The Valens Company Inc. (TSX: VLNS) (Nasdaq: VLNS) (the “Company” “The Valens Company” or “Valens”), a leading manufacturer of cannabis products, is pleased to announce integration initiatives aimed at driving revenue growth and market share gains for each of its portfolio brands in their target markets, as well as margin improvement through more efficient operations, reduced operational and organizational costs and realization of M&A-related synergies following an acquisitive 2021.
As Valens now enters the ‘Grow & Optimize’ phases of its ‘Launch, Grow, Optimize’ strategy, the Company will be focusing on four key pillars:
- Driving revenue growth with a focus on Canadian recreational and U.S. health and wellness markets
- Capturing market share across its brand portfolio in product categories of focus that include flower, vape, pre-roll, edible, and beverage offerings in the premium, accessible premium, and value segments
- Seeking to generate increased gross margins and positive EBITDA margins through revenue growth and cost reduction and efficiency initiatives aimed at keeping operations flexible and innovative
- Creating shareholder value through operational performance, financial transparency, and increased trading liquidity
“It’s a pivotal time for Valens after a very acquisitive 2021 that saw us accelerate our business plan from three years to one and create a leading cannabis consumer products company with an exciting portfolio of brands,” said Tyler Robson, Chief Executive Officer and Chairman of The Valens Company. “As we redirect our focus to realizing the full package of targeted benefits from these acquisitions, we are now capturing the first wave of synergies through operational and organizational changes that we believe will not only improve our efficiencies but also drive the business towards becoming EBITDA positive in fiscal Q4 2022, which will be discussed in greater detail on our upcoming investor day. I’m proud to say that we have identified $10 million in annual cost efficiencies and expect to identify an additional $10 million in the coming quarters through additional planned initiatives. Investors can expect to start to see some of the benefits of the first wave of efficiencies in fiscal Q2 2022, with the majority of the impact being realized in the second half of the fiscal year.”
Valens’ first $10 million in annual cost efficiencies are expected to come from the following areas:
- Operational Efficiencies: Valens has eliminated overlapping functions and centralized some shared services across different business segments.
- Portfolio Rationalization: Elimination of both underperforming product SKUs and those that were not aligned with our go-forward strategy, as well as the realignment of certain brand offerings to better address consumer demand opportunities.
- Automation: Initiatives in this category include the commissioning of Pommies and the implementation of automated edible equipment, packaging lines and pre-roll machines. Additional automation is expected to come on-line over the next few months.
- Contract Grow: Valens has made significant advances in its biomass sourcing strategy by leveraging its existing relationships and buying power as the largest purchaser of biomass in the country.
“Although we have only just begun to experience the targeted revenue growth from our ‘Launch, Grow, and Optimize’ strategy, we are already pursuing optimization initiatives to ensure we remain operationally agile, competitively positioned in the market, and best able to deal with ongoing logistical and inflationary challenges that are being amplified by an ongoing and drastic industry recalibration,” said Jeff Fallows, President of The Valens Company. “By the end of 2022, we expect to realize additional annual cost efficiencies of $10 million through the continued optimization of internal processes, right-sizing of our cost structure and the realization of further synergies from our recent acquisitions. Incremental to the $20 million of cost efficiencies, efforts to monetize surplus or unnecessary assets and tighter working capital management is anticipated to generate an additional $5 to $10 million in cash over the coming quarters.”
Robson concluded, “We remain focused on our strategic vision for Valens – to bring the benefits of cannabis to the world. I want to thank our entire organization for the dedication and tireless work directed at creating a platform that is second to none in the market. We would like to invite our investors and interested potential investors to our virtual investor day, which is scheduled for February 7, 2022, where we will provide many more details and insights into our 2022 operational plan. Through the implementation of our strategic initiatives, we are developing a roadmap for Valens in its next phase of growth, while always remaining focused on the needs of consumers. The actions we are announcing today will better align our organizational structure with our evolving business and best position The Valens Company to drive shareholder value in 2022 and beyond.”
