29-05-2025
Covalon Technologies Ltd (CVALF) Q2 2025 Earnings Call Highlights: Strong Revenue Growth and ...
Revenue Growth: Strong revenue growth relative to prior periods, with sequential quarterly growth expected in Q3 and the second half of the year.
Vascular Access and Surgical Consumables Sales Growth: More than 40% year-to-date growth over last year.
Gross Margin: Performance in the 55% to 60% range, slightly lower in Q2 due to geographic revenue mix.
Profitability: Positive adjusted EBIT in Q2, marking the fifth consecutive quarter of profitability.
Cash Position: Over $18 million in cash on hand, an increase of about $11 million from a year ago.
US Product Revenue Growth: Over 30% growth in the US product revenue category over three years.
Top 50 US Hospital Customers: 100% retention and 38% revenue growth from the same group of top 50 hospitals from 2024.
New Hospital Accounts: Added 29 new hospital accounts in Q2, totaling 50 new hospitals in the first half of the year.
Warning! GuruFocus has detected 6 Warning Signs with BMO.
Release Date: May 28, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Covalon Technologies Ltd (CVALF) reported strong revenue growth in its vascular access and surgical consumables and international sales channels, with both up more than 40% year-to-date compared to last year.
The company has maintained a disciplined approach to spending, achieving its fifth consecutive quarter of profitability with positive adjusted EBIT.
Covalon Technologies Ltd (CVALF) has a robust cash position with over $18 million in cash and zero debt, providing significant flexibility for growth and shareholder value initiatives.
The company has successfully retained 100% of its top 50 US hospital customers, demonstrating the stickiness of its business and the quality of its products.
Covalon Technologies Ltd (CVALF) has engaged Origin Merchant Partners to explore opportunities for mergers, acquisitions, and partnerships to maximize shareholder value and expand the reach of its technology.
The company's gross margin was slightly lower this quarter due to a higher geographic mix of revenue from its international sales channel, which has a lower gross margin than the US sales channels.
Covalon Technologies Ltd (CVALF) experienced a softer quarter in its US Advanced wound care sales channel, impacting overall revenue growth.
The company has not yet executed a share buyback program, despite discussions with the board and Origin Merchant Partners.
Covalon Technologies Ltd (CVALF) does not currently provide quarterly guidance, citing the stage of the company and the predictability of its revenue.
The company's adjusted EBITDA for the trailing 12 months has decreased, attributed to the softer performance in the US Advanced wound care channel.
Q: Given the company's $18 million cash position and low valuation, is there a plan for share buybacks? A: Brent Ashton, CEO: Our cash position provides flexibility for growth and shareholder value initiatives, including potential share buybacks. This is under discussion with our board and Origin, but no action has been taken yet.
Q: When will Covalon provide quarterly guidance, considering the goal of doubling the share price annually for five years? A: Brent Ashton, CEO: We are confident in our growth potential but are not issuing guidance due to the current stage of our company and revenue predictability.
Q: What caused the erosion in gross profit as a percentage of sales? A: Brent Ashton, CEO: The shift in revenue mix, with a higher percentage from our international business, which has lower gross margins, affected the overall gross profit. We expect margins to rebound.
Q: Can you explain the drop in adjusted EBITDA for the trailing 12 months? A: Brent Ashton, CEO: The drop is due to a softer quarter in the US Advanced wound care channel. We anticipate sequential quarterly growth in Q3 and a stronger second half of the year.
Q: What is the future outlook for the international sales channel, and will US sales channel growth improve gross margins? A: Brent Ashton, CEO: We expect gross margins to improve as US sales pick up. The international sales channel is a strong growth driver, and we are expanding product offerings and entering new countries.
Q: What is Covalon's M&A strategy, and are there specific geographic focuses? A: Brent Ashton, CEO: We are actively exploring opportunities with Origin, focusing on North America but open to global prospects. Specific targets are not disclosed due to the ongoing process.
Q: How many US sales reps does Covalon have, and what are the future plans? A: Brent Ashton, CEO: We have one open position for the West Coast and will continue to refine our model responsibly to support growth without inflating costs.
Q: How does EBITDA margin on international sales compare to the US? A: Brent Ashton, CEO: We report EBITDA at the company level. International gross margins are lower than US margins, but the selling model differs, affecting the EBITDA profile.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
