 |
Sales |
$77,500 |
$67,659 |
Gross profit |
$23,812 |
$15,052 |
Gross margin |
30.7% |
22.2% |
Net income (loss) |
($1,104) |
($8,284) |
per share - basic and diluted |
($0.05) |
($0.38) |
Adjusted EBITDA1 |
$3,862 |
($3,290) |
Adjusted net income1
(loss) |
($1,015) |
($7,910) |
per share - basic and diluted |
($0.05) |
($0.37) |
Weighted average share outstanding (‘000s) |
21,586 |
21,586 |
“Velan opened fiscal 2025 with a robust
performance across its core markets, generating double-digit
year-over-year sales growth, an order backlog of $528 million, and
a gross margin above 30% in the first quarter,” said James A.
Mannebach, Chairman and CEO of Velan. “We are particularly excited
about expanded opportunities in the nuclear sector based on
heightened interest in small modular reactors that are gaining
traction in Europe and North America. As a whole, nuclear power
deployments, which are critical to reducing greenhouse gas
emissions, were recently fast-tracked by a bipartisan bill in the
U.S. Senate. In Canada, we strengthened our position in the nuclear
market by signing a 10-year strategic agreement with Bruce Power
earlier this week to supply industrial valves for asset management
and life-extension projects. Looking ahead, we anticipate a nuclear
power growth cycle for at least the next decade on a global
basis.”
“We significantly improved our gross margin in
the first quarter, driven by increased sales volume and a
favourable mix delivering substantial growth year-over-year in
Adjusted EBITDA,” said Rishi Sharma, Chief Financial and
Administrative Officer of Velan. “Based on a net cash position of
$34.0 million at the end of the quarter, Velan has the financial
strength to maintain investments in key growth areas and build
long-term shareholder value.”
BACKLOG(‘000s of U.S. dollars, excluding
ratio) |
As at |
May 31, 2024 |
Feb. 29, 2024 |
Backlog |
$528,278 |
$491,525 |
for delivery within the next 12 months |
$372,250 |
$360,669 |
|
|
|
BOOKINGS (‘000s of U.S. dollars, excluding
ratio) |
Three-month periods ended |
May 31, 2024 |
May 31, 2023 |
Bookings |
$109,768 |
$91,811 |
Book-to-bill ratio |
1.42 |
1.36 |
As at May 31, 2024, the backlog stood at $528.3
million, up $36.8 million, or 7.5%, from $491.5 million at the
beginning of the fiscal year, reflecting solid first quarter
bookings. As at May 31, 2024, 70.5% of the backlog, representing
orders of $372.3 million, is deliverable within the next 12 months
versus 73.4% of last year’s backlog. Currency movements had a
positive effect of $1.1 million on the backlog during the
period.
Bookings in the first quarter of fiscal 2025
amounted to $109.8 million, up 19.6% over bookings of $91.8 million
last year. This growth mainly reflects higher bookings in North
America driven by new projects and the MRO business, along with
higher bookings for oil refinery projects in Germany and for the
nuclear power market in France. These factors were partially offset
by reduced oil and gas orders in Italy given large orders recorded
in the fourth quarter of fiscal 2024. Currency movements had a
positive effect of $1.1 million on bookings in the quarter.
As bookings outpaced sales, the Company’s
book-to-bill ratio was 1.42 in the first quarter of fiscal 2025
compared to 1.36 in the corresponding period of fiscal 2024.
FIRST QUARTER RESULTS
Sales reached $77.5 million in the first quarter
of fiscal 2025, up 14.5% from the same period last year. The growth
is mainly attributable to an increase in shipments from Velan’s
North American operations, including important project deliveries
and a solid performance from its MRO business, as well as from
Italian operations which delivered on a solid backlog despite
shipment delays due to supply-chain issues. Currency movements had
a $0.6 million negative effect on sales in the quarter.
Gross profit totaled $23.8 million in the first
quarter of 2025, up significantly from $15.1 million last year. The
increase is primarily due to the higher sales volume, which
positively impacted the absorption of fixed production overhead
costs, a more favorable product mix compared to last year, and
production efficiency gains. Currency movements had a $0.1 million
negative effect on gross profit in the first quarter of 2025. As a
percentage of sales, gross profit reached 30.7% compared to 22.2%
last year.
Administration costs totaled $21.8 million, or
28.1% of sales, in the first quarter of fiscal 2025 compared to
$21.5 million, or 31.8% of sales, a year ago. This year’s
administration costs included $0.1 million in restructuring
expenses, mainly consisting of severance payments, while last
year’s costs included $0.5 million in expenses related to the
proposed transaction with Flowserve Corporation. Excluding these
items, administration costs amounted to $21.7 million, or 28.0% of
sales, in the first quarter of fiscal 2025 versus $21.0 million, or
31.0% of sales, last year. The year-over-year decrease mainly
reflects cost-containment initiatives throughout the Company’s
operations and leverage from higher sales.
EBITDA amounted to $3.7 million in the first
quarter of fiscal 2025 compared to negative $3.8 million last year.
Excluding this year’s restructuring costs and last year’s expenses
related to the proposed Flowserve transaction, adjusted EBITDA
reached $3.9 million, up from a negative $3.3 million last year.
The year-over-year increase was mainly driven by higher sales
volume combined with the significant improvement in gross profit
and cost containment initiatives.
Net loss totaled $1.1 million, or $0.05 per
share, in the first quarter of fiscal 2025 compared to a net loss
of $8.3 million, or $0.38 per share, last year. Excluding the
after-tax effect of restructuring costs and expenses related to the
proposed transaction, adjusted net loss was $1.0 million, or $0.05
per share, versus an adjusted net loss of $7.9 million, or $0.37
per share, last year. The year-over-year variation can be
attributed to higher adjusted EBITDA in the first quarter of 2025,
partially offset by greater net finance costs and income tax
expense.
FINANCIAL POSITION
As at May 31, 2024, the Company held cash and
cash equivalents of $35.8 million and short-term investments of
$5.7 million, while long-term debt, including the current portion,
amounted to $24.8 million.
OUTLOOK
Velan delivered strong first quarter results,
highlighted by a growing order backlog of $528.3 million and a
book-to-bill ratio of 1.42. As at May 31, 2024, orders amounting to
$372.3 million, which represents 70.5% of the total backlog, are
expected to be delivered within the next 12 months. Given these
orders, the Company is reiterating its expectations to deliver
sales growth in fiscal 2025.
CONFERENCE CALL NOTICE
Financial analysts, shareholders, and other
interested individuals are invited to attend the first quarter
conference call to be held on Friday, July 12, 2024, at 8:00 a.m.
(EDT). The toll-free call-in number is 1-800-836-8184 or by
RapidConnect URL: https://emportal.ink/3z8pLbF. The material
that will be referenced during the conference call will be made
available shortly before the event on the company’s website
under the Investor Relations section
(https://www.velan.com/en/company/investor_relations). A recording
of this conference call will be available for seven days at
1-289-819-1450 or 1-888-660-6345, access code 87075.
ABOUT VELAN
Founded in Montreal in 1950, Velan Inc.
(www.velan.com) is one of the world’s leading manufacturers of
industrial valves, with sales of US$346.8 million in its last
reported fiscal year. The Company employs 1,654 people and has
manufacturing plants in 9 countries. Velan Inc. is a public company
with its shares listed on the Toronto Stock Exchange under the
symbol VLN.
SAFE HARBOUR STATEMENT
This news release may include forward-looking
statements, which generally contain words like “should”, “believe”,
“anticipate”, “plan”, “may”, “will”, “expect”, “intend”, “continue”
or “estimate” or the negatives of these terms or variations of them
or similar expressions, all of which are subject to risks and
uncertainties, which are disclosed in the Company’s filings with
the appropriate securities commissions. While these statements are
based on management’s assumptions regarding historical trends,
current conditions and expected future developments, as well as
other factors that it believes are reasonable and appropriate in
the circumstances, no forward-looking statement can be guaranteed
and actual future results may differ materially from those
expressed herein. The Company disclaims any intention or obligation
to update or revise any forward-looking statements contained herein
whether as a result of new information, future events or otherwise,
except as required by the applicable securities laws. The
forward-looking statements contained in this news release are
expressly qualified by this cautionary statement.
NON-IFRS AND SUPPLEMENTARY FINANCIAL
MEASURES
In this press release, the Company has presented
measures of performance or financial condition which are not
defined under IFRS (“non-IFRS measures”) and are, therefore,
unlikely to be comparable to similar measures presented by other
companies. These measures are used by management in assessing the
operating results and financial condition of the Company and are
reconciled with the performance measures defined under IFRS. The
Company has also presented supplementary financial measures which
are defined at the end of this report. Reconciliation and
definition can be found below.
Adjusted net income (loss), Adjusted net
income (loss) per share, Earnings before interest, taxes,
depreciation and amortization ("EBITDA") and Adjusted
EBITDA
(in thousands,
except amount per shares) |
Three-month periods ended |
May 31, 2024 |
May 31, 2023 |
|
$ |
|
$ |
|
Reconciliation of net income (loss) to adjusted net income (loss)
& adjusted net income (loss) per share |
|
|
Net income (loss) |
(1,104 |
) |
(8,284 |
) |
Adjustment for: |
|
|
Restructuring costs |
89 |
|
- |
|
Proposed transaction related
costs |
- |
|
374 |
|
Adjusted net income (loss) |
(1,015 |
) |
(7,910 |
) |
per share - basic and diluted |
(0.05 |
) |
(0.37 |
) |
|
|
|
Reconciliation of net income
(loss) to Adjusted EBITDA |
|
|
Net income (loss) |
(1,104 |
) |
(8,284 |
) |
Adjustments for: |
|
|
Depreciation of property,
plant and equipment |
1,685 |
|
2,066 |
|
Amortization of intangible
assets and financing costs |
771 |
|
563 |
|
Finance costs – net |
1,341 |
|
1,205 |
|
Income
taxes |
1,048 |
|
651 |
|
EBITDA |
3,741 |
|
(3,799 |
) |
|
|
|
Adjustments for: |
|
|
Restructuring costs |
121 |
|
- |
|
Proposed transaction related
costs |
- |
|
509 |
|
Adjusted EBITDA |
3,862 |
|
(3,290 |
) |
The term “Adjusted net income (loss)” is defined
as net income or loss attributable to Subordinate and Multiple
Voting Shares plus adjustment, net of income taxes, for costs
related to restructuring and to the proposed transaction. The terms
“Adjusted net income (loss) per share” is obtained by dividing
Adjusted net income (loss) by the total amount of subordinate and
multiple voting shares. The forward-looking statements contained in
this press release are expressly qualified by this cautionary
statement.
The term “EBITDA” is defined as adjusted net
income plus depreciation of property, plant & equipment, plus
amortization of intangible assets, plus net finance costs, plus
income tax provision. The term “Adjusted EBITDA” is defined as
EBITDA plus adjustment for costs related to restructuring and to
the proposed transaction. The forward-looking statements contained
in this press release are expressly qualified by this cautionary
statement.
Definitions of supplementary financial
measures
The term “Net new orders” or “bookings” is
defined as firm orders, net of cancellations, recorded by the
Company during a period. Bookings are impacted by the fluctuation
of foreign exchange rates for a given period. The measure provides
an indication of the Company’s sales operation performance for a
given period as well as well as an expectation of future sales and
cash flows to be achieved on these orders.
The term “backlog” is defined as the buildup of
all outstanding bookings to be delivered by the Company. The
Company’s backlog is impacted by the fluctuation of foreign
exchange rates for a given period. The measure provides an
indication of the future operational challenges of the Company as
well as an expectation of future sales and cash flows to be
achieved on these orders.
The term “book-to-bill” is obtained by dividing
bookings by sales. The measure provides an indication of the
Company’s performance and outlook for a given period.
The forward-looking statements contained in this
press release are expressly qualified by this cautionary
statement.
Contact:
Rishi Sharma,
Chief Financial and Administrative Officer |
Martin Goulet,
M.Sc., CFA |
Velan Inc. |
MBC Capital Markets Advisors |
Tel: (438) 817-4430 |
Tel.: (514) 731-0000, ext. 229 |
1 Non-IFRS and supplementary financial measure.
Refer to the Non-IFRS and Supplementary Financial Measures section
for definitions and reconciliations.2 Net income or loss refer to
net income or loss attributable to Subordinate and Multiple Voting
Shares.
Consolidated Statements of Financial Position |
|
|
(in
thousands of U.S. dollars) |
|
|
|
|
As
at |
|
May
31, |
February 29, |
|
2024 |
2024 |
|
$ |
$ |
Assets |
|
|
|
|
|
Current assets |
|
|
Cash and
cash equivalents |
35,798 |
36,445 |
Short-term
investments |
5,735 |
5,271 |
Accounts
receivable |
105,661 |
119,914 |
Income taxes
recoverable |
6,374 |
6,132 |
Inventories |
220,235 |
208,702 |
Deposits and
prepaid expenses |
9,443 |
10,421 |
Derivative assets |
202 |
125 |
|
383,448 |
387,010 |
|
|
|
Non-current assets |
|
|
Property,
plant and equipment |
69,978 |
69,918 |
Intangible
assets and goodwill |
16,960 |
16,543 |
Deferred
income taxes |
6,021 |
5,193 |
Other assets |
729 |
729 |
|
|
|
|
93,688 |
92,383 |
|
|
|
Total assets |
477,136 |
479,393 |
|
|
|
Liabilities |
|
|
|
|
|
Current liabilities |
|
|
Bank
indebtedness |
1,779 |
- |
Accounts
payable and accrued liabilities |
86,149 |
88,230 |
Income taxes
payable |
1,453 |
1,568 |
Customer
deposits |
35,649 |
30,396 |
Provisions |
13,909 |
14,129 |
Derivative
liabilities |
- |
26 |
Current
portion of long-term lease liabilities |
1,568 |
1,607 |
Current portion of long-term debt |
5,317 |
24,431 |
|
145,823 |
160,387 |
|
|
|
Non-current liabilities |
|
|
Long-term
lease liabilities |
11,115 |
11,036 |
Long-term
debt |
19,494 |
4,346 |
Income taxes
payable |
1,912 |
2,325 |
Deferred
income taxes |
3,938 |
3,462 |
Customer
deposits |
34,364 |
35,082 |
Provisions |
72,929 |
74,058 |
Other liabilities |
5,216 |
5,438 |
|
|
|
|
148,968 |
135,747 |
|
|
|
Total liabilities |
294,791 |
296,134 |
|
|
|
Total equity |
182,345 |
183,259 |
|
|
|
Total liabilities and equity |
477,136 |
479,393 |
|
|
|
The
accompanying notes are an integral part of these unaudited
condensed interim consolidated financial statements. |
|
|
Consolidated
Statements of Loss |
|
|
(in
thousands of U.S. dollars, excluding number of shares and per share
amounts) |
|
|
|
Three-month
periods ended |
|
May
31, |
May
31, |
|
2024 |
2023 |
|
$ |
$ |
|
|
|
|
|
|
Sales |
77,500 |
|
67,659 |
|
|
|
|
Cost of sales |
53,688 |
|
52,607 |
|
|
|
|
Gross profit |
23,812 |
|
15,052 |
|
|
|
|
Administration costs |
21,807 |
|
21,499 |
|
Other expense (income) |
776 |
|
(13 |
) |
|
|
|
Operating income (loss) |
1,229 |
|
(6,434 |
) |
|
|
|
Finance
income |
111 |
|
135 |
|
Finance costs |
(1,452 |
) |
(1,340 |
) |
|
|
|
Finance costs – net |
(1,341 |
) |
(1,205 |
) |
|
|
|
Income (loss) before income taxes |
(112 |
) |
(7,639 |
) |
|
|
|
Income tax expense |
1,048 |
|
651 |
|
|
|
|
Net loss for the period |
(1,160 |
) |
(8,290 |
) |
|
|
|
Net
loss attributable to: |
|
|
Subordinate Voting Shares and Multiple Voting
Shares |
(1,104 |
) |
(8,284 |
) |
Non-controlling interest |
(56 |
) |
(6 |
) |
|
|
|
Net loss for the period |
(1,160 |
) |
(8,290 |
) |
|
|
|
Net
loss per Subordinate and Multiple Voting Share |
|
|
Basic and diluted |
(0.05 |
) |
(0.38 |
) |
|
|
|
|
|
|
Dividends declared per Subordinate and
Multiple |
- |
|
0.02 |
|
Voting Share |
(CA$ - ) |
(CA$ 0.03) |
|
|
|
|
|
|
Total weighted average number of Subordinate
and |
|
|
Multiple Voting Shares |
|
|
Basic and diluted |
21,585,635 |
|
21,585,635 |
|
|
|
|
The accompanying notes are an integral part of these
unaudited condensed interim consolidated financial
statements. |
Consolidated Statements of Comprehensive Loss |
|
(in
thousands of U.S. dollars) |
|
|
|
Three-month
periods ended |
|
May
31, |
May
31, |
|
2024 |
2023 |
|
$ |
$ |
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
Net loss for the period |
(1,160 |
) |
(8,290 |
) |
|
|
|
Other comprehensive income |
|
|
Foreign currency translation |
246 |
|
1,408 |
|
|
|
|
Comprehensive loss |
(914 |
) |
(6,882 |
) |
|
|
|
Comprehensive loss attributable to: |
|
|
Subordinate
Voting Shares and Multiple Voting Shares |
(858 |
) |
(6,876 |
) |
Non-controlling interest |
(56 |
) |
(6 |
) |
|
|
|
Comprehensive loss |
(914 |
) |
(6,882 |
) |
|
|
|
|
|
|
Other
comprehensive loss is composed solely of items that may be
reclassified subsequently to the consolidated statement of
loss. |
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited
condensed interim consolidated financial statements. |
|
|
|
|
Consolidated Statements of Changes in Equity |
|
|
|
|
|
(in thousands of U.S. dollars, excluding number of shares) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to the Subordinate and Multiple Voting
shareholders |
|
|
|
Share capital |
Contributed surplus |
Accumulated other comprehensive loss |
Retained earnings |
Total |
Non-controlling interest |
Total equity |
|
|
|
|
|
|
|
|
Balance - February 28, 2023 |
72,695 |
6,260 |
(41,208 |
) |
162,142 |
|
199,889 |
|
946 |
|
200,835 |
|
|
|
|
|
|
|
|
|
Net loss for
the period |
- |
- |
- |
|
(8,284 |
) |
(8,284 |
) |
(6 |
) |
(8,290 |
) |
Other comprehensive loss |
- |
- |
1,408 |
|
- |
|
1,408 |
|
- |
|
1,408 |
|
|
|
|
|
|
|
|
|
Comprehensive loss |
- |
- |
1,408 |
|
(8,284 |
) |
(6,876 |
) |
(6 |
) |
(6,882 |
) |
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
Multiple Voting Shares |
- |
- |
- |
|
(346 |
) |
(346 |
) |
- |
|
(346 |
) |
Subordinate Voting Shares |
- |
- |
- |
|
(134 |
) |
(134 |
) |
- |
|
(134 |
) |
|
|
|
|
|
|
|
|
Balance - May 31, 2023 |
72,695 |
6,260 |
(39,800 |
) |
153,378 |
|
192,533 |
|
940 |
|
193,473 |
|
|
|
|
|
|
|
|
|
Balance - February 29, 2024 |
72,695 |
6,260 |
(38,692 |
) |
141,914 |
|
182,177 |
|
1,082 |
|
183,259 |
|
|
|
|
|
|
|
|
|
Net loss for
the period |
- |
- |
- |
|
(1,104 |
) |
(1,104 |
) |
(56 |
) |
(1,160 |
) |
Other comprehensive income |
- |
- |
246 |
|
- |
|
246 |
|
- |
|
246 |
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
- |
- |
246 |
|
(1,104 |
) |
(858 |
) |
(56 |
) |
(914 |
) |
|
|
|
|
|
|
|
|
Balance - May 31, 2024 |
72,695 |
6,260 |
(38,446 |
) |
140,810 |
|
181,319 |
|
1,026 |
|
182,345 |
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these unaudited
condensed interim consolidated financial statements. |
Consolidated
Statements of Cash Flow |
|
|
(in
thousands of U.S. dollars) |
|
|
|
Three-month
periods ended |
|
May
31, |
May
31, |
|
2024 |
|
2023 |
|
|
$ |
$ |
|
|
|
Cash
flows from |
|
|
|
|
|
Operating activities |
|
|
Net income
(loss) for the period |
(1,160 |
) |
(8,290 |
) |
Adjustments
to reconcile net income (loss) to cash provided by operating
activities |
1,620 |
|
834 |
|
Changes in
non-cash working capital items |
745 |
|
18,150 |
|
Cash provided by operating activities |
1,205 |
|
10,694 |
|
|
|
|
Investing activities |
|
|
Short-term
investments |
22 |
|
19 |
|
Additions to
property, plant and equipment |
(3,904 |
) |
(1,109 |
) |
Additions to
intangible assets |
(1,159 |
) |
(384 |
) |
Proceeds on
disposal of property, plant and equipment, and intangible
assets |
82 |
|
14 |
|
Net change in other assets |
30 |
|
28 |
|
Cash provided (used) by investing activities |
(4,929 |
) |
(1,432 |
) |
|
|
|
Financing activities |
|
|
Short-term
bank loans |
- |
|
- |
|
Repayment of
long-term debt |
(7,693 |
) |
(926 |
) |
Repayment of long-term lease liabilities |
(1,292 |
) |
(362 |
) |
Cash used by financing activities |
(4,276 |
) |
(1,288 |
) |
|
|
|
Effect of exchange rate differences on cash |
(252 |
) |
403 |
|
|
|
|
Net
change in cash during the period |
(8,252 |
) |
8,377 |
|
|
|
|
Net cash – Beginning of the period |
36,445 |
|
50,253 |
|
|
|
|
Net cash – End of the period |
28,193 |
|
58,630 |
|
|
|
|
Net cash is
composed of: |
|
|
Cash and cash equivalents |
35,798 |
|
58,842 |
|
Bank indebtedness |
(1,779 |
) |
(212 |
) |
|
|
|
Net cash – End of the period |
34,019 |
|
58,630 |
|
|
|
|
Supplementary information |
|
|
Interest
paid |
30 |
|
(49 |
) |
Income taxes
paid |
(1,744 |
) |
(2,610 |
) |
|
|
|
The
accompanying notes are an integral part of these unaudited
condensed interim consolidated financial statements. |
|
|
|
|
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