Velan Inc. SV ((TSE:VLN)) has held its Q2 earnings call. Read on for the main highlights of the call.
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In Velan Inc. SV’s recent earnings call, the sentiment was a mix of optimism and caution. The company showcased significant strategic progress, particularly in the nuclear sector, and celebrated the successful launch of operations in Saudi Arabia. However, these achievements were overshadowed by financial setbacks, including rescheduled deliveries, tariffs, and a decrease in gross profit, which collectively led to increased net losses.
Saudi Arabia Plant Milestone
Velan Inc. SV marked a significant milestone with the delivery of the first order from its newly established manufacturing plant in Saudi Arabia. This plant, part of a joint venture, targets the largest market for oilfield valves globally. The plant’s pipeline is robust, with a backlog already exceeding USD 500,000, indicating promising future prospects.
Strong Nuclear Industry Position
The company has solidified its position in the nuclear sector by securing substantial contracts, including a notable project for reactor cooling valves in Ontario, valued at over $15 million. Velan’s role as a key supplier for GE Hitachi’s SMR project at Darlington further cements its leadership in nuclear energy.
Order Backlog Growth
Velan reported an order backlog growth to $285.8 million, marking a 4% increase from the beginning of the year. Impressively, 88.3% of this backlog is expected to be deliverable within the next 12 months, showcasing the company’s strong pipeline and future revenue potential.
Rescheduled Deliveries Impact Revenue
The company’s sales fell to $67.6 million, a 13% decrease from the previous year. This decline was primarily due to rescheduled deliveries totaling over $12 million and the impact of tariffs on purchasing decisions, which have affected revenue streams.
Decrease in Gross Profit
Gross profit experienced a decline, dropping to $15.7 million from $20 million the previous year. This decrease was largely attributed to lower sales volumes and a less favorable product mix, compounded by the adverse effects of tariffs.
Net Loss Increase
Velan’s net loss increased to $1.7 million, compared to a net loss of $1.2 million last year. The adjusted net loss was $1.2 million, contrasting with an adjusted net income of $2.8 million a year ago, highlighting the financial challenges faced by the company.
Forward-Looking Guidance
Despite the financial hurdles, Velan Inc. remains optimistic about its future. The company reported an adjusted EBITDA of $3.4 million and operating income of $400,000 on sales of $67.6 million. While bookings were down from the previous year, early third-quarter order intake showed signs of recovery. With a strong cash position and a $35 million credit facility, Velan is poised to capitalize on growth opportunities in the nuclear and clean energy sectors, exploring capital structure options to support its strategic goals.
In summary, Velan Inc. SV’s earnings call reflected a company navigating through financial challenges while making strategic strides in key sectors. The sentiment was cautiously optimistic, with significant achievements in the nuclear industry and the successful launch of operations in Saudi Arabia. However, financial performance was hindered by external factors, leading to increased net losses. Looking ahead, Velan remains committed to leveraging its strong market position and exploring growth opportunities in emerging sectors.