Covalon Technologies Ltd. (CVALF) research, news, and more from GeoInvesting

Company description

Mon, 13 Sep 2021 13:19:19 GMT

Covalon Technologies Ltd. researches, develops, manufactures, commercializes, and licenses medical technologies and products in the United States, Canada, the United Kingdom, Europe, the Middle East, Asia, Latin America, and internationally. The company has five proprietary platform technologies, including collagen matrix platform that is used to manufacture a family of products to treat chronic and infected wounds, including diabetic ulcers, pressure ulcers, venous ulcers, donor and graft sites, traumatic wounds healing by secondary intention, dehisced surgical wounds, and first and second degree burns; antimicrobial silicone adhesive platform that is used for family of pre and post-surgical, and vascular access products that are designed to kill bacteria or yeast that comes into contact with the antimicrobial silicone providing broad-spectrum antimicrobial activity; medical coating platform, a proprietary process that utilizes photo-polymerization to create active grafting sites where new polymer chains are initiated and propagated from the surface of an existing medical device; aquaguard moisture barrier technology, an impermeable moisture barrier that allows the clinician or patient to cover wounds, dressings, and intravenous sites to keep them dry; and covaguard antimicrobial sanitizing technology that incorporates Benzalkonium Chloride into a lipid delivery system to surfaces and skin to kill viruses and bacteria. Its products include wound care dressings; surgical and peri-operative products; infection management products; moisture barriers; and antimicrobial sanitizers under the Covalon brand name. The company sells its products through third-party distribution networks and company's direct sales force. It serves hospitals, wound care centers, burn centers, extended/alternate care and acute care facilities, home health care agencies, and physicians' offices. The company is headquartered in Mississauga, Canada.

Research

Thu, 27 Aug 2026 14:56:11 GMT

Covalon Technologies Ltd. (OTC:CVALF) (TSXV:COV) (C$2.29; C$63.2M market cap) announced Q3 2026 results:

Q3 sales of C$10.04 million vs. C$8.37 million in the prior year, ahead of analyst estimates of $9.45 million
Q3 2026 EPS: C$0.10 vs. C$0.00 in the prior year, ahead of analyst estimates of C$0.02
Gross margin expanded to 67.2% from 46.5% in the prior year.
Contamination Protection revenue increased 68% year-over-year and 34% sequentially.
U.S. Vascular Access and Surgical Consumables sales grew 51% year-over-year.
Management said hospitals are expanding Contamination Protection adoption across additional products, care units, and sites.
Management described its Contamination Protection hospital opportunity pipeline as robust in both quantity and opportunity size.

Management Commentary:

“Covalon’s third quarter of fiscal 2026 delivered outstanding results that clearly demonstrate the strong progress that Covalon has made in advancing our company, both strategically and financially. This quarter’s revenue, gross margin, and Adjusted EBITDA were each the highest recorded by the Company in any quarter during the last five fiscal years.”

“In a market growing at roughly 5%, Covalon’s US Vascular Access and Surgical Consumables sales channel grew 51%, ten times the underlying market growth rate. This growth was fueled by the rapidly increasing adoption of the Company’s Contamination Protection solution.

“Contamination at vascular access sites is an under-recognized problem with severe consequences. Bloodstream infections kill hundreds of thousands of people globally every year with significant costs to health systems estimated to be in the billions of dollars. Covalon understood the challenge of contamination, built products to help solve for it, and has advanced the Contamination Protection category around it. This pioneering work is now showing up at hospitals, at scientific meetings, and in Covalon’s financial results. Third quarter revenue for the solution grew 68% over the same quarter last year and 34% over the immediately preceding quarter. Hospitals that started with a single product in a single care unit at a single site are extending to additional product, units, and sites. Covalon’s pipeline of hospital opportunities for the Contamination Protection solution is robust both in quantity and in opportunity size.

“The growing awareness and importance of Contamination Protection is driving business development opportunities that would not have been available to Covalon a year or two ago. Covalon is now being recognized as a serious player in the medical technology space.

“Covalon has the financial foundation and the commercial momentum to execute on its aggressive growth strategy. We are still early, and the opportunity ahead of us is substantial. I remain confident in our ability to deliver for patients, for the clinicians who care for them, and for our shareholders.”

Our Quick Take:

Well, for the past couple years, we have been waiting for Covalon to validate why we added the stock to our Focus Model Portfolio on November 6,2024, as the new CEO executes a turnaround to expand markets, concentrate on higher margins products and win more revenue for current customers.

The Q3 results this morning were encouraging and could represent the beginning of the growth inflection we’ve been waiting for. Revenue increased 20% to a record C$10.0 million, finally breaking through the roughly C$8–9 million quarterly range the company has been stuck in, while EPS jumped to C$0.10. U.S.

Vascular Access revenue grew 51% and the newer Contamination Protection business grew 68%, two particularly important KPIs to watch. CEO Brent Ashton has done a good job stabilizing the business and getting it sustainably profitable, but my biggest concern has been his inability thus far to generate consistent revenue growth. Q3 is a meaningful step in the right direction, although one quarter doesn’t establish a trend.

We may have more information after digesting this morning’s earnings call. But here is what we have so far on “sustainability questions” coming live, from InfoArb.io’s NEW Live Earnings Call transcript summary feature.

CEO Comments:

“At this time, it's great to see the work that's progressing in all three of the sales channels, and very optimistic on the future. There was also a question around the collagen cycle, and this actually came up in a couple questions. If in this quarter did we receive any unusual orders? Where are we at in the cycle?

And so no. We operate our business on a consistent basis, quarter to quarter. When we win new accounts, for sure they are in the US business, for instance, in the US vascular business, for instance, they will take on products to support the first month or two of implementation.

And so we view that as a positive part of customer adoption. Per the comments on the accounts that grow, we're already seeing recurring orders from initial orders going into recurring monthly revenue.

And seeing continued reorder activity across the customer base. So the key metric for us is that conversion and how do we—it's kind of captured in that slide on the customer metrics, right?

How do we retain business? How do we grow existing customers? And how do we add new ones? Because we know that when we add new things, they fuel the growth.

So it’s a very sustainable business.”

“...and really, we've had operating expenses that have been more or less flat over the last, call it, last two and a half years. This is not a one-quarter trick or just a lucky quarter.

This is what happens when the work of the past few years starts to compound. We've got a lot of work ahead, and we're not taking a single thing for granted.

But I've been in this industry a long time, and I know what it looks like when the company moves from promise to proof. What I hope came through loud and clear today is that Covalon isn't just reporting a strong quarter.

We're building something much larger, and I'm really proud of what we've accomplished to date. I couldn't be more excited about our future prospects.”

Covalon Technologies Ltd. is a patient-driven medical device company that provides innovative and cost-effective healthcare solutions for advanced wound care, infection control, and medical device coatings.

Research

Wed, 25 Feb 2026 15:08:06 GMT

CVALF (TSXV:COV) (C$1.61; C$44.5M market cap) announced Q1 2026 results:

Q1 sales of $6.9 million vs. $8.1 million in the prior year, below analyst estimates of C$8.9 million
Q1 2026 EPS: $0.00 vs. $0.04 in the prior year, below analyst estimates of C$0.04

Management Commentary:

Brent Ashton, Covalon’s Chief Executive Officer’s commented, “Covalon’s first quarter of fiscal 2026 delivered results just above a breakeven, reflecting normal quarter-to-quarter variability in the timing of orders received and shipments fulfilled. Notably, sales and orders received in the first half of the second quarter, from January 1 to February 15, 2026 have already exceeded the total revenue reported for Q1 fiscal 2026. As a result, we are confident that we will remain on track for a strong Q2 and a strong fiscal 2026 overall.

Covalon’s recent clinical validations, accelerating sales wins and rapidly expanding industry recognition are also resulting in growing attention from both large and emerging companies, leading to numerous business development discussions that could result in significant opportunities such as strategic partnerships, mergers and acquisitions.

For all these reasons, along with many other initiatives currently underway within our organization, and coupled with Covalon’s strong balance sheet, with more than $17 million in cash and no debt, I continue to remain extremely excited about Covalon’s prospects.”

Our Quick Take:

Weak Q1 FY2026 results with sales of C$6.9M, representing a significant decline from Q4 2025 sales of C$8.7M and also down from Q1 2025 sales of C$8.1M, while profitability deteriorated sharply. Although management attributes the sales decline to quarterly variability in orders, they’ve been struggling to grow over the past four quarters.

Covalon continues to face challenges in accelerating sales and EPS; however, management stated that sales and orders received in the first half of Q2 FY2026 have already exceeded total Q1 2026 revenue, suggesting a potential near-term rebound.

Additionally, Covalon maintains a strong cash balance of approximately C$17M and no debt, which it could use for M&A.

Research

Thu, 11 Dec 2025 05:00:00 GMT

Covalon Technologies Ltd. (TSXV:COV) (OTC:CVALF) (C$1.97; C$54.4M market cap) announced Q4 2025 results:

Q4 revenue of C$8.69 million vs. C$8.87 million in the prior year, below analyst estimates of C$10.49 million
Q4 2025 EPS: C$0.01 vs. C$0.02 in the prior year, ahead of analyst estimates of -$C0.04
Full-year 2025 revenue: C$32.82 million vs. C$31.17 million in FY 2024, below analyst estimates of C$34.61 million
Full-year 2025 EPS: C$0.07 vs. C$0.11 in FY 2024, ahead of analyst estimates of C$0.01
Paid first-ever special cash dividend of C$0.15/share ( C$4.1M total)
Appointed Katie Martinovich as permanent CFO
Secured new US strategic partner for Advanced Wound Care channel (first order >$1M to be delivered in Q2 2026)
US Vascular Access and Surgical Consumables channel delivered record revenue in Q4, +50% YoY
International sales nearly doubled YoY in Q4 and grew 40% for the full year
Published peer-reviewed study showing significant CLABSI infection reduction using VALGuard®
Completed ISO 13485 surveillance audit with zero non-conformances

Management Commentary:

"Covalon has made significant progress as a company to close out our fiscal year 2025. We delivered our highest revenue quarter of the year in Q4 and are proud to see numerous growth-focused elements around commercial advancement, market development, innovation, and operations making an impact. We’re excited for these actions to accelerate growth even further in 2026 and beyond.

2025 has been a challenging year for most companies, although Covalon managed to do very well. With a new administration in place in the United States, where the vast majority of Covalon’s revenue is generated, there was a large amount of uncertainty around trade and other policy areas. Covalon navigated through this uncertainty successfully, growing global revenue by 5% to $32.8 million for FY’25 and incurring just 0.1% of our FY’25 revenue in tariff expense.

With our strong financial position, with revenue up more than 80% from FY’22, with $17 million in cash and no debt, and the continued success we’ve had in accelerating the adoption of our unique and impactful products, we were delighted to be able to pay Covalon’s first ever special dividend of $0.15 per share a few weeks ago.

As I head into my third year as CEO, I’m extremely proud of the advancements that we have made over the past few years and laser-focused on actions to accelerate growth and increase shareholder value in FY’26 and beyond."

Research

Fri, 21 Nov 2025 15:32:29 GMT

Yesterday, Covalon Technologies Ltd. (TSXV:COV) (OTC:CVALF) (C$1.90; C$52.5M market cap) announced the payment of a special dividend:

Declared and paid a special cash dividend of C$0.15 per common share on November 18, 2025
This is Covalon’s first-ever dividend, marking a milestone in the company’s financial turnaround
Record date for dividend eligibility was November 4, 2025

Management Commentary:

“This dividend marks an exciting new phase for Covalon,” said Brent Ashton, Chief Executive Officer of Covalon. “It is both a thank you to our loyal shareholders and a signal of the financial strength and stability we’ve worked hard to achieve. In the past three years, Covalon has increased revenue by 82% to $33.0 million, increased Gross Margins from 41% to 56% and flipped Adjusted EBITDA from -$7.8 million to +$4.1 million. Our incredible technologies are greatly improving patient care while also driving strong, sustainable financial results for our company, and this dividend is one way we’re sharing that success. Numerous advancements including our recent VALGuard® Line Guard clinical evidence study and our new CovaClear® indication are fueling accelerated growth which gives the Company a solid basis for continued strength of financial performance.”

Research

Tue, 21 Oct 2025 04:00:00 GMT

Covalon Technologies Ltd. (TSXV:COV) (OTC:CVALF) (C$2.08; C$57.0M market cap) announced a special dividend declaration:

Declared a special cash dividend of CAD $0.15 per share (CAD $4,112,711.55 in total), payable November 18, 2025 to shareholders of record as of November 4, 2025.

“Our company has been profitable for the last 6 quarters, resulting in a current cash balance of $18.9 million CAD and no debt. Covalon’s Board of Directors is of the view that the Company should reward shareholders by paying a special cash dividend as Covalon’s financial success has allowed it to aggregate a very strong cash position which is not necessary for the continued successful operation of the Company. The Covalon team is working hard to continue the success we are currently experiencing. The Board of Directors may or may not determine to pay additional special cash dividends to its shareholders in the future.” – Brent Ashton, Director and Chief Executive Officer

Research

Thu, 21 Aug 2025 18:16:41 GMT

Covalon Technologies Ltd. (TSXV:COV) (OTC:CVALF) ($2.88; $80.0M market cap) announced Q3 2025 results (all figures in Canadian dollars):

Q3 2025 sales: $8.37M vs. $9.22M in the prior year, below analyst estimates of $9.34M
Q3 2025 EPS: $0.00 vs. $0.06 in the prior year, below analyst estimates of $0.04
VALGuard® Line Guard clinical study results to be published in Fall 2025; highlighted at Association for Vascular Access and ANCC National Magnet Conference.
New use case for CovaClear IV® dressing presented at upcoming scientific meeting, opening new revenue opportunity.
Secured DTC eligibility in the U.S., making it easier for U.S. investors to trade Covalon shares.

Management Commentary:

“The Covalon team has made numerous advancements on our strategic priorities in the past few months. This solid progress is enabling customer wins, exciting new partnerships, and important market development activities that will drive increased use of Covalon’s life-saving products.

Our U.S. Vascular Access and Surgical Consumables sales channel delivered a record high quarter of revenue with fiscal year 2025 year to date revenue up by more than 35% vs. the prior year, driven by significant growth from Covalon’s VALGuard® Vascular Access Line Guard product. New clinical evidence studies will be presented to thousands of clinicians at upcoming key scientific meetings, and Covalon expects that this will drive a strong acceleration in adoption for several of our key products.

Our US Advanced Wound Care sales channel delivered sequential quarter-on-quarter (FY’25-Q3 vs FY’25-Q2) growth exceeding 40% and on a trailing twelve months basis (FY’24-Q4 through FY’25-Q3) is up more than 85% from the same period two years ago.

We also continue to have strong performance in our International sales channel, with year to date revenue up more than 35% compared to a year ago. Key business wins have taken place in the Middle East, Asia, and Latin America.

Covalon’s strategic accomplishments, combined with our solid balance sheet with over $18 million of cash and no debt, puts us in a strong position to accelerate the adoption of our products to benefit a larger patient population and to unlock the significant value we believe is inherent in our Company.”

Our Quick Take:

The company continues to struggle to gain momentum in sales and EPS since phase one of its turnaround stabilized the company’s operations to achieve current revenue levels and profitability. We still like the CEO and his vision for the company, but obviously we need to see some better traction soon. We would have liked the company to have provided an update on the company’s progress on exploring strategic opportunities in the press release, although the CEO did address it on the earnings call:

“Answer – Management: And yes, there's been a ton of progress, a lot of really exciting engagement. It's one of those processes that once we have something to announce, we will. But I would say it's been -- it's been very, a very encouraging process to date. And when there's an outcome that warrants advising on, we will do that .”

Earlier this week, I hosted a skull session with Mathieu Martin, founder of Rivermont Microcap Fund and Stocks and Stones Substack. During that conversation, he pitched Covalon as an idea to watch. You can watch that Pitch Clip here, where he talks about the company’s assets, alone, being higher than the current value of the company.

Research

Wed, 28 May 2025 15:23:21 GMT

Covalon Technologies Ltd. (TSXV:COV) (OTC:CVALF) ($2.80; $76.8M market cap) announced Q2 2025 results (all figures in Canadian dollars):

Q2 sales of $7.6 million vs. $8.4 million in the prior year
Q2 GAAP EPS of $0.02 vs. $0.06 in the prior year
5th consecutive quarter of profitability
Strong free cash flow generation of $0.6 million
$2.3 million in Q2 International sales, the highest in over 5 years
U.S. Vascular Access and Surgical Consumables revenue up 46% YTD
New distribution agreement with Paul Hartmann USA for advanced wound care productsNo tariff-related costs due to North American manufacturing strategy
Over $18 million in cash and no debt

"Brent Ashton, Covalon’s Chief Executive Officer, reported, “In the past few months, the Covalon team has delivered on several of our key priorities that have led to expanded sales with new and existing customers, new agreements with key strategic partners, and exciting new clinical evidence generation.

As stated last quarter, we fully anticipated our U.S. Advanced Wound Care sales channel to have a sequential quarter decline in Q2. This is not consequential, as we have a clear line of sight via in-house orders, forecasts and recent strategic partner sell out trends, to a strong Q3 and second half.

...I see a clear path for Covalon to become a major player in the lucrative healthcare spaces we operate in.”

Our Quick Take:

The Company continues to struggle with short-term challenges and inconsistent growth in its U.S. business. Regardless, management has alway been clear that growth will not be linear. We still believe the long-term growth plan is intact.

Research

Tue, 20 May 2025 20:30:36 GMT

Covalon Technologies Ltd. (TCOV.V) (OTC:CVALF) ($2.64; $72.2M market cap) announced it has retained Origin Merchant Partners as its financial and strategic advisor to evaluate shareholder value-enhancing opportunities:

"Our primary objectives are to accelerate the adoption of our products to benefit a larger patient population and to unlock the significant value we believe is inherent in our Company," said Amir Boloor, Executive Chair of Covalon.
"We believe Covalon is undervalued — trading at a mid-single-digit Adjusted EBITDA multiple compared to med-tech peers in Canada and the U.S., which typically trade at significantly higher multiples. This is despite the fact that we are making long-term investments and are not focused on near-term EBITDA optimization."

Mr. Boloor also stated that "the Company’s Advanced Wound Care segment, led by its collagen dressings, has grown more than 4x in the U.S. market over the past four years and contributed more than $10 million in Adjusted EBITDA on a standalone basis in our most recent fiscal year. We believe that we still have a runway to improve margins and profitability and to grow this business over a multi-year time horizon through market share expansion and the launch of new products."

"Our Vascular Access and Surgical Consumables segment—representing a smaller, but growing portion of our overall revenue today—has grown at a compound annual rate of over 50% in the U.S. market over the past three fiscal years, attracting some of the largest and most prestigious hospitals in the United States. This growth reflects the strong clinical value and differentiation of our products."

Key highlights:

Retained Origin Merchant Partners as financial and strategic advisor.
Exploring a wide range of strategic alternatives, including:
- Joint ventures, partnerships, and acquisitions.
- Mergers or mergers of equals.
- In-licensing/out-licensing of products and IP.
- Potential NASDAQ listing.
- Stock buybacks using $18 million in net cash.
- Potential spinoffs of Advanced Wound Care and Vascular Access segments.
No assurance that any specific transaction will occur.
No further updates will be provided unless required.

Research

Fri, 21 Feb 2025 14:59:48 GMT

Covalon Technologies Ltd. (TSXV:COV) (OTC:CVALF) ($2.49; $49.8M market cap) reported Q1 2025 results: (financial in CAD)

Sales of $8.1 million vs $4.6 million in the prior year
EPS of $0.04 vs a loss of $0.03

“While we are reporting exceptional year-over-year growth of more than 75%, we did experience a slight sequential slowdown in our US Collagen business due to some normalization in our channel inventory. We expect this slowdown to reverse in the second half of fiscal 2025, supported by ongoing conversations and forecasts received from our customers. Additionally, we are very pleased with the performance of our US Vascular Access and Surgical Consumables business, which grew more than 20% sequentially over the previous quarter.”

Going forward, we'll be watching two key factors: how quickly the company can reverse its recent sequential revenue decline in the last couple of quarters, and whether there's room to further improve its already healthy gross margins. The company's highest revenue mark of $9.2 million was achieved in Q3 2024.

Covalon is a patient-driven medical device company that provides innovative and cost-effective healthcare solutions for advanced wound care, infection control, and medical device coatings.

Research

Mon, 03 Feb 2025 17:04:58 GMT

Covalon Technologies Ltd. (TSXV:COV) (OTC:CVALF) ($2.06; $56.7M market cap) released a statement on the U.S / Canada trade dispute. There are two main takeaways from the release that seem to have the potential to offset possible negative impacts on any trade war:

“Covalon has manufacturing and commercial operations on both sides of the Canada – United States border. Depending on the specific regulations that will in due course be published, Covalon has the flexibility to adjust manufacturing processes and locations that could mitigate negative financial implications to the Company.

“Almost all of Covalon’s revenues are in US Dollars, and the majority of its costs are in Canadian dollars. There has been, and will likely continue to be, foreign exchange benefit to the company. The current exchange rate of 1.45 in Canadian Dollars to the US Dollar compares with the exchange rate a year ago of 1.35.”

In our 11/6/2024 Open Forum, we added the stock as a Focus Stock of the Month, not too long after having had the chance to speak with management for the first time, in a September 2024 Fireside.

Covalon is a patient-driven medical device company that provides innovative and cost-effective healthcare solutions for advanced wound care, infection control, and medical device coatings

Research

Tue, 07 Jan 2025 21:07:50 GMT

Covalon Technologies Ltd. (TSXV:COV) (OTC:CVALF) ($2.49; $49.8M market cap) reported Q4 and full year 2024 results: (financial in CAD)

Q4 Sales of $8.9 million vs $6.5 million in the prior year
Q4 EPS of $0.02 vs a loss of $0.12
Full year sales of $31.0 million vs $23.9 million in the prior year
Full year EPS of $0.11 vs a loss of $0.18 in the prior year

“We delivered very strong revenue growth coupled with margin improvements, robust earnings, and positive free cash flow. Our Medical Consumables revenue increased 35% for Q4 and 30% for the full 2024 fiscal year,” said Brent Ashton, Covalon’s Chief Executive Officer. “As I reflect on my first 12 months at Covalon, I am incredibly proud of our team's efforts to drive these results in a year of significant change and challenges. We remain focused on delivering strong value to patients and the clinicians who serve them by enhancing our product offerings and supporting exceptional care. The team and I are excited to continue our growth journey and make an even greater impact in 2025 and beyond.”.

The company’s 2024 fourth-quarter earnings-per-share was sequentially down from their breakout to profitability over the last 2 quarters, when the company reported EPS of $0.06 on sales of $8 to $9 million.

The higher sequential operating expenses of $700k, accounted for the sequential drop in EPS.

The one caveat we had mentioned in our October 27, 2024 report—and one that management has been very open about—is that quarter to quarter financial comparisons will not be linear, and the stock is most suited for longer term investors. So we’re not overly surprised by the Q4 results. We noticed that last year’s fourth-quarter also saw a $1.5 million sequential rise in operating expenses from the third-quarter. So, it’s possible that this is just a normal year-end seasonal pattern.

We were on the live conference call to get more details on the operating expense outlook.

While we did not specifically get to ask the question ourselves, someone else asked a similar question. It seems the large sequential increase in operating expenses was mainly due to bonuses and consulting fees. Management did state that moving forward they will expense the bonuses quarterly rather than all in Q4, like they did this year. While GeoInvesting does not issue buy and sell recommendations, we would view pullbacks as buying opportunities for long-term multibagger microcap investors.

Covalon is a patient-driven medical device company that provides innovative and cost-effective healthcare solutions for advanced wound care, infection control, and medical device coatings

Research

Wed, 21 Aug 2024 13:16:25 GMT

Covalon Technologies Ltd. (COV).V (OTC:CVALF) ($2.02; $49.8M market cap) reported Q3 2024 results: (financial in CAD)

Sales of $9.2 million vs $6.0 million in the prior year
EPS of $0.06 vs a loss of $0.02 .

“We delivered a very successful Q3 – solid performance on growth, margins and operating expenses all led to another strong quarter of profitability,” said Brent Ashton, Covalon’s Chief Executive Officer. “Our results clearly demonstrate the progress that the One Covalon team is making against our key priorities, and that the foundational work to strengthen Covalon is delivering value to our customers, stakeholders, and investors.”

We were on the conference call, and while management did not provide any specific guidance, the tone suggested that Q4 should continue the growth pattern seen in the last several quarters. After a string of quarterly losses, this marks the second consecutive quarter of strong profitability, as a new CEO’s plan to focus on the company’s highest growth and margin areas of the business seems to be inflecting. We are in the process of scheduling a Fireside Chat Skull Session with the CEO.

Covalon is a patient-driven medical device company that provides innovative and cost-effective healthcare solutions for advanced wound care, infection control, and medical device coatings.

Research

Mon, 13 Sep 2021 13:20:14 GMT

Covalon Technologies Ltd. (OTC:CVALF) ($2.15; $57.7M market cap) is a researcher, developer, manufacturer, and marketer of patent-protected medical products that improve patient outcomes and save lives in the areas of advanced wound care, infection management and surgical procedures.

Strong Q3 2021 results and comments have CVALF on our radar:

Sales of $8.8 million vs $6.7 million in the prior year
EPS of $0.04 vs $0.01 in the prior year

Press release comments:

“With the recently completed sale of our AquaGuard product line, we are debt free with over $24 million of cash (approximately $0.93 per share) on our balance sheet. We are positioned extremely well to further accelerate the growth of our biological collagen and antimicrobial products that have been contributing to revenue growth this fiscal year.

Covalon is a different company than we were a few short months ago – we have a significantly improved balance sheet, we have posted strong earnings year-to-date, and we have many more levers at our disposal to fuel further growth.

Our core business of collagen and antimicrobial silicone adhesive dressings continues to experience growth in the United States and internationally. We are seeing increases in orders placed by our distribution partners and have more visibility into forecasted orders over the next twelve months.”

Additional Bullish Comments From Conference call:

“We are positioned extremely well to further accelerate the growth of our biological collagen and our antimicrobial products that have been contributing to our revenue growth this fiscal year. Our core business of collagen and antimicrobial silicone adhesive dressings continues to experience growth in the United States and internationally. We are seeing increases in orders placed by our distribution partners and we have more visibility into forecasted orders over the next 12 months than we have in any point in our history.

I’m very excited about the future revenue potential of these new projects as well as the various projects currently underway with the previously announced major contract with one of the world’s largest medical device companies.

Management’s comments on recent product sale and value of remaining assets:

I’m very excited about the future revenue potential of these new projects as well as the various projects currently underway with the previously announced major contract with one of the world’s largest medical device companies.

We sold AquaGuard. It was a non-core product line supported by very little intellectual property, and we sold it for about $38 million. We still have our three platform technologies: our biological collagen, our antimicrobial silicone technology, and our medical coatings which are supported by very strong patents and intellectual property.

Now, I want to make it clear that the value of these highly advanced technology platforms have yet, in my opinion, to be fully reflected in the value of Covalon. I believe that each of these platforms has much more value individually than our non-core AquaGuard product line that we sold for $38 million. By combining the value of our $24 million of cash, our clean balance sheet, and the potential of our three, highly sought after product and technology platforms, it is clear to me that Covalon will generate significantly more value for our shareholders over the coming quarters.”

We encourage you to read the full conference call transcript. Management believes it will be able to maintain profitability moving forward. While we have been unsuccessful in our early attempts to speak with management, we plan to continue to try and secure an interview.

It is unclear how much revenue the AquaGuard product line accounted for. When the company acquired it in 2017, revenues were about $11 million. There is still a lot to learn about the remaining products and what phases they are in of their respective growth outlook cycles. It also should be noted that it seems revenues can be lumpy on a quarter to quarter basis.

While we are very early in our due diligence process, the company is very intriguing at first glance.