Velan Inc. said first-quarter sales fell nearly 20% from a year earlier, while bookings dropped more sharply and adjusted EBITDA turned negative, as geopolitical and regional conflicts disrupted customer activity and shipment timing. The valve maker reported CAD 57.8 million in revenue for the quarter ended May 31, 2026, down from CAD 72.2 million a year earlier, with order bookings of CAD 48 million versus CAD 78.2 million in the prior-year period. The stock was unchanged at $16.2, near the middle of its 52-week range of $13.61 to $19.5. With a market capitalization of $226 million and a beta of 1.35, the stock shows moderate volatility relative to the broader market. According to InvestingPro analysis, Velan appears undervalued at current levels, placing it among companies on the platform’s Most Undervalued list.
Key Takeaways
- Revenue fell 19.9% year over year, reflecting weaker customer activity and delayed shipments.
- Bookings dropped 38.6%, with management pointing to geopolitical and regional conflict-related disruptions.
- Gross profit declined to CAD 11.4 million, or 19.6% of sales, from CAD 20.6 million, or 28.6%, a year earlier.
- Adjusted EBITDA swung to a loss of CAD 2.1 million from a gain of CAD 3.8 million.
- Velan ended the quarter with CAD 275.1 million in backlog and later secured a new CAD 80 million credit facility.
Company Performance
Velan’s first quarter was marked by weaker demand and uneven shipment timing across its core markets. Management said the results were affected by external factors, including geopolitical tensions and regional conflicts that reduced customer activity, delayed orders and disrupted delivery schedules.
North America remained the company’s largest market, accounting for 57% of sales. Asia-Pacific contributed 21%, while Africa and the Middle East made up 16%. The company said bookings were especially constrained in North American maintenance, repair and operations activity, while refinery shutdown and maintenance work in the Middle East also slowed.
Even so, management emphasized that the business is shifting toward longer-duration contracts, especially in nuclear and defense. That change, if sustained, could improve backlog visibility and support more stable revenue over time.
Financial Highlights
- Revenue: CAD 57.8 million, down 19.9% from CAD 72.2 million a year earlier.
- Order bookings: CAD 48 million, down 38.6% from CAD 78.2 million.
- Backlog: CAD 275.1 million as of May 31, 2026, slightly below the prior quarter.
- Gross profit: CAD 11.4 million, down 44.7% from CAD 20.6 million.
- Gross margin: 19.6%, down from 28.6% a year earlier.
- Adjusted gross profit: about 22% of sales, excluding a provision adjustment.
- Administration costs: CAD 15.7 million, down 14.2% from CAD 18.3 million.
- Adjusted EBITDA: negative CAD 2.1 million, versus positive CAD 3.8 million a year earlier.
- Adjusted net loss: CAD 6.9 million, compared with adjusted net income of CAD 0.1 million.
- Cash and cash equivalents: CAD 34.6 million, with long-term debt of CAD 16.8 million and bank indebtedness of CAD 17.6 million.
- Current ratio: 5.21, indicating strong short-term liquidity coverage.
- Debt-to-equity ratio: 0.08, reflecting minimal leverage on the balance sheet.
Earnings vs. Forecast
No EPS or revenue forecast-versus-actual comparison was provided for the quarter, so a formal surprise calculation is not available.
Still, the reported figures show a softer quarter by most operating measures. Revenue fell nearly one-fifth, bookings declined more than one-third, and adjusted EBITDA moved from a profit to a loss. Gross margin also narrowed sharply, indicating that lower volume reduced the company’s ability to absorb fixed production costs.
The decline was large enough to stand out even for a company with a history of uneven quarterly results. Management said the weakness was largely tied to external disruptions rather than a change in the underlying business mix.
Market Reaction
Velan shares were flat at $16.2, unchanged from the previous close. The lack of movement suggests investors took a wait-and-see approach after a quarter that mixed weaker operating results with a stronger liquidity position and a sizable backlog.
At the current price, the stock trades about 18.9% above its 52-week low of $13.61 and about 16.9% below its 52-week high of $19.5. That places the shares in the middle of their recent range, suggesting the market has not yet assigned a clear direction after the report.
The muted reaction may also reflect the absence of a sharp surprise in either direction. The quarter was clearly weaker than a year earlier, but management also outlined steps that could support future performance, including a new credit facility and a transformation plan.
Outlook & Guidance
Management said near-term conditions remain “dynamic,” but it sees a favorable long-term backdrop in nuclear power, defense and oil and gas maintenance.
Key points in the outlook include:
- Backlog of CAD 275.1 million, with about 70% expected to be delivered over the next 12 months.
- Deferred shipments from the quarter are expected to be recaptured by the end of the fiscal year.
- Several funded projects are moving through engineering and procurement, with a meaningful portion expected to convert into bookings soon.
- Revenue from those projects is expected to begin within the next 24 months.
- The company expects to benefit from nuclear refurbishment, small modular reactor programs, naval modernization and deferred maintenance demand.
Velan also said it secured a new five-year CAD 80 million revolving credit facility after the quarter ended. Management said the facility strengthens liquidity and lowers the cost of capital. An InvestingPro tip notes that the company holds more cash than debt on its balance sheet, though it is quickly burning through cash. Analysts tracking the stock have set price targets ranging from $4 to $5, suggesting significant upside potential from current levels. For deeper insights, investors can access Velan’s comprehensive Pro Research Report, one of 1,400+ available on InvestingPro, which transforms complex data into actionable intelligence.
Executive Commentary
Rishi Sharma, Velan’s president and chief executive, said the company’s recent changes were aimed at creating a more durable business. “The past couple of years have been highly active for Velan,” he said, noting initiatives to unlock shareholder value, reduce risk and position the company for sustainable growth.
He also said the weak quarter was driven mainly by outside forces. “While results were below last year, it is important to note that most of the factors impacting our performance were external in nature,” Sharma said, citing geopolitical and regional conflicts.
On the company’s long-term prospects, Sharma said nuclear power remains a major growth driver. He pointed to Velan’s more than 55 years of nuclear experience, its role in the GE Hitachi small modular reactor program and its preferred supplier status in the CANDU ecosystem.
Chief Financial Officer Imran Gibbons said the lower gross profit reflected weaker volume and a larger provision. He also highlighted the new credit facility, saying it increases available liquidity and reduces borrowing costs.
Risks and Challenges
- Geopolitical disruption: Conflicts in several regions are affecting order timing, shipments and customer spending.
- Margin pressure: Lower volume is reducing absorption of fixed production costs, which can squeeze profitability.
- Working capital strain: Cash used in operations rose as accounts payable, accrued liabilities and customer deposits fell.
- Booking volatility: A sharp drop in bookings could pressure future revenue if order intake does not recover.
- Execution risk: The company is relying on a transformation plan that will require sustained operational improvement.
Q&A
No analyst questions were taken during the call. The operator said there were no questions at the time the Q&A session opened, and the call moved directly to closing remarks.
That left management’s prepared comments as the main source of detail on the quarter and the outlook. The absence of questions may reflect limited analyst participation or a relatively straightforward earnings presentation.
Full transcript – Velan Inc. (VLN) Q1 2027:
Operator: Good morning, ladies and gentlemen, and welcome to the Velan Inc. Q1 Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Please turn your attention to the disclaimer from Velan’s related IR presentation, which is available on its website in the investor relations section. The first paragraph mentions that the presentation provides analysis of Velan’s consolidated results for the first quarter ended May 31st, 2026, which the board of directors of the company approved yesterday, July 9th, 2026. The second paragraph refers to non-IFRS and supplementary financial measures, which are defined and reconciled at the end of the presentation.
The last paragraph addresses forward-looking information, which is subject to risks and uncertainties that are not guaranteed to occur. Forward-looking statements contained in this presentation are expressly qualified by this cautionary statement. Finally, unless indicated otherwise, all amounts are expressed in US dollars. This call is being recorded on Friday, July 10th, 2026. I now turn the conference over to Rishi Sharma, President and Chief Executive Officer. Please go ahead.
Rishi Sharma, President and Chief Executive Officer, Velan Inc.: Thank you, operator. Good morning. Bonjour. I’m here with Imran Gibbons, Chief Financial Officer of Velan. Thank you for joining us for our conference call, and I invite you to turn to slide 3 of the presentation. The past couple of years have been highly active for Velan, as we undertook numerous initiatives to unlock shareholder value, reduce our risk profile, and position the company for sustainable growth. These efforts culminated in an important milestone with last month’s closing of Birch Hill’s acquisition of Velan Holdings’ majority interest. With this transaction now completed, we are entering a new chapter in our history from a position of strength. Backed by a strong balance sheet, a solid brand reputation, product quality, and expertise in critical applications, we are well-positioned to strengthen our leadership across the markets we serve. Please turn to slide 4.
Before discussing our results, I would like to sincerely thank Jim Enebak, the board of directors, and our shareholders for their confidence and support during this leadership transition. I am honored to lead Velan as we begin this next chapter in the company’s history. I would also like to recognize Jim for his leadership and contributions to Velan. His support and guidance have been invaluable, and I am pleased that we will continue to benefit from his experience as a member of our board. The board has welcomed Patrick Duncan, partner at Birch Hill, as Chair, along with Joshua Lundy and Shauna Gamble. The three current directors will continue to serve as independent board members, including Daniel Desjardins, who has been appointed Lead Director. The board now consists of 7 directors, 4 of whom are independent.
I would also like to thank Ivan, Peter, Rob, and Tom Velan for their long-standing service and contributions to the company, helping build up its 75-year legacy. I would also like to congratulate Imran Gibbons on his promotion to Chief Financial Officer. Imran has played an important role in strengthening our financial discipline and strategic planning capabilities. I look forward to working closely with him as we execute on our priorities. Turning to the quarter on slide five. While results were below last year, it is important to note that most of the factors impacting our performance were external in nature, primarily relating to geopolitical and regional conflicts and its effect on our customer activity, order timing, and shipment schedules. Bookings totaled CAD 48 million and sales were CAD 57.8 million, while our backlog remains solid at CAD 275 million, with approximately 70% expected to be delivered over the next 12 months.
Certain shipments were deferred as a result of these external factors. They are expected to be realized in future periods. At the same time, there are areas within our control where we see opportunities for improvement. Cost discipline remains a core priority for Velan. We continue to focus on rightsizing our cost structure to improve operating leverage as the business grows. While we have made meaningful progress, we remain committed to driving further efficiencies across the organization and ensuring our cost base supports long-term profitable growth. Accordingly, we are advancing a transformation plan focused on optimizing our operations, leveraging our global scale, simplifying our organizational structure, and modernizing our facilities as we prepare for anticipated growth across nuclear, defense, energy, and other critical markets. These initiatives are designed to improve execution, enhance delivery performance, strengthen customer service, and support profitable growth.
We are also investing in our commercial capabilities to expand market share across our product portfolio. We look forward to providing more details on these initiatives as we progress. In that context, let’s turn to slide six, where I would like to spend a few moments discussing the outlook for our key markets and why we believe Velan is positioned to benefit from the opportunities ahead. Nuclear power remains a major growth driver for Velan, supported by growing demand for reliable, low-carbon energy and increasing investment in reactor refurbishments, life extension programs, SMRs, and new build projects. With more than 55 years of nuclear expertise, a global installed base, and leadership across reactor technologies, we are very well positioned to benefit from these opportunities. In Canada, the recently announced Nuclear Energy Strategy reinforces the important role nuclear power will play in meeting future electricity demand, energy security, and economic growth.
The strategy supports both reactor refurbishment and new build opportunities, including SMRs, while promoting Canadian nuclear expertise on the global stage. As a preferred supplier to CANDU ecosystem and through our long-term standing relationship with AtkinsRéalis, we believe Velan is well-positioned to participate in future CANDU refurbishments and new reactor projects in both Canada and internationally. Many of the opportunities in our pipeline are tied to funded projects that are advancing through engineering and procurement stages, including our contribution to the GEH SMR program. As a result, we expect a meaningful portion to convert into bookings in the near term, with execution occurring largely within the next 24 months and revenue contribution beginning during that period. Turning to slide seven. In defense, rising global security concerns continue to drive investment in naval modernization programs.
Given our leading position in nuclear propulsion valve applications, we’re actively pursuing several opportunities that we believe could translate into orders and execution activity over the next two years. In oil and gas, while geopolitical uncertainty affected customer activity, bidding levels remain healthy. Deferred maintenance activity in North America and potential infrastructure investments in the Middle East are creating attractive opportunities. Given our strong market position and our joint venture in Saudi Arabia, we are well-positioned to capture this demand, particularly in shorter cycle MRO opportunities that can convert to revenue more quickly. As anticipated on slide eight, Velan’s financial results were affected by the factors discussed earlier. Order bookings and delivery schedules and related profitability have moved out into future periods. Bookings were constrained by uncertainty and reduced in North America by the MRO activity.
Since MRO activities and bookings are frequently converted into sales within the same period, reduced activity and refinery shutdowns in the Middle East had an adverse impact on sales. Shipments were deferred to future periods, but the majority is expected to be recaptured by the end of the fiscal year. Reflecting lower bookings, the order backlog decreased slightly to $275 million, with about 70% deliverable over the next 12 months. As anticipated and previously discussed, our backlog is progressively evolving towards a structure that reflects a growing share of longer duration, large-scale contracts, particularly in the nuclear and defense sectors, which increases backlog visibility and extends delivery timelines. Finally, our financial position remains solid with nearly $35 million in cash and cash equivalents on hand. Additionally, our new credit agreement signed after quarter end provides us with greater liquidity and flexibility to execute our business strategy going forward.
We’d now like to turn the call over to Imran Gibbons, the financial lead.
Imran Gibbons, Chief Financial Officer, Velan Inc.: Thank you, Rishi, and good morning, everyone. Please turn to slide nine. Our order backlog stood at $275.1 million at the end of Q1, down slightly from the previous quarter due to shipments exceeding bookings during the period. Bookings totaled $48 million in Q1 compared to $78.2 million last year. As mentioned, challenging market conditions resulted in lower bookings in our North American, Italian, and German operations, as well as for MRO activity, mainly in North America. Turning to the P&L on slide 10. First quarter sales totaled $57.8 million, compared to $72.2 million last year. The decrease was mainly due to the impact of geopolitical and regional conflicts, which resulted in shipments being deferred to subsequent periods. This situation mostly affected volume coming out of our North American and Italian operations. By customer geographic location, North America was our principal market in Q1, accounting for 57% of total sales.
Asia-Pacific represented our second largest revenue-generating region with 21% of sales, while Africa and the Middle East was third at 16%. Turning to slide 11. Gross profit was $11.4 million, or 19.6% of sales versus $20.6 million, or 28.6% of sales in the prior year. The decrease primarily reflects the impact of lower business volume on the absorption of fixed production overhead costs, as well as a $1.3 million increase in our provision. Excluding this factor, gross profit was approximately 22% of sales. Administration costs totaled $15.7 million, compared to $18.3 million a year ago. The reduction is attributed to cost reduction initiatives and lower sales commissions. Adjusted EBITDA, which excludes restructuring expenses and non-recurring provision adjustments, was a negative $2.1 million, compared to a positive $3.8 million last year. The decrease reflects lower gross profit, partially offset by lower administration costs.
The adjusted net loss was $6.9 million, compared to an adjusted net income of $0.1 million in the prior year. Turning to cash flows on slide 12. Cash used by operating activities before net change in provisions was $17.4 million, compared to $15.5 million last year. This year’s unfavorable cash variation reflects negative changes in non-cash working capital items, mainly decreases in accounts payable and accrued liabilities, as well as in short-term customer deposits. These factors were partially offset by lower inventories. The increase in working capital is primarily attributed to operational factors that have temporarily increased the amount of capital invested in the business, such as securing material procurement ahead of executing long-term contracts. Efforts remain focused on improving working capital efficiency through inventory management, timely collection of receivables, and optimization of cash flows. We concluded the first quarter with a solid financial position.
Cash and cash equivalents totaled $34.6 million as at May 31st, 2026. Long-term debt stood at $16.8 million and bank indebtedness at $17.6 million. Subsequent to the end of the quarter, we secured a new five-year, $80 million revolving credit facility with a major Canadian chartered bank. This facility strengthens our capital structure by increasing available liquidity and lowering our cost of capital. Proceeds were used to repay existing North American debt. The new facility in place provides us the flexibility to accelerate the execution of our strategy and to invest in our core capabilities to sustain profitable growth and create long-term value for our shareholders. I now turn the call over to Rishi for his concluding remarks.
Rishi Sharma, President and Chief Executive Officer, Velan Inc.: Thank you, Imad. Turning to my closing remarks on slide 13, we are entering an exciting new chapter in Velan’s 75-year history. We have a solid balance sheet, a growing backlog of strategic projects, and a strong opportunity pipeline. We are well-positioned to execute strategy and create long-term value. Across our core nuclear defense and energy markets, we continue to see attractive opportunities supported by favorable long-term fundamentals. Many of these opportunities are advancing through engineering and procurement stages, providing us visibility towards future bookings and execution activity. At the same time, we are advancing our transformation program focused on operational excellence, cost optimization, and profitable growth. By improving execution, enhancing our commercial effectiveness, modernizing our operations, and leveraging technology across the organization, we are positioning Velan to better serve our customers and capture growth opportunities.
While near-term market conditions remain dynamic, we are confident in our long-term outlook and in our ability to build a stronger, more competitive, and more profitable Velan. I now turn the call over to the operator for the Q&A session.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please. There are no questions at this time. I will now turn the call over to Rishi for closing remarks.
Rishi Sharma, President and Chief Executive Officer, Velan Inc.: Thank you, operator. Thank you everyone for joining us today. We look forward to sharing with you our second-quarter results in October. Also note that we’ll be hosting our annual general meeting of shareholders on Tuesday, August 25th, 2026, at 4:30 P.M., to be held in virtual format. Thank you to all, have a great day.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
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