Velan Inc. Reports Its Fiscal 2024 Fourth Quarter and Year-End Results
Strong new order inflow and higher backlog¹ entering fiscal 2025
MONTREAL, May 16, 2024 (GLOBE NEWSWIRE) -- Velan Inc. (TSX: VLN) (“Velan” or the “Company”), a world-leading manufacturer of industrial valves, announced today its financial results for its fourth quarter and fiscal year ended February 29, 2024. All amounts are expressed in U.S. dollars unless indicated otherwise.*FOURTH QUARTER HIGHLIGHTS: *
· Bookings^1 of $132.8 million, up sharply from $87.1 million last year and $78.3 million in the third quarter.
· Book-to-bill^1 ratio of 1.13, versus 0.76 for the same period a year ago and 0.97 in the third quarter.
· Sales of $117.9 million, up from $115.1 million last year and up from $80.9 million in the third quarter.
· Gross profit of $38.4 million, or 32.6% of sales, compared to $39.9 million, or 30.4% of sales, last year.
· Net loss^2 of $2.1 million compared to a net loss of $47.2 million last year.*YEAR-END HIGHLIGHTS: *
· Order backlog^1 of $491.5 million, up $27.1 million from last year.
· Bookings of $374.5 million, compared to $353.2 million in fiscal 2023.
· Book-to-bill ratio of 1.08, versus 0.95 last year.
· Sales of $346.8 million, compared to $370.4 million in fiscal 2023.
· Gross profit of $93.2 million, or 26.9% of sales, versus $112.5 million, or 30.4% of sales, last year.
· Net loss of $19.7 million, versus a net loss of $55.5 million in the prior year.
· Cash and cash equivalents of $36.4 million.*FINANCIAL RESULTS*
*(‘000s of U.S. dollars, excluding per share amounts)**
* *Three-month periods ended* *Fiscal years ended*
*Feb. 29, 2024* *Feb. 28, 2023* *Feb. 29, 2024* *Feb. 28, 2023*
Sales $117,894 $115,141 $346,816 $370,429
Gross profit $38,384 $39,945 $93,207 $112,465
Gross margin 32.6% 34.7% 26.9% 30.4%
Net loss ($2,083) ($47,164) ($19,737) ($55,453)
per share - basic and diluted ($0.10) ($2.18) ($0.91) ($2.57)
Adjusted EBITDA $19,879 $16,468 $17,780 $21,092
Adjusted net income (loss) $8,944 $8,790 ($7,918) $501
per share - basic and diluted $0.41 $0.41 ($0.37) $0.02
Weighted average share outstanding (‘000s) 21,586 21,586 21,586 21,586 “Velan concluded fiscal 2024 with strong fourth quarter results, marked by heightened sales volume and healthy profit margins on improved quality of execution,” said James A. Mannebach, Chairman and CEO of Velan. “In addition, robust bookings during the period further increased our backlog to $491.5 million at year-end. Given the value of orders to be shipped over the next 12 months, we expect sales growth in fiscal 2025. As a supplier of critical equipment to essential industries, Velan is well positioned to capture growth opportunities driven by the ongoing energy transition and expand its reach in the flow control industry based on an agile workforce, global presence and strong brand recognition.”
“Fueled by a net cash position, Velan’s strong balance sheet will allow the Company to fund its current operations and pursue re-investment to expand its global reach. Over the longer term, we remain committed to building shareholder value through sales and cash flow growth,” added Rishi Sharma, Chief Financial and Administrative Officer of Velan.
*BOOKINGS AND BACKLOG*
*(‘000s of U.S. dollars, excluding ratio)*
*Three-month periods ended* *Fiscal years ended* *Feb. 29, 2024* *Feb. 28, 2023* *Feb. 29, 2024* *Feb. 28, 2023*
Backlog $491,525 $464,337
for delivery within the next 12 months $360,669 $307,991
Bookings $132,825 $87,085 $374,454 $353,176
Book-to-bill ratio 1.13 0.76 1.08 0.95 As at February 29, 2024, the backlog stood at $491.5 million, up $27.2 million, or 5.9%, from $464.3 million a year earlier reflecting strong fourth quarter bookings. As at February 29, 2024, 73.4% of the backlog, representing orders of $360.7 million, is deliverable in the next 12 months, versus 66.3% of last year’s backlog. Currency movements had a positive effect of $5.6 million on the backlog during the year.
Bookings for the fourth quarter of fiscal 2024 amounted to $132.8 million, up 52.5% over bookings of $87.1 million a year earlier. The increase is mainly attributable to strong oil and gas bookings recorded by the Company’s Italian operations and to higher orders recorded by North American operations, partially offset by the timing of orders for the French subsidiary following strong bookings in the prior year. Currency movements had a positive effect of $3.8 million on bookings during the quarter.
As a result of bookings outpacing sales, the Company’s book-to-bill ratio was 1.13 in the fourth quarter of fiscal 2024, compared to 0.76 in the corresponding period of fiscal 2023.
Fiscal 2024 bookings reached $374.5 million, an increase of $21.3 million or 6.0% compared to the previous year. As a result of bookings outpacing sales for the fiscal year, the Company’s book-to-bill ratio was 1.08 in fiscal 2024, compared with 0.95 in fiscal 2023.
*FISCAL 2024 FOURTH QUARTER RESULTS *
Sales reached $117.9 million, up $2.8 million or 2.4% from last year. The variation is mostly attributable to stronger shipments from the Company’s International operations. These factors were partially offset by lower shipments from North American operations and shipping delays due to the situation in the Red Sea. Currency movements had a $1.7 million positive effect on sales for the quarter.
Gross profit was $38.4 million, versus $39.9 million a year ago. The variation reflects a less favorable product mix this year compared to last due to the execution of certain low margin projects. Last year’s gross profit also benefitted from a favorable revaluation of the inventory provision based on new estimates relating to changes in market demand. As a percentage of sales, gross profit was 32.6%, versus 34.7% last year.
Administration costs reached $33.1 million, compared to $80.8 million last year. This year’s administration costs include a $10.0 million asbestos provision adjustment and restructuring charges of $1.3 million mostly consisting of severances. Last year’s costs included a $56.0 million charge to increase the Company’s asbestos provision. Excluding these items, administration costs totaled $21.7 million, or 18.4% of sales, in the fourth quarter of fiscal 2024, versus $24.9 million, or 21.6% of sales, in the fourth quarter of fiscal 2023. The decrease is mostly due to lower expenses for the North American operations and cost reduction initiatives throughout the Company’s operations.
EBITDA^1 reached $8.5 million compared to negative $39.5 million last year. Excluding asbestos and restructuring costs, adjusted EBITDA was $19.9 million in the fourth quarter of fiscal 2024, compared to $16.5 million a year earlier. This increase reflects lower administration costs and a $1.7 million net reduction in other expenses, mainly related to a provision related to a commodity tax audit last year. These factors were partially offset by a lower gross profit.
Net loss was $2.1 million, or $0.10 per share, versus a net loss of $47.2 million, or $2.18 per share last year. Excluding the after-tax effect of asbestos and restructuring costs, adjusted net income was $8.9 million, or $0.41 per share, compared to $8.8 million, or $0.41 per share, last year. The variation is attributable to higher adjusted EBITDA partially offset by higher net finance costs and income tax expense.
*YEAR-END RESULTS*
For the fiscal year ended February 29, 2024, sales amounted to $346.8 million, down from $370.4 million last year. Gross profit was $93.2 million, or 26.9% of sales, compared to $112.5 million, or 30.4% of sales, last year. EBITDA stood at $5.3 million, versus negative $34.9 million a year ago, while adjusted EBITDA reached $17.8 million compared to $21.1 million last year. Net loss was $19.7 million, or $0.91 per share, compared to a net loss of $55.5 million, or $2.57 per share, a year ago, while adjusted net loss was $7.9 million, or $0.37 per share, compared to adjusted net income of $0.5 million, or $0.02 per share in the prior year.
*FINANCIAL POSITION*
As at February 29, 2024, Velan’s financial position remained solid. The Company had cash and cash equivalents of $36.4 million, as well as short-term investments of $5.3 million, while long-term debt, including the current portion, amounted to $28.8 million.
*OUTLOOK*
Velan aims to build on the momentum gained in the second half of fiscal 2024, concluding the year on a solid note with a growing order backlog and a book-to-bill ratio of 1.08. As at February 29, 2024, orders totaling $360.7 million, representing 73.4% of a total backlog of $491.5 million, are expected to be delivered in the next 12 months. Given these orders, the Company expects to deliver annual sales in fiscal 2025 above the level achieved in fiscal 2024.
*CONFERENCE CALL NOTICE*
Financial analysts, shareholders, and other interested individuals are invited to attend the fourth quarter conference call to be held on Friday, May 17, 2024, at 8:00 a.m. (EDT). The toll-free call-in number is 1-888-660-6345 or 1-289-819-1450. 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 24455.
*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 approximately 1,641 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, Adjusted net income per share, Earnings before interest, taxes, depreciation and amortization ("EBITDA") and Adjusted EBITDA*
(thousands, except amount per shares)
*Three-month period ended* *Fiscal years ended* *Feb. 29, 2024* *Feb. 28, 2023* *Feb. 29, 2024* *Feb. 28, 2023* *$* *$* *$* *$*
Reconciliation of net income (loss) to adjusted net income (loss)^2& adjusted net income (loss) per share
Net income (loss) (2,083 ) (47,164 ) (19,737 ) (55,453 )
Adjustment for:
Proposed transaction related costs 108 - 900 -
Restructuring costs 919 - 919 -
Adjustment to asbestos provision 10,000 55,954 10,000 55,954
*Adjusted net income (loss)* *8,944* *8,790* *(7,918* *)* *501*
per share - basic and diluted 0.41 0.41 (0.37 ) 0.02
Reconciliation of net income (loss) to Adjusted EBITDA
Net income (loss) (2,083 ) (47,164 ) (19,737 ) (55,453 )
Adjustments for:
Depreciation of property, plant and equipment 2,472 2,452 8,930 8,722
Amortization of intangible assets and financing costs 650 608 2,296 2,272
Finance costs – net 2,355 516 6,346 1,552
Income taxes 5,088 4,102 7,471 8,045
*EBITDA* *8,482* *(39,486* *)* *5,306* *(34,862* *)*
Adjustments for:
Proposed transaction related costs 147 - 1,224 -
Restructuring costs 1,250 - 1,250 -
Adjustment to asbestos provision 10,000 55,954 10,000 55,954
*Adjusted EBITDA* *19,879* *16,468* *17,780* *21,092* 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 the proposed transaction, restructuring, and asbestos provision. 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 MD&A 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 the proposed transaction, restructuring, and asbestos provision. The forward-looking statements contained in this MD&A 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 measures. 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* *February 29,* *February 28,* *2024* *2023* *$* *$*
*Assets*
*Current assets*
Cash and cash equivalents 36,445 50,513
Short-term investments 5,271 37
Accounts receivable 119,914 121,053
Income taxes recoverable 6,132 6,195
Inventories 208,702 202,649
Deposits and prepaid expenses 10,421 7,559
Derivative assets 125 107 387,010 388,113
*Non-current assets*
Property, plant and equipment 69,918 68,205
Intangible assets and goodwill 16,543 16,153
Deferred income taxes 5,193 4,663
Other assets 729 723 92,383 89,744
*Total assets* 479,393 477,857
*Liabilities*
*Current liabilities*
Bank indebtedness - 260
Accounts payable and accrued liabilities 88,230 79,408
Income taxes payable 1,568 2,832
Customer deposits 30,396 28,201
Provisions 14,129 16,485
Derivative liabilities 26 299
Current portion of long-term lease liabilities 1,607 1,298
Current portion of long-term debt 24,431 8,177 160,387 136,960
*Non-current liabilities*
Long-term lease liabilities 11,036 9,458
Long-term debt 4,346 21,719
Income taxes payable 2,325 933
Deferred income taxes 3,462 3,966
Customer deposits 35,082 27,937
Provisions 74,058 70,924
Other liabilities 5,438 5,125 135,747 140,062
*Total liabilities* 296,134 277,022
*Total equity* 183,259 200,835
*Total liabilities and equity* 479,393 477,857
Consolidated Statements of Loss
(in thousands of U.S. dollars, excluding number of shares and per share amounts)
*Three-month periods ended**
* *Fiscal years ended* *February 29,* *February 28,* *February 29,* *February 28,* *2024* *2023* *2024* *2023* *$* *$* *$* *$*
*Sales* 117,894 115,141 346,816 370,429
*Cost of sales* 79,510 75,196 253,609 257,964
*Gross profit* 38,384 39,945 93,207 112,465
Administration costs 33,121 80,841 98,744 156,759
Other expense (income) (91 ) 1,700 448 1,568
*Operating profit (loss)* 5,354 (42,596 ) (5,985 ) (45,862 )
Finance income 64 240 459 467
Finance costs (2,419 ) (758 ) (6,805 ) (2,019 )
Finance costs – net (2,355 ) (518 ) (6,346 ) (1,552 )
*Income (loss) before income taxes* 2,999 (43,114 ) (12,331 ) (47,414 )
Income tax expense 5,088 4,102 7,471 8,045
*Net loss for the period* (2,089 ) (47,216 ) (19,802 ) (55,459 )
*Net income (loss) attributable to:*
*Subordinate Voting Shares and Multiple Voting Shares* *(2,083* *)* *(47,164* *)* *(19,737* *)* *(55,453* *)*
Non-controlling interest (6 ) (52 ) (65 ) (6 )
*Net loss for the period* (2,089 ) (47,216 ) (19,802 ) (55,459 )
*Net loss per Subordinate and Multiple Voting Share*
Basic and diluted (0.09 ) (2.18 ) (0.91 ) (2.57 )
*Dividends declared per Subordinate and Multiple* - - 0.02 0.02
*Voting Share* (CA$ - ) (CA$ - ) (CA$0.03 ) (CA$0.03 )
*Total weighted average number of Subordinate and*
*Multiple Voting Shares*
Basic and diluted 21,585,635 21,585,635 21,585,635 21,585,635
Consolidated Statements of Comprehensive Loss
(in thousands of U.S. dollars) *Three-month periods ended**
* *Fiscal years ended* *February 29,* *February 28,* *February 29,* *February 28,* *2024* *2023* *2024* *2023* *$* *$* *$* *$*
*Comprehensive loss *
*Net loss for the period* (2,089 ) (47,216 ) (19,802 ) (55,459 )
*Other comprehensive income (loss)*
Foreign currency translation (719 ) 1,423 2,516 (8,985 )
*Comprehensive loss * (2,808 ) (45,793 ) (17,286 ) (64,444 )
*Comprehensive income (loss) attributable to:*
Subordinate Voting Shares and Multiple Voting Shares (2,802 ) (45,741 ) (17,221 ) (64,438 )
Non-controlling interest (6 ) (52 ) (65 ) (6 )
*Comprehensive loss * (2,808 ) (45,793 ) (17,286 ) (64,444 )
Other comprehensive loss is composed solely of items that may be reclassified subsequently to the consolidated statement of loss.
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, 2022* 72,695 6,260 (32,126 ) 217,995 264,824 686 265,510
Net loss for the year - - - (55,453 ) (55,453 ) (6 ) (55,459 )
Other comprehensive loss - - (8,985 ) - (8,985 ) - (8,985 )
Comprehensive loss - - (8,985 ) (55,453 ) (64,438 ) (6 ) (64,444 )
Acquisition of non-controlling interests - - - - - 266 266
Other - - (97 ) 97 - - -
Dividends
Multiple Voting Shares - - - (366 ) (366 ) - (366 )
Subordinate Voting Shares - - - (131 ) (131 ) - (131 )
*Balance - February 28, 2023* 72,695 6,260 (41,208 ) 162,142 199,889 946 200,835
Net loss for the year - - - (19,737 ) (19,737 ) (65 ) (19,802 )
Other comprehensive loss - - 2,516 - 2,516 - 2,516
Comprehensive loss - - 2,516 (19,737 ) (17,221 ) (65 ) (17,286 )
Acquisition of non-controlling interests - - - - - 201 201
Dividends
Multiple Voting Shares - - - (354 ) (354 ) - (354 )
Subordinate Voting Shares - - - (137 ) (137 ) - (137 )
Non-controlling interest - - - - - - -
*Balance - February 29, 2024* 72,695 6,260 (38,692 ) 141,914 182,177 1,082 183,259
Consolidated Statements of Cash Flow
(in thousands of U.S. dollars) *Three-month periods ended**
* *Fiscal years ended* *February 29,* *February 28,* *February 29,* *February 28,* *2024* *2023* *2024* *2023* *$* *$* *$* *$*
*Cash flows from*
*Operating activities*
Net loss for the period (2,089 ) (47,216 ) (19,802 ) (55,459 )
Adjustments to reconcile net loss to cash provided by operating activities 12,669 64,794 14,289 67,553
Changes in non-cash working capital items 9,069 911 9,814 (11,572 )
*Cash provided by operating activities * 19,649 18,489 4,301 522
*Investing activities*
Short-term investments (5,254 ) 9,367 (5,232 ) 8,250
Additions to property, plant and equipment (2,925 ) (1,385 ) (6,829 ) (4,370 )
Additions to intangible assets (1,199 ) (903 ) (2,358 ) (2,219 )
Proceeds on disposal of property, plant and equipment (127 ) 141 (45 ) 185
Net change in other assets 317 (117 ) 347 (87 )
*Cash provided (used) by investing activities * (9,198 ) 7,103 (14,127 ) 1,759
*Financing activities*
Dividends paid to Subordinate and Multiple Voting shareholders - - (491 ) (497 )
Acquisition of non-controlling interests 1 266 201 266
Net change in revolving credit facility - (5,373 ) 5,000 -
Increase in long-term debt 1,286 1,506 1,286 3,666
Repayment of long-term debt (1,069 ) (683 ) (8,762 ) (4,398 )
Repayment of long-term lease liabilities (603 ) (566 ) (1,895 ) (1,657 )
*Cash provided (used) by financing activities * (385 ) (4,850 ) (4,661 ) (2,620 )
*Effect of exchange rate differences on cash * 17 200 679 (2,873 )
*Net change in cash during the period* 10,083 20,942 (13,808 ) (3,212 )
*Net cash – Beginning of the period* 26,362 29,311 50,253 53,465
*Net cash – End of the period* 36,445 50,253 36,445 50,253
Net cash is composed of:
Cash and cash equivalents 36,445 50,513 36,445 50,513
Bank indebtedness - (260 ) - (260 )
*Net cash – End of the period* 36,445 50,253 36,445 50,253
*Supplementary information*
Interest paid (845 ) (524 ) (1,274 ) (974 )
Income taxes paid (2,523 ) (1,361 ) (6,708 ) (8,160 )