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Velan Inc. Reports First Quarter Results for Fiscal 2025

GlobeNewswire - Thu Jul 11, 8:31PM CDT

MONTREAL, July 11, 2024 (GLOBE NEWSWIRE) -- 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, 2024May 31, 2023
Sales$77,500$67,659
Gross profit$23,812$15,052
Gross margin30.7%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)21,58621,586

“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, 2024Feb. 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, 2024May 31, 2023
Bookings$109,768$91,811
Book-to-bill ratio1.421.36

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, 2024May 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 costs89 - 
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 equipment1,685 2,066 
Amortization of intangible assets and financing costs771 563 
Finance costs – net1,341 1,205 
Income taxes1,048 651 
EBITDA3,741 (3,799)
   
Adjustments for:  
Restructuring costs121 - 
Proposed transaction related costs- 509 
Adjusted EBITDA3,862 (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 OfficerMartin Goulet, M.Sc., CFA
Velan Inc.MBC Capital Markets Advisors
Tel: (438) 817-4430Tel.: (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,
 20242024
 $$
Assets  
   
Current assets  
Cash and cash equivalents35,79836,445
Short-term investments5,7355,271
Accounts receivable105,661119,914
Income taxes recoverable6,3746,132
Inventories220,235208,702
Deposits and prepaid expenses9,44310,421
Derivative assets202125
 383,448387,010
   
Non-current assets  
Property, plant and equipment69,97869,918
Intangible assets and goodwill16,96016,543
Deferred income taxes6,0215,193
Other assets729729
   
 93,68892,383
   
Total assets477,136479,393
   
Liabilities  
   
Current liabilities  
Bank indebtedness1,779-
Accounts payable and accrued liabilities86,14988,230
Income taxes payable1,4531,568
Customer deposits35,64930,396
Provisions13,90914,129
Derivative liabilities-26
Current portion of long-term lease liabilities1,5681,607
Current portion of long-term debt5,31724,431
 145,823160,387
   
Non-current liabilities  
Long-term lease liabilities11,11511,036
Long-term debt19,4944,346
Income taxes payable1,9122,325
Deferred income taxes3,9383,462
Customer deposits34,36435,082
Provisions72,92974,058
Other liabilities5,2165,438
   
 148,968135,747
   
Total liabilities294,791296,134
   
Total equity182,345183,259
   
Total liabilities and equity477,136479,393
   
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 sales53,688 52,607 
   
Gross profit23,812 15,052 
   
Administration costs21,807 21,499 
Other expense (income)776 (13)
   
Operating income (loss)1,229 (6,434)
   
Finance income111 135 
Finance costs(1,452)(1,340)
   
Finance costs – net(1,341)(1,205)
   
Income (loss) before income taxes(112)(7,639)
   
Income tax expense1,048 651 
   
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 diluted21,585,635 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 translation246 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 capitalContributed surplusAccumulated other comprehensive lossRetained earningsTotalNon-controlling interestTotal equity
        
Balance - February 28, 202372,6956,260(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, 202372,6956,260(39,800)153,378 192,533 940 193,473 
        
Balance - February 29, 202472,6956,260(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, 202472,6956,260(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 activities1,620 834 
Changes in non-cash working capital items745 18,150 
Cash provided by operating activities 1,205 10,694 
   
Investing activities  
Short-term investments22 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 assets82 14 
Net change in other assets30 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 period36,445 50,253 
   
Net cash – End of the period28,193 58,630 
   
Net cash is composed of:  
Cash and cash equivalents35,798 58,842 
Bank indebtedness(1,779)(212)
   
Net cash – End of the period34,019 58,630 
   
Supplementary information  
Interest paid30 (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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