Covalon Reports Fourth Straight Quarter of Revenue Growth and Positive Earnings
Covalon Technologies Ltd. (TSXV: COV; OTCQX: CVALF), an advanced medical technologies company, today announced its financial results for the first quarter of fiscal 2025, ending December 31, 2024, alongside several key achievements and milestones. The company reported strong revenue growth, driven by the success of its U.S. Medical Consumables business, which remains the primary focus of the company’s operations.
Key Highlights: Brent Ashton, Covalon’s Chief Executive Officer, expressed satisfaction with the company’s performance: “Covalon achieved strong revenue growth, driven by the success of our U.S. Medical Consumables business, which continues to be our primary focus. This growth led to significant increases in gross profit and earnings compared to the previous year.”
The company reported an impressive 75% year-over-year revenue increase. Additionally, Covalon’s Adjusted EBITDA for the trailing twelve months ending December 31, 2024, stood at $7.6 million, compared to an Adjusted EBITDA loss of $4.0 million for the same period in 2023. Although there was a slight slowdown in the U.S. Collagen business due to inventory normalization, Covalon expects this trend to reverse in the second half of fiscal 2025, backed by ongoing customer discussions and positive forecasts.
Covalon’s U.S. Vascular Access and Surgical Consumables business also saw a notable sequential growth of more than 20% compared to the previous quarter. This performance underscores the company’s robust strategy in expanding its product portfolio and strengthening customer relationships in the healthcare sector.
Fiscal 2025 First Quarter Financial Overview:
- Revenue Growth: Total revenue increased 75% to $8.17 million, compared to $4.66 million in the same period in the prior year. Product revenue, which accounted for the majority of total sales, grew by 77% to $8.08 million.
- Gross Profit: The company reported a gross profit of $5.0 million, reflecting a gross margin of 61.2%, a 75% increase from the previous year.
- Adjusted EBITDA: The company posted an Adjusted EBITDA of $1.6 million, a $2.8 million improvement compared to the same period in fiscal 2024.
- Earnings per Share: Covalon achieved earnings per share of $0.04, an increase of $0.07 compared to the prior year, reflecting strong financial performance.
Recent Achievements and Strategic Developments:
Covalon has made significant progress in its product development and market presence:
- TSX Ventures Top 50 Recognition: Covalon was recognized as a 2025 TSX Ventures Top 50 Company and a 2025 OTCQX Best 50 Company, highlighting the company’s impressive performance.
- Patent Milestone: The company secured a new patent for its flagship product, the VALGuard® Line Guard, reinforcing its position as a leader in vascular access solutions.
- Revenue Growth from Top Customers: Covalon achieved 39% year-over-year revenue growth from its top 50 customers in the U.S. Vascular Access and Surgical Consumables business. Additionally, 21 new hospital customers were added to the company’s portfolio.
- Strategic Approvals: Covalon received confirmation that its VALGuard® Line Guard product line was approved for system-wide use by one of the top 5 Integrated Delivery Networks (IDNs) in the United States, a major milestone for the company.
Q1 Financial Breakdown:
Covalon’s total product revenue reached $8.08 million, a substantial increase from $4.58 million in Q1 2024. The growth was driven by heightened customer demand for the company’s collagen dressing products, along with a broader expansion of its product offerings within U.S. hospitals.
Revenue from development and consulting services was $5,826, a significant decline from $56,640 during the same period last year, as Covalon continued to prioritize its U.S. Medical Consumables business. Licensing and royalty fees increased to $82,214, up from $30,650, reflecting the timing of various customer projects.
The gross margin remained robust at 61%, consistent with the previous year. The company recorded a small inventory provision release of $114,645 due to revised obsolescence estimates, compared to a higher provision release in Q1 2023.
Operating Expenses and Profitability:
Covalon achieved a 15% reduction in total operating expenses, which amounted to $3.68 million, compared to $4.32 million in Q1 2024. This reduction was largely due to the restructuring of the sales and marketing teams completed in the previous fiscal year.
The company’s operations expenses decreased to $371,069, down from $630,713 in Q1 2024. Research and development expenses increased slightly to $373,339, reflecting higher patent and trademark costs. Sales and marketing expenses decreased by 27%, attributed to the prior restructuring efforts.
Covalon’s net income for Q1 2025 was $1.21 million, compared to a net loss of $851,543 in the same period last year. The company also reported a total comprehensive income of $3.06 million, a significant turnaround from a loss of $1.24 million in Q1 2024.
